Free calculator
Sell or borrow?
When you need cash from your portfolio, you can sell shares or borrow against them. See what each choice does to your wealth, your taxes and your risk, year by year.
Net Equity is the fairer comparison if the holdings are kept until death, because heirs generally receive a step-up in cost basis under current US law. After-Tax Value assumes everything is sold in the snapshot year and the loan is repaid.
Same total return, different split
Each row keeps your total return and moves the mix between dividends and price growth. Results are at the snapshot year. Click a row to use that split.
Net equity over time
Year by year
Learn the strategy before you use it.
Borrowing against a portfolio can be powerful and it carries real risk. The Perfect Portfolio teaches how investing, taxes and borrowing work together, in plain English, before you make a single move.
How the model works
- Both scenarios start with the same portfolio and take the same after-tax cash draw at the end of each year.
- Liquidate: shares are sold to raise the draw. The sale is grossed up for long-term capital gains tax using average cost basis.
- Borrow: the draw is added to a margin loan, so the full portfolio keeps compounding. Interest is charged on the opening loan balance each year.
- Dividends are paid on the start-of-year value. The Return of Capital share is untaxed and reduces cost basis. Once basis reaches zero, further ROC is taxed as a capital gain.
- Total return is split into dividend yield and price growth, and both are held constant, so the model does not show market drops. A sharp early decline is the main margin-call risk when borrowing. Test it with a low or negative total return.
Disclaimer
This tool is provided to help you model and test financial scenarios and is for educational purposes only. It is an estimate, not a projection or guarantee, and does not constitute financial, legal, or tax advice. Results depend entirely on the inputs you provide. Margin borrowing involves the risk of forced liquidation and losses greater than your investment. Tax treatment depends on your circumstances and current law. Consult qualified professionals before acting. All decisions and their results are solely your responsibility.