The Strategic Case for Borrowing Against Investable Assets

When our client needed $225,000 to help fund a real estate venture, selling investments would have triggered over $20,000 in capital gains taxes. Instead, we arranged a low interest portfolio line of credit using their investments as collateral, preserving both their

market exposure and tax efficiency. Five months later, their portfolio had grown by over 10%, the loan was repaid from business proceeds, and their investment strategy stayed fully intact.

For many investors, the need for liquidity often sparks a difficult decision: access cash now or stay fully invested for the long term. Selling assets may seem like the obvious solution, but doing so can come at a cost such as capital gains taxes, lost market exposure, and a disruption to your carefully crafted investment strategy.

By borrowing against investments, you can access the liquidity you need without giving up the growth potential of your portfolio. This approach, known as a securities based loan or portfolio line of credit, uses your investment account as collateral. It allows you to unlock funds quickly, efficiently, and without triggering a taxable event.

A key advantage is tax efficiency. Selling appreciated assets may result in significant taxes. Borrowing instead defers those taxes on gains and offers flexibility in timing sales for optimal tax treatment. In some cases, interest expense on the loan may even be taxdeductible if used for investment purposes (consult a tax advisor).

Currently, Altman Advisors’ clients can borrow at 5.1% and further potential Fed Fund rate cuts this year would directly translate into lower interest paid. We also offer a 3-year fixed rate solution with a current rate of 4.76%. These loans also offer speed and payment flexibility. Since your investments serve as visible, easily valued collateral,

approvals are faster than traditional loans. This makes them ideal for seizing investment opportunities, funding business ventures, or covering large expenses like auto or real estate purchases without disrupting your financial plan.

“Five months later, their portfolio had grown over 10%, the loan was repaid from business proceeds, and their investment strategy stayed fully intact.”

Selling to raise cash can mean missing out on potential market gains. By keeping your assets invested, you preserve market participation. Over time, the compounding effect of staying invested may outweigh the loan’s interest cost if portfolio growth exceeds borrowing rates.

Portfolio loans can also serve as a bridge to future liquidity, useful when awaiting proceeds from a business or real estate sale, avoiding the need for premature asset liquidation.

That said, there are risks. If the market declines, you may face a margin call and be forced to add collateral or sell at a loss. Rising interest rates can also increase borrowing costs. To mitigate these risks, loans should be conservatively sized with other liquid reserves in place and a payoff plan should be established.

This approach to borrowing offers a rare combination of flexibility, tax efficiency, and strategic control that aligns well with the complex needs of high-net-worth individuals and families. However, it also demands careful oversight, disciplined planning, and a strong understanding of the potential risks. Altman Advisors has nearly a decade of experience successfully implementing this securities-based loan strategy and can align it with your goals while managing associated risks. Contact us at (312) 759-7801 or info@altmanadvisors.com to see if this strategy could be right for you.