Maximizing returns, mitigating risks, pre-IPO planning.
Mark Davidson holds $3.2 million in RSUs at a promising but pre-IPO tech company. He's concerned about concentration risk, managing his tax burden in California, and ensuring his investments are generating sufficient returns to achieve his retirement goals in 10 years. He lacks a clear framework for evaluating the true profitability of his potential investment strategies given his unique circumstances.
Using the Residual Income Calculator, we determined that Mark's current investment approach, without considering the cost of capital tied to his RSUs and associated risks, was underperforming by approximately $85,000 annually. By integrating the Tax Equivalent Yield Calculator to assess after-tax returns and the Put Option Calculator to explore hedging strategies against potential market downturns related to his tech company's IPO, we formulated a diversified portfolio that aims to increase his residual income by at least $50,000 per year while mitigating downside risk.
The Residual Income Calculator was used to assess investment performance against a personalized cost of capital derived from Mark's risk tolerance and financial goals. This was integrated with tax-optimized withdrawal strategies modeled using projected RSU vesting schedules.
$250,000 increase in projected retirement savings over 5 years by optimizing investment strategy and reducing risk.
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