> If I ever want to spend that money I have to take it out and pay capital gains. No. This is the trick. You can take money out of the asset tax free by borrow

> If I ever want to spend that money I have to take it out and pay capital gains. No. This is the trick. You can take money out of the asset tax free by borrowing against it. Say that you wanted to invest your home equity. You have two choices. You can sell the house and rent or borrow against the house. Imagine that you paid $0 for the house and can now sell it for $500,000. You have to pay tax on that, bringing it down to $425,000 in your pocket. You lose 15%. You put that 425K in the stock market and it gains 10% per year. After 10 years you have 1.1 million. Alternatively, you can just borrow 500,000 and put your house up as collateral to the bank you are borrowing from. You pay no tax on that 500K. Put that 500K in the market at the same 10%. You end up with 1.3 million in 10 years. The tax benefit is in avoiding the destruction of your initial capital by 15%. You effectively spent the money in our home, but one method makes you pay capital gains while another does not. You could spend your house equity on a boat in the same way. This example is very contrived and ignores things like the capital gains exemption on housing (and the fact that no house costs 0) and that you generally can't borrow 100% of house value (but you can with stocks as long as they are liquid).