Finance
Tax-efficient Diversification Techniques | Fox Business
Investors are increasingly focused on not just how they invest their money but also how they can optimize their after-tax investment outcomes. Allspring Global Investments is dedicated to helping investors navigate the evolving tax and estate planning landscapes.
Concentrated stock positions can create unwanted risk in investors’ portfolios. Despite the risk, a combination of factors—including emotional biases and fear of built-in capital gains consequences—can make investors unwilling to diversify. By understanding the many tax-efficient diversification options available to them, investors may be more willing to take some of that concentration risk off the table.
Holly Swan, Allspring’s expert on taxes, recently wrote about 10 techniques for diversifying a concentrated position in a tax-efficient manner. She thinks about tax-management diversification strategies as being in one of these three buckets: avoid, defer, or offset.
Holly Swan, Head of Wealth Solutions, Global Client Strategy, Allspring Global Investments
Avoid:
Tax strategies may focus on reducing or eliminating capital gains exposure altogether. The first example of this is when investors may choose to hold certain highly appreciated assets so they can pass through a taxable estate and receive a step-up in basis.
Common lifetime strategies include borrowing against their portfolios to generate liquidity without selling and triggering taxes, gifting appreciated assets to lower‑income family members who are unlikely to owe capital gains tax, and using options strategies to manage risk or monetize positions without selling. Less common strategies available to founders and early-stage investors may allow eligible shareholders to exclude substantial capital gains on investments in qualified small businesses.
Defer:
Certain tax strategies may help investors defer when taxes are recognized, often smoothing the impact over time. One example is systematic diversification, where investors, such as public company executives, sell portions of a concentrated position gradually.
Investors may also use tax loss harvesting to capture losses that offset current or future gains. Other deferral tools include exchange funds, which allow investors to contribute concentrated stock in exchange for a diversified portfolio without triggering immediate taxes, and opportunity zones, which—beginning again in 2027—will allow taxpayers to reinvest capital gains in designated areas in exchange for up to five years of capital gains deferral and, in some cases, partial basis step-up (opportunity zone investments made today are only eligible for gain deferral until December 31, 2026).
Offset:
Offset strategies reduce tax liability by pairing gains with deductions or other tax‑favored actions. A primary example of this is charitable giving, where donating appreciated securities held for more than a year can allow investors to avoid capital gains recognition while receiving a deduction for the asset’s fair market value, subject to income limits.
Investors have many options for tax-efficient diversification, each of which can be a powerful step in moving away from a concentrated position that may be adding unnecessary risk to portfolios. Allspring Global Investments can offer insights into this and more as investors prepare for their financial future.
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Allspring Global Investments does not provide accounting, legal, or tax advice or investment recommendations. Any tax or legal information in this brochure is merely a summary of our understanding and interpretations of some of the current income tax regulations and is not exhaustive. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation.
Allspring does not offer options. Options involve significant risks and are not suitable for all investors.
Diversification does not ensure or guarantee better performance and cannot eliminate the risk of investment losses.
This material is provided for informational purposes only. This content and the information within do not constitute an offer or solicitation in any jurisdiction where or to any person to whom it would be unauthorized or unlawful to do so and should not be considered investment advice, an investment recommendation, or investment research in any jurisdiction.
INVESTMENT RISKS: All investments contain risk. Your capital may be at risk. The value, price, or income of investments or financial instruments can fall as well as rise and is not guaranteed.
You may not get back the amount originally invested. Past performance is not a guarantee or reliable indicator of future results.
Allspring Global Investments™ (Allspring) is the trade name for the asset management firms of Allspring Global Investments Holdings, LLC, a holding company indirectly owned by certain private funds of GTCR LLC and Reverence Capital Partners, L.P. These firms include but are not limited to Allspring Funds Management, LLC, and Allspring Global Investments, LLC. Unless otherwise stated, Allspring is the source of all data (which is current or as of the date stated). Content is provided for informational purposes only. Views, opinions, assumptions, or estimates are not necessarily those of Allspring or their affiliates and there is no representation regarding their adequacy, accuracy, or completeness. They should not be relied upon and may be subject to change without notice.
© 2026 Allspring Global Investments Holdings, LLC. All rights reserved.
Alliance Global Partners chief global strategist Mark Grant discusses his income tax strategy for retirees on ‘Varney & Co.’
For the generation that should be in its “peak savings years,” the prospect of retiring on time has shifted from a plan to a prayer.
A newly released Employee Financial Wellness Survey by PwC found that nearly 50% of Gen X employees are pushing back their retirement dates, citing stagnant wages, rising everyday costs, and a lack of liquid savings.
Additionally, only 38% of Gen Xers believe they can retire when they originally planned, and more than half of this demographic expect to withdraw funds from their retirement accounts early to cover short-term costs.
“For employers, this isn’t a future problem. Financial anxiety during peak career years can affect focus and engagement,” PwC researchers write. “If the risks are clear, the question is why more employees aren’t taking action. It’s not a lack of desire. Most employees want stability, confidence and to feel in control. But many don’t feel equipped to get there.”
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The primary driver of this retirement delay is the inability to save as inflation eats away at monthly expenses, the report notes. Twenty-five percent of the total workforce is living without a buffer, and nearly half cannot meet basic household expenses.
Nearly half of Gen X workers are delaying retirement, PwC reports. (Getty Images)
“[Forty-nine percent] say their compensation isn’t keeping up with costs. As expenses rise faster than income, day-to-day trade-offs are becoming routine. Employees aren’t just feeling squeezed. They’re making difficult financial decisions to stay afloat,” the PwC report continues..
As a result, when Gen Xers cannot afford to leave their current jobs, the entire corporate ladder stalls, creating business risks, with companies facing higher costs as older talent remains on payroll longer than expected.
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“When employees dip into retirement funds early or delay retirement altogether, it affects more than personal finances and retirement plan leakage,” the report says. “It may also influence workforce planning, healthcare costs, succession timing and overall organizational stability.”
The findings also show that a significant portion – 41% – of the workforce feel they were never given the tools to manage a crisis of this magnitude, leading to a sense of being “overwhelmed” by financial choices.
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PwC provided a call to action for employees and their employers, encouraging them to reduce the stigma around financial education, foster trust through human coaches, emphasize skill building and focus on day-to-day finances before long-term goals.
“Employees define financial wellness simply: less stress, fewer surprises and the freedom to make financial choices with confidence. For employers, that’s the opportunity.”
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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