This strategy is usually presented as a way for billionaires to avoid paying taxes on their wealth, but that's a blatant manipulation. The reality is that it allows you to introduce a bit of risk to potentially save taxes on day-to-day expenses. Which, even for billionaires, are not that high to have a noticeable impact on society.
Nobody is going to take a loan provided in the reddit example, since even a minor market fluctuation will trigger a margin call and cause you to lose all your assets used as collateral (and pay taxes on it).
The higher the loan amount, the higher the risks. The longer you have left to live, the higher the risks.
Since you have to commit to this strategy till the end of your life in order for it to work, you're essentially betting that your asset will always appreciate faster than losses accumulate on your compound rate on the loan. Making a bet like that for the rest of your life is quite the gamble (unless you're planning to die in the near future).
This strategy is only viable if you use it for a tiny fraction of your wealth, so it can potentially be used to fund your day-to-day expenses. But it's still a lifelong gamble. What if you happen to die during a market crash?
Nobody is going to take a loan provided in the reddit example, since even a minor market fluctuation will trigger a margin call and cause you to lose all your assets used as collateral (and pay taxes on it).
The higher the loan amount, the higher the risks. The longer you have left to live, the higher the risks.
Since you have to commit to this strategy till the end of your life in order for it to work, you're essentially betting that your asset will always appreciate faster than losses accumulate on your compound rate on the loan. Making a bet like that for the rest of your life is quite the gamble (unless you're planning to die in the near future).
This strategy is only viable if you use it for a tiny fraction of your wealth, so it can potentially be used to fund your day-to-day expenses. But it's still a lifelong gamble. What if you happen to die during a market crash?