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Elon Musk once paid one of the largest tax bills in U.S. history after selling Tesla stock in 2021 (1) — eclipsed only by Berkshire Hathaway’s $26.8 billion payment in 2024 (2). But in a 2024 Pittsburgh town hall clip (3) once again making the rounds on X (4), the trillionaire argued Americans are already paying more than enough.

“You get taxed on what you earn, you get taxed on what you buy, and you get taxed on what you own,” Musk said while discussing government spending and taxation.

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While Musk’s comments were aimed at public policy, they also highlight an important lesson for investors: Wealthy individuals typically try to avoid creating taxable events in the first place. This is one of the secrets the rich use to stay that way.

But for most Americans, that’s a problem to be tackled after entering the seven-figure society. In the meantime, it comes down to building long-term wealth through patience, rigorous strategy and diversification — many of which can be learned by studying the habits of America’s most successful.

Why selling assets can trigger massive tax bills

One of the biggest misconceptions about wealth is that net worth and income are the same thing. They aren’t.

An investor may own stocks, real estate or other assets worth millions of dollars without generating much taxable income. In many cases, taxes only come due when those assets are sold and gains are realized. These taxes are referred to as capital gains taxes (5). Similarly, a huge amount of Musk’s net worth is tied up in his companies — meaning his ability to take advantage of his trillionaire status may be more limited than it appears.

Consider the math: If you have a $100,000 gain on an asset, selling it today might trigger a 20% long-term capital gains tax ($20,000), leaving you with only $80,000 to reinvest. By holding that asset and allowing it to compound, you keep that $20,000 working for you instead of sending it to the IRS.

It’s a simple calculation that highlights why those like Elon Musk often prefer to hold appreciating assets or borrow against them rather than triggering taxable sales.

Read More: Thanks to Jeff Bezos, you can become a landlord for $100 — without the headache of actually being one

Build a tax-smart investing plan

Many investors focus on returns but spend far less time thinking about taxes. Yet, taxes — as the example above illustrates — can have a significant impact on long-term wealth creation.

For example, an investor who earns $50,000 by selling a stock may owe thousands in taxes on that profit alone, reducing the amount available to reinvest and compound over time. This is one of the reasons why avoiding a taxable event literally keeps money, and profit, in your pocket.

Working with a financial advisor can help investors identify tax-efficient strategies without losing thousands to a capital gains tax.

Advisor.com makes it simple to speak with licensed financial professionals who can provide personalized guidance — including ways to potentially lower your tax burden.

Beyond tax planning, a professional advisor can also help you determine how many years you have left to invest before retirement, and assess your comfort level with market fluctuations — two key factors in building the right asset mix for your portfolio. Investing regularly for over 30-years is when the gains really start to compound.

And the best part? You can schedule a free, no-obligation consultation to discuss your retirement goals and long-term financial plan. That way, you can make sure that you have the right advisor in your corner.

However, having an advisor is only the first step. You may also want to change your perspective on investing.

Avoid chasing trendy stocks

Many investors fall into the trap of constantly chasing hot stocks, market trends or the latest headlines. According to CIBC (6), 2023 Morningstar study, while funds generated annualized returns of 7.7% over a 10-year period, the average investor earned just 6.0%, largely because of poor decisions about when to buy and sell. Those who chase performance can end up buying after gains and selling after losses, reducing their long-term returns.

Case in point: Musk’s own SpaceX (NASDAQ: SPCX) IPO saw record-breaking increases in share prices. However, in the week following, the stock dropped back to around its initial asking price, meaning anyone buying in during the ascent to a high of $224.64 per share has now lost money (7). Chasing that particular rocket to the moon might now come with a bit of buyer’s remorse — unless you bought in for the long-haul flight to Mars.

With this in mind, many successful investors focus on consistent contributions and a long-term mindset.

If you’re in this for the long term, automated investing platforms can help remove emotion from the process and encourage steady investing habits over time. Even small amounts can grow over time with tools like Acorns, an app that automatically invests your spare change. This also taps into dollar cost averaging, which aims to smooth out performance spikes through consistent investing.

Signing up for Acorns takes just minutes: Link your cards, and Acorns will round up each purchase to the nearest dollar, investing the difference into a diversified portfolio — trillionaire or not.

With Acorns, you can invest in a dividend ETF with as little as $5 and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.

Learn what to pick

One reason affluent investors often hold assets instead of constantly selling them is that they understand the power of compounding. Legendary investor Warren Buffett has often emphasized the importance of long-term investing — about 99% of his wealth was accumulated after age 50 (8), as decades of compounding accelerated his portfolio’s growth.

That doesn’t mean every investment should be held forever. But understanding how taxes, diversification and asset allocation work together can help investors make more informed decisions.

If you’re looking to sharpen your financial knowledge, Moby offers expert research and recommendations to help you identify strong, long-term investments backed by advice from former hedge fund analysts.

In four years, and across almost 400 stock picks, their recommendations have beaten the S&P 500 by almost 12% on average. They also offer a 30-day money-back guarantee.

Moby’s team spends hundreds of hours sifting through financial news and data to provide you with stock and crypto reports delivered straight to you. Their research keeps you up-to-the-minute on market shifts, and can help you reduce the guesswork behind choosing stocks and ETFs.

Plus, their reports are easy to understand for beginners, so you can become a smarter investor in just five minutes. You also maintain complete control on whether to buy or not. Moby offers advice, not ultimatums.

Of course, not every investment opportunity is found in the stock market. Many affluent investors supplement their stock holdings with alternative assets, particularly real estate, to create a more diversified portfolio that can support long-term wealth creation.

Diversify for wealth generation

Holding real estate is a diversification strategy that even trillionaires like Elon Musk understand and use. While Musk famously vowed to “own no house” (9) in 2020, he still holds a massive $3.4 billion in real estate for tax purposes (10), including 6,000 acres of land across Texas, Starbase in Boca Chica and Snailbrook.

However, the time, effort and costs involved in managing and maintaining multiple properties prevent many from investing. So, unless you’re a hedge fund titan or the owner of SpaceX, you’ve been shut out of one of the most profitable corners of the market.

That’s where mogul comes in. This real estate investment platform offers fractional ownership in blue-chip rental properties, which provides investors with monthly rental income, real-time appreciation, and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.

Founded by former Goldman Sachs real estate investors, the mogul team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional-quality offerings for a fraction of the usual cost.

Each property undergoes a vetting process that requires a minimum 12% return, even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property. Rockets not included.

Getting started is quick and easy. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

Real estate on a big budget

As portfolios grow, investors often gain access to opportunities that aren’t available in public markets. Institutional investors have long used private real estate as a source of potential income, diversification and long-term wealth preservation.

Accredited investors can now tap into this opportunity through platforms such as Lightstone DIRECT, which gives accredited investors access to single-asset multifamily and industrial deals.

Lightstone DIRECT lets individual investors tap into the institutional approach of Lightstone, one of the largest privately held real estate investment firms in the U.S., with $12 billion in assets under management.

The platform eliminates middlemen and the extra layers of fees that can add up in traditional real estate investing, usually known as “fee stacking.” This streamlined approach provides more direct access to institutional-quality deals.

Over nearly four decades, Lightstone has delivered strong risk-adjusted performance — including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.

Each opportunity requires a $100,000 minimum and undergoes a rigorous review by Lightstone’s principals, including founder David Lichtenstein.

Lightstone also invests at least 20% of its own capital in every deal — roughly four times the industry average. With skin in the game, the firm ensures its interests are directly aligned with those of its investors.

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

CNBC (1), (7); Berkshirehathaway (2); WalterWhiteAmerica/ YouTube (3); @r0ck3t23/ X (4); Investopedia (5); Investorsedge CIBC (6); InDmoney (8); Homesandgardens (9); Credaily (10)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.