Billionaires’ “Buy, Borrow, Die” Strategy Has Become A $5 Trillion Market. Here’s How It Works And What It Means For Regular Investors
Borrowing against your stocks sounds like a loophole that lets you dodge the tax bill for good. But one clause in the lender's fine print can turn the whole plan into the very sale you were trying to avoid.
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On Oct. 26, 2026, The Wall Street Journal put a price tag on one of the oldest moves in wealth management, calling buy, borrow, die a $5 trillion market. That figure is the Journal’s estimate. Nobody has published an official, measured total. The paper followed up with a piece saying the strategy “Gains in Popularity.”
The playbook once applied to founders sitting on giant stock positions. These days, brokers and banks offer portfolio-backed credit lines to investors far below the billionaire level, so it pays off to understand how the strategy works and where it breaks.
Three Moves That Keep the Tax Bill Waiting
- Buy: Own assets that grow, usually stocks, and hold them for years.
- Borrow: When you need cash, borrow against the shares instead of selling them. A loan is borrowed money, so selling nothing means no capital gain is realized.
- Die: Leave the shares to your heirs. Their cost basis resets to the shares’ value at your death.
For most readers, the real decision is simpler: sell appreciated stock and pay capital gains tax once, or borrow against it and pay interest every year.
Portfolio Loans Have Moved Down the Wealth Ladder
Who can do this depends on taxable brokers assets. Federal Reserve data show the top 1% held 51% of household stocks and mutual funds held outside retirement plans in the second quarter of 2026. The next 9% held 37%. That group starts at about $2.1 million in net worth, which explains why lenders now market these lines to the merely wealthy.
The bottom half of households held just 0.6% of those assets. Retirement accounts generally can’t be pledged, so a large 401(k) does nothing to qualify you.
Interest Is the Number That Decides Everything
Say you need $100,000, and the shares you would sell cost you $20,000. At the top 20% federal long-term capital gains rate under 26 U.S.C. § 1(h), selling triggers about $16,000 in tax. You pay it once.
Borrow the $100,000 instead at an assumed 7%, and you pay about $7,000 in interest every year.
In a little over two years, the interest passes the tax you saved. Hold the loan for a decade and you’ve pays off about $70,000.
These lines usually float with short-term rates. The Fed’s target rate tops out at 4%, and it moved twice in the past year. Borrowing only beats selling when your portfolio grows faster than your loan rate and you hold until death. That is a long time to carry interest.
Why Heirs Inherit a Clean Slate
Under the tax code, an heir’s basis is generally “the fair market value of the property at the date of the decedent’s death.” If you bought shares for $20,000 and they’re worth $100,000 when you die, your heir’s basis becomes $100,000. The gain built up over your lifetime generally goes untaxed.
This works only if you hold the shares until death, and only under current law. Large estates can still owe estate tax. Returns filed in 2024 reported $23 billion of it.
Where Portfolio Loans Go Wrong
These lines are secured by your portfolio and are typically payable on demand. Charles Schwab (NYSE:SCHW | SCHW Price Prediction) states in its own terms that “entering into a Pledged Asset Line and pledging securities as collateral involves a high degree of risk.” The terms also call the line “an uncommitted demand line of credit” and say funds “may not be used to purchase securities.”
In plain terms, the lender can ask for its money back at any time. If the market falls, you may have to add collateral or watch the lender sell your shares. A forced sale creates the very tax bill the strategy was built to saved. And you generally can’t use the money to buy more investments.
Crashes like that happen. The top 1%’s stock and fund holdings dropped about 27% between late 2021 and the third quarter of 2022.
Who This Fits and Who Should Pass
- Run the interest math first. Compare a one-time tax bill with years of floating-rate interest. If the loan would last longer than a few years, the tax savings may never show up.
- Check your staying power. This may suit people with large taxable portfolios, steady income to cover interest, and the ability to ride out a 25% drop without selling. It fits poorly if you’d need the loan to cover everyday bills or if your portfolio is concentrated in one stock.
- Saved the most common mistake. People treat the loan as free money. Leaving interest unpaid and letting the balance grow raises the odds of a forced sale at the worst possible time.
Before pledging anything, talk with a tax or estate professional. They can model your actual basis, your estate tax exposure and how long you’re likely to hold the shares, and those factors decide whether this strategy saves money. The paperwork side matters just as much as the math, and we put a full checklist, beneficiary forms and account titling included, in a free estate guide here.
Contact [email protected] for any questions or corrections.
AJ spent 10 years writing about financial markets at The Motley Fool. His coverage centers on technology stocks and the broader macroeconomic trends, from interest rates to geopolitics, that shape where markets are headed next. AJ is drawn to the stories where big-picture economics and individual companies collide.
