Taxes are the largest investment hurdle in the US. I’m considering the following structure to minimize them:
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Majority of the account is holding ETFs or stocks for a multi year period with minimal rebalancing
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Using a small portion (tactical strategies that can be tested on P123 with ETFs) of the account to hedge the above with futures.
Since only a small portion of the account has high turnover (the futures portion) as futures have 10x+ leverage the “exposed” portion to taxes is minimized. Also since futures are taxed at 60% long term and 40% short term there is a preferential tax treatment which can result in about a 10% tax savings. I will hold a certain amount in “low risk” assets to pay for losses in futures trading in case my hedges don’t work as well as planned (likely since the future isn’t the past). I have never traded futures before and understand that the futures price can deviate from the spot price. Are there any other risks or downsides to this approach? Can anyone suggest any good futures references?
Thank you
Scott