There's a limit on this. If you borrow against the capital appreciation, eventually your debt percentage will put you at risk of a margin call. If your assets drop in value such that the assets are less than the debt, you lose all your assets, and the portion of the debt not covered by your assets still sticks to you.
I know people this has happened to.
The trick relies on your assets always increasing in value, which is not what assets do in the real world.
In practice the best strategy is not to borrow the maximum against the capital appreciation. You use this system to fund your day to day expenses as one part of an overall wealth management strategy.
You can keep under the maximum, and still get caught with a plunging asset value, leaving you with a negative net worth.
I had a stock that dropped 90% in a period of a couple weeks. I didn't borrow against it, but I could have easily borrowed 40%, then when it dropped, I'd be holding the bag.
Are there actively managed ETFs with target dates? That way when you are still working you are purchasing shares of the ETF that are investing in a more risky strategy. However, by a certain date the ETF shifts to a much more conservative focus, allowing for you to borrow against said ETF without the risk of a margin call.
Not an investment professional or even an amateur investor, just an idea I had so wouldn't be surprised if there is an issue in this.
I know people this has happened to.
The trick relies on your assets always increasing in value, which is not what assets do in the real world.