Key Takeaways
- Concentration risk is asymmetric: the stock made you wealthy, but no single company is worth betting your future on twice.
- Tools in rough order: sell in planned tranches, gift appreciated shares, harvest losses against sales, exchange funds, and charitable structures.
- A written diversification schedule beats waiting for a better price; the better price is a hope, not a plan.
A position becomes "concentrated" somewhere around 10% of your investable net worth, and by the time employer equity, a family inheritance, or one great pick reaches 30% or 50%, the portfolio's fate rides on a single ticker. The uncomfortable math: to justify holding, you must believe the stock will beat a diversified portfolio by enough to compensate for the risk of a 50-80% drawdown, which individual stocks suffer far more often than markets.
The obstacle is rarely conviction; it is the embedded capital gain. Here is the toolkit for unwinding concentration at a tax cost you choose.
First, Size the Real Problem
Separate the position into lots: shares with little gain (recent RSU vests, recent purchases) can be sold nearly tax-free and should go first. Inherited shares received a stepped-up basis and may carry almost no gain at all. What remains is the truly appreciated core, and even that is taxed at long-term capital gains rates, 15% or 20% plus the 3.8% net investment income tax, not the confiscatory rates people imagine. Paying 20-24% to eliminate a single-stock risk is often the best insurance premium available.
Employer-stock holders should coordinate with vesting: every future vest adds concentration, so selling at vest stops the hole from deepening while you drain it.
The Workhorse: a Tranche Schedule
The core strategy is unglamorous: a written schedule selling fixed percentages at fixed intervals, say 10% of the position each quarter, regardless of price. The schedule defeats the two behavioral traps, waiting for recovery after dips and waiting for more after rallies, and spreads gains across tax years to manage brackets, harvested losses, and the net investment income tax. Insiders subject to trading windows formalize this as a 10b5-1 plan; everyone else can simply behave as if they had one.
Try it: the free Future Value Calculator takes a couple of minutes and shows you where you stand. Or explore investment management at Attend.
Charitable and Family Routes
Appreciated shares are the best charitable asset you own: donating them to a donor-advised fund or charity captures a full-value deduction while the gain vanishes, covered in our giving guide. Large positions with strong charitable intent can fund a charitable remainder trust, diversifying inside the trust tax-deferred while paying you income. Family gifting moves gains to relatives in lower brackets, and holding until death steps up basis entirely, a legitimate plan for the last tranche, not the whole position.
The Specialist Tools
Exchange funds pool your concentrated shares with other investors', delivering a diversified basket after a seven-year term without triggering gains, useful, illiquid, fee-laden, worth understanding before committing. Options collars can cap downside while gains season toward long-term treatment. Direct-indexing accounts funded by gradual sales harvest losses to offset each tranche. These tools suit seven-figure positions; most households do brilliantly with the schedule, the charity, and patience.
We design these unwinds inside investment management, coordinating the tax, charitable, and estate angles in one plan.
Frequently Asked Questions
How much company stock is too much?
A common guideline caps any single stock at 10% of investable assets, and employer stock deserves a stricter view since your paycheck already depends on the same company.
Should I wait for long-term treatment before selling?
Usually yes for shares within months of the one-year mark; the rate difference is large. But do not let a few months of tax seasoning talk you into years of holding.
What if I truly believe in the company?
Keep a deliberate, sized position, 5-10%, and diversify the rest. Belief is not a risk plan, and the graveyard of former blue chips is full of employees who were sure.
Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, and business owners. Advisory services are held to a fiduciary standard. More about Attend
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