Fallows: Exchange funds allow investors to diversify concentrated stock tax-free
Tad Fallows · Why Half of Them Have No Mortgage and Still Win · Dec 30, 2025 · at 27:04
Wealth strategist Tad Fallows explains exchange funds as a tool for high-net-worth tech employees and founders to de-risk concentrated equity positions.
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“A second one is what's called an exchange fund, and what that looks like is, let's say I've worked at Exxon, you've worked at Apple, and a third person over here has been working at Bank of America, and all three of those stocks have gone up. Each of us is over allocated to our own stock, but we basically form a pool. I put in a million dollars of Exxon, you put in a million of Microsoft, he puts in a million of Bank of America, And then we each own a third of this now diversified portfolio of stocks. And actually the way the laws work, at least in the U S after a certain number of years, I believe it's five or seven years, you can take out a third of each of those shares and you never actually had to sell any of them. So you become diversified without actually having a sales transaction.”
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