The Taxable Investor's Manifesto

CHAPTER THIRTEENEvaluate the Risks to This Approach

This manifesto explains the rationale for a long-term, equity-heavy, business-building, tax-efficient, leakage-controlled, patient approach to wealth management for taxable investors. It is a call to action that I do not take lightly. I am committed to it, my family is committed to it, and so are my other clients. They are people working hard to build businesses, financial security, and cultures in which their families can flourish. Of course, my approach can't guarantee results. But implementing these practices will raise the odds of success significantly higher than for any alternative I've seen in over 35 years of practice.

When assessing risks, it's important to evaluate the path you've chosen; it is also important to compare it with reasonable alternatives. So what are the biggest risks to executing this strategy? I see two: permanent impairment of capital and a confiscatory tax code. I have touched on both of these risks throughout the book, but here they are again in a single place.

There are four most likely causes of permanent impairment of capital. First is the risk of a structural decline in corporate profits that leads to a decline in equity valuations that is never followed by a recovery. For the last 200 years, through world wars, disease epidemics, and great depressions, the world has experienced tremendous productivity growth, rises in standards of living, growth in population, declines in war-driven casualties, ...