Concentrated Stock: Managing the Risk Hiding in Your Net Worth
If one company makes up a large share of your wealth, your net worth and your career may be riding on the same bet. Here is how to reduce that risk without an avoidable tax bill.
For many executives and long-tenured employees, success creates a quiet problem: a single company's stock grows into an outsized share of their net worth. It feels like loyalty and conviction. It is also concentration risk, and it is one of the most underestimated dangers in a high earner's financial life.
The risk you cannot see when it is working.
When the stock is climbing, concentration looks like genius. The danger only becomes obvious when it is too late. Your salary, your bonus, your unvested equity, and a large share of your investments can all depend on the same company. A single bad year, in the business or the sector, can hit your income and your savings at the same time. Diversification is not pessimism. It is refusing to let one outcome decide your family's future.
Unwinding it without an avoidable tax hit.
The instinct is either to hold forever or to sell it all at once. Both are usually wrong. Selling a large position in one year can trigger a significant capital gains bill, and certain stock options carry alternative minimum tax exposure. The better path is usually a deliberate, multi-year plan: trimming the position on a schedule, coordinating sales with lower-income years, using charitable gifts of appreciated shares, and reinvesting into a diversified portfolio. Risk comes down while the tax cost stays controlled.
It belongs in the whole plan.
Concentrated stock decisions touch your tax strategy, your investment plan, and even your estate plan. Handled in isolation they create surprises; coordinated, they become an opportunity. This is central to how we work with corporate executives.