> Mr. Pearl noted that people with only a couple of million can use “securities-based loans,” borrowing low-cost funds from banks using the value of a given investment portfolio as collateral. “You just loan yourself money,” he explained, and in many if not most cases, the portfolio’s rate of return exceeds the rate of interest on the loan.
It seems like a step is missing here. Wouldn’t the borrower have to sell part of the portfolio to pay the interest on the loan? And wouldn’t that trigger capital gains?
It seems like a step is missing here. Wouldn’t the borrower have to sell part of the portfolio to pay the interest on the loan? And wouldn’t that trigger capital gains?