In this article on managing equity in a down market, we discuss:

First, why are many tech stocks down?

In principle, each stock trades at a price which reflects public market investors’ belief in the future profitability of the business.

To simplify the analysis of building a complex “discounted cash flow model,” many investors think about stock price as a reflection of the company’s key financial metrics (usually some derivative of earnings) and apply an earnings multiple to represent how they expect those earnings to change in the future.

Typically, a low growth, low margin company (e.g. energy utility) trades at a low multiple and a high growth, high profit company (e.g. a high demand medical device business) trades at a high multiple. In 2021, technology stocks were trading at multiples of earnings much higher than historical averages.

The combination of increased interest rates, geopolitical uncertainty, and many investors turning towards sectors they perceive as “safer” caused high growth technology stocks (many that went public during the last two years) to decrease in value. Companies that were perceived as Covid-era darlings — the Zooms, DocuSigns, and Pelotons of the world — have seen particularly steep drops.

What can you do about it?


Prepare for the worst:

Stocks, no matter how beaten down they may seem, can always go lower. If you have a significant portion of your wealth in one stock and have near-term cash needs, you should continue to sell down your position to ensure you can meet obligations if the stock continues to slide. Single stocks, no matter the business quality, can be highly volatile in the public markets and internal or external events can radically change stock prices. For every Salesforce (+5,000% since IPO), there is a Groupon (-96% since IPO).

Be tax efficient when you sell:

Identify the most tax efficient order for selling options/shares

Consider exercising options:

If you have stock options and plan to hold the equity for the long-term, this could be a good time to exercise. The lower the stock price when you exercise the better. Assuming you hold for over 12 months, any appreciation after you exercise will have a far more efficient long-term capital gains tax treatment.

Margin Lending:

If you have a significant public equity position, adequate resources, and risk tolerance, you can use margin lending to tap into the value of your equity without selling.

Typically the lending rates against public stocks have a very low interest rate of around 2 – 6%. This avoids the taxes from selling, and the interest on the margin loan is tax deductible. However, it’s important to understand the risks of this type of borrowing. If the value of your stock drops further, you may be required to post collateral or pay back part of the loan.

Gifting and tax efficient trusts:

If you plan to give any portion of your equity value to family members or to exclude it from your own taxable estate, it’s advantageous to make these transfers when the stock price is low. Each person has a lifetime gift limit and transferring assets when you believe their value is lower than they will be in the future is prudent.

From an estate planning perspective, if assets are down, it might be worth considering a trust, like a Grantor Retained Annuity Trust (GRAT). This structure allows you to transfer assets out of your estate, receive an annuity from that value for a number of years, and then have the residual assets pass to a dependent.


The right financial advisory, tax, and trust & estate firms can work with you to identify all the right opportunities to maximize your finances. Now is the optimal time to get the best team in place to help you. We’ll set you up with complimentary conversations with each advisory firm in order to help you ultimately select the right one. Get started here.