Options can reshape the risk around a concentrated holding, but they do not inherently remove its embedded tax liability. A collar limits a price range at a cost, while covered calls leave downside exposure and can force a taxable disposition if the shares are called away.

Protective puts can soften a collapse but cost money.
A collar does not erase capital gains.
Covered calls retain downside risk.
A rally can cause shares to be called away and trigger gains.

“It doesn't mean you're not gonna pay capital gains tax.”
Barry Ritholtz · 02:56

“Either way, none of these solutions are optimal.”
Barry Ritholtz · 03:21

#options#collars#covered calls#taxes

Explainer· 5

Explainer01:53

How a Winning Stock Quietly Creates a Concentrated Portfolio

A stock that rises much faster than the rest of a portfolio automatically becomes a larger allocation, even without additional purchases. That mathematical drift can leave investors dependent on one company while fear of capital-gains tax makes them reluctant to rebalance.

Strong appreciation increases a holding’s portfolio weight.
Broad US stocks had risen nearly tenfold from the 2009 bottom.
Individual winners such as Nvidia or Apple could have risen much more.
Tax concerns can leave investors feeling trapped in a risky allocation.

“The way math works, you end up with a stock that goes up a bunch. It gets to be a bigger, bigger percentage of your…”
Meb Faber · 02:18

“You get lopsided in your portfolio, and then many investors simply feel stuck.”
Meb Faber · 02:41

#concentration risk#capital gains#portfolio risk

Explainer03:33

How the 1031 Exchange Inspired a Stock-Portfolio Alternative

Faber uses the century-old real-estate 1031 exchange as an analogy for tax-deferred portfolio restructuring. Real-estate owners can exchange one qualifying property for another without treating the swap as an immediately taxable sale, illustrating how assets can change while embedded gains remain deferred.

The 1031 exchange has supported real-estate wealth building for decades.
A qualifying property can be exchanged for another property.
The transaction defers rather than necessarily eliminates tax.
The analogy helps explain tax-deferred restructuring of appreciated assets.

“where you buy a building, you buy a hotel, and you're able to sell it swap it for a new property, and that is not…”
Meb Faber · 03:43

#1031 exchange#real estate#tax deferral

Explainer14:13

The Seven-Year Lockup and Heavy Fees Behind Exchange Funds

Traditional exchange funds have allowed accredited or qualified investors to pool appreciated securities since the 1970s. The trade-off is often a seven-year holding requirement, a portfolio determined by contributed assets, setup costs, and annual management fees that may approach 1.5% to 2%.

Exchange funds have existed since the 1970s.
Access has generally been limited to wealthy qualified investors.
Investors may be required to hold for seven years.
The resulting portfolio reflects what participants contributed.
Setup and annual management fees can be substantial.

“the rules are you have to hold it for seven years.”
Meb Faber · 14:32

“the management fee is a percent and a half or two percent per year on average”
Meb Faber · 14:46

#exchange funds#accredited investors#fees#lockups

Explainer10:28

Why Cambria Targets Value and Quality Stocks With Almost No Yield

Cambria’s first tax-aware fund is described as a systematic US equity portfolio holding 100 stocks and rebalancing quarterly. It targets value and quality companies while seeking a dividend yield close to zero, reducing recurring taxable income for investors in high-tax jurisdictions.

The strategy uses systematic, rules-based selection.
The fund plans to hold 100 US stocks.
Rebalancing is quarterly.
Selection emphasizes value and quality.
The dividend-yield target is close to zero.

“everything we do at Cambria is systematic rulespace.”
Meb Faber · 10:50

“this fund will be a quarterly balance one hundred stocks.”
Meb Faber · 10:58

#value investing#quality stocks#dividends#systematic investing

Explainer12:40

Why ETF Investors Usually Avoid Mutual Funds’ Phantom Gains

Mutual funds may distribute capital gains generated by portfolio turnover, creating taxable income for shareholders who did not personally sell. ETFs generally use in-kind creation and redemption transactions, allowing many strategies to manage holdings without making comparable capital-gains distributions.

Mutual-fund turnover can create taxable distributions.
Investors may receive year-end capital-gains notices without selling shares.
ETF creation and redemption commonly occur in kind.
Many equity ETFs report zero capital-gains distributions.
The structural difference can improve taxable-account outcomes.

“if you have turnover, you're going to have to pay out those capital gains.”
Meb Faber · 12:54

“ETFs are eating the asset management industry. It's simply a better structure.”
Meb Faber · 13:10

#ETFs#mutual funds#capital gains#tax efficiency

Story· 1

Story15:20

The Question That Turned Closed-Door Transactions Into Open Enrollment

Faber learned more about Section 351 transactions through ETF Architect’s Wes Gray and attorney Bob Elwood, who had completed many such conversions. He then asked why the process could not be opened to a broader pool of contributors, leading to an operational model designed to aggregate thousands of accounts.

Bob Elwood reportedly completed his first transaction about a decade earlier.
Section 351 conversions had often been arranged for closed client groups.
Faber proposed opening enrollment to outside contributors.
ETF Architect’s account-aggregation capabilities made the broader model feasible.

“why can't we open this up, open enrollment to everyone to contribute”
Meb Faber · 15:56

“you need that military efficiency of all these marines at ETF architect to be able to cobble together thousands of accounts”
Meb Faber · 16:01

#product origin#ETF Architect#open enrollment#innovation

Q&A· 1

Q&A09:59

Stocks and ETFs Qualify, but Crypto and Private Assets Do Not

The proposed funds can accept publicly traded stocks and ETFs, including broad funds whose underlying securities are examined on a look-through basis. Private assets, cryptocurrency, futures, and options are outside the described contribution set.

Mid- and large-cap US stocks are preferred for the first fund.
ETFs can qualify through their underlying holdings.
SPY and QQQ are offered as examples of eligible ETFs.
Private assets, Dogecoin, futures, and options are excluded.

“You can't contribute private assets, you can't contribute your dogecoin, you can't contribute futures options, things like that.”
Meb Faber · 10:17

“But in general stocks, ETFs or AOK.”
Meb Faber · 10:25

#eligible assets#stocks#ETFs#crypto

Frameworks in this episode

After-Tax Asset Location

Section 351 Tax-Deferred ETF Diversification

Insights & moments

⚡Myth Buster· 1

Why Collars and Covered Calls Do Not Fix Concentrated-Stock Taxes

✶Explainer· 5