295: Understanding Leverage, Short Selling, and Active Trading in Tax-Aware Long-Short Strategies (Part 1 of 2)

What if the financial tools you’ve been taught to fear—like leverage, short selling, and active trading—aren’t inherently dangerous?

What if the real risk isn’t the tool itself, but how it’s applied and who is using it? 

The truth is these tactics can create unnecessary risk if misused. But when they’re applied for a specific, evidence-based purpose–like generating consistent tax advantages–they can actually become powerful tools in a savvy investor’s toolkit.In this episode of Love, your Money® (the first in a two-part series!) Hilary pulls back the curtain on a misunderstood strategy in modern wealth management: market-neutral leverage–and how it functions within a tax-aware long-short strategy.

You’ll learn:

• The difference between “long” and “short” overlays, and why it matters
• How leverage shows up in peoples’ financial lives–and what makes it high-risk vs low-risk
• How long-short overlays can reduce tax drag without adding market risk 
• How advanced strategies with a “bad reputation” can actually protect and grow wealth when used responsibly

If you’ve ever wondered whether strategies like leverage, short selling, and active trading are too risky to touch, this episode will show you why the answer isn’t so simple–and why dismissing them outright could mean missing out on meaningful, lasting tax benefits.

Here’s what you’ll learn in this week’s episode of Love, your Money:

• 02:44 What leverage is, the role it plays in building wealth, and low-risk versus high-risk
• 06:21 How leverage is used prudently in the tax-aware long-short strategy we execute within Ultra Tax Efficient Wealth Management℠ 
• 08:49 Introducing the market-neutral tax-aware long-short strategy we offer through Flex SMAs
• 11:03 Breaking down the long overlay, the short overlay, and the long-short overlay
• 14:57 How using the market-neutral, long-short overlay allows you to generate tax alpha whether the market is up or down
• 17:33 A few examples of real world outcomes that a tax-aware, long-short strategy can provide for investors
• 20:29 How farming can help us understand market-neutral leverage and tax-aware long-short strategies
• 24:03 How we implement long-short overlays and separately managed accounts in client portfolios
• 27:42 How to get in touch to learn more about Ultra Tax Efficient Wealth ManagementSM–and whether tax-aware long-short strategies are right for you

Show NotesTo get access to the full show notes, including all the resources mentioned, visit: https://hendershottwealth.com/podcast/tax-aware-long-short-strategies-pt1 Follow Hilary on:

LinkedIn 

Instagram

YouTube 

Hendershott Wealth Management, LLC and Love, your Money do not make specific investment recommendations on Love, your Money or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.