What if there was a perfectly legal investment strategy that could potentially save you $455,000 in taxes over 25 years on a $1 million investment? It’s called “Tax Alpha,” and it’s quietly revolutionizing how wealthy families manage their portfolios.
When Success Creates Tax Headaches
If you’re a successful business owner, retiree, or high earner, you’ve likely encountered this dilemma: your investments have grown significantly, but you’re sitting on highly appreciated stocks that you’re afraid to sell because of the massive tax bill.
Consider these common scenarios:
- The concentrated stock holder: You’ve accumulated company stock worth millions, but selling means paying hundreds of thousands in capital gains taxes
- The business owner: You received acquiring company stock as part of your business sale, and it’s doubled in value
- The inheritor: You’ve inherited a portfolio of blue-chip stocks with decades of appreciation
Traditional solutions fall short.
- Holding concentrated positions is risky
- Selling everything is costly
- Charitable trusts can be complicated and restrictive
What is Tax Alpha?
Tax Alpha, powered by Lion’s NexPath: Custom Index Builder, offers a smarter, more flexible path forward.
Rather than investing in mutual funds or ETFs, NexPath gives you direct ownership of 200–500 individual stocks selected to mirror the performance of an index but with one crucial difference:
You control the tax impact of every position.
How Lion’s NexPath Works
Daily Tax Loss Harvesting
Every day, our technology scans your holdings for loss opportunities.
Let’s say Microsoft drops 6% while the market stays flat, NexPath can:
- Sell your Microsoft position to realize the loss
- Immediately buy a similar tech stock (like Apple) to maintain market exposure
- Use the tax loss to offset gains elsewhere in your portfolio
Gradual Portfolio Transition
Instead of liquidating your concentrated position all at once, NexPath enables a gradual transition:
- Transfer appreciated stock in-kind (with no immediate tax event)
- Use harvested losses from the rest of your portfolio to offset gains when you choose to sell over time
It’s a disciplined exit strategy that works with your tax picture, not against it.
Complete Customization
Want to exclude fossil fuels? Overweight healthcare innovation? Avoid tobacco stocks for personal reasons?
With Lion’s NexPath, you’re not limited by a fund manager’s rules. You can fully customize your portfolio to reflect your values and priorities while still maintaining broad market exposure.
The Numbers Behind Tax Alpha Strategy
Research shows direct indexing can potentially harvest 1.9 times more tax losses than traditional ETF approaches over 10 years. In one analysis, a $1 million direct index portfolio generated over $455,000 in additional after-tax returns over 25 years compared to passive investing.
Results vary based on market conditions and individual tax situations, but the concept remains powerful: using natural stock volatility to generate tax benefits while maintaining diversified exposure.
Why Timing Matters Now
Three factors make this strategy particularly relevant today:
- Rising tax rates: Future tax increases make today’s harvested losses potentially more valuable
- Market volatility: Turbulent markets create more tax loss harvesting opportunities
- Growing appreciation: The longer you wait to address concentrated positions, the larger your potential tax bill becomes
Is Tax Alpha Right for You?
Lion’s NexPath is best suited for investors who:
- Hold significant appreciated securities
- Are in high tax brackets and want to reduce their tax burden
- Value control and customization in their portfolio
- Have $500K–$1M+ in investable assets
- Take a long-term approach to wealth building
Important Considerations
Tax alpha isn’t a get-rich-quick scheme—it’s sophisticated, long-term wealth management. You’ll still pay taxes, just more strategically. The approach requires advanced technology to manage hundreds of positions, monitor daily opportunities, avoid wash sale rules, and maintain proper index tracking.
For the right families in the right situations, concentrated stock diversification through direct indexing can potentially save hundreds of thousands in taxes while providing better portfolio control.
Ready to learn more? Watch our detailed video explanation of the Tax Alpha strategy, including real client examples and step-by-step breakdowns of how this approach has helped families save significant money on taxes while building diversified portfolios.
