There are worse problems than owning too much of a stock that has performed well.
We love our winners, but we have seen families with 15%-45% of their net worth tied to a single company’s performance. Do we trust our winners that much? Of course, this is rarely a conscious decision someone made to invest disproportionately in a single company. It’s usually caused by factors like:
- Years of equity compensation.
- A legacy holding passed down through the family.
- An early investment in a company that has performed disproportionately well.
Whatever the reason, the result is the same: a position that has quietly ballooned into something much larger than originally intended. It is what we would call a “good problem,” but it is still a problem.
The question is not whether concentration matters. It is how to unwind it without creating new problems in the process. Here is how we typically approach it.
Determining Your Dependence On That Position
Before we discuss tax strategy or staged selling, the first question is simpler and more personal: If this stock had a bad stretch, how much would actually need to change?
For some households, the answer is “not much.” If you have a $10 million balance sheet and a $2 million concentrated position, a sharp decline would be frustrating, but it may not alter your long-term retirement timeline, gifting plans, or lifestyle in any meaningful way.
For others, the math looks very different. A $2 million household with $600,000 of employer stock compensation is carrying a different level of exposure. A significant drawdown in that position could directly affect income sustainability, liquidity flexibility, or major goals.
That is where proportionality matters. We are not just evaluating whether the stock is risky. We are evaluating whether your overall financial plan can absorb that risk without forcing uncomfortable decisions later.
If the stock declined 30% or 40%, would you delay retirement? Reduce spending? Revisit estate plans? Postpone a major purchase? Or would the plan remain largely intact?
We know we can’t predict or control investing risk. What can, however, more effectively model the consequences of a bad stretch. We want to understand how much risk your plan can handle without changing how you want to live.
Acknowledge “Hidden” Exposure
Many investors underestimate how concentrated they really are. If you hold a large individual tech stock and also own diversified tech funds, you may have layered exposure. Part of the roadmap is understanding what you already own before reallocating proceeds.
Map the Tax Impact
Next, quantify the capital gain and the estimated tax liability. Large concentrated positions often carry significant embedded gains. Selling $1 million of low-basis stock can create a meaningful tax bill. That tax needs to be funded and/or mitigated intentionally.
- Are we setting aside cash from proceeds?
- Spreading sales across multiple tax years?
- Pairing gains with losses elsewhere?
- Can we fund our charitable giving by donating the appreciated stock?
This is where Fully Integrated coordination with your CPA becomes critical.
Unwind Gradually
In most cases, the solution is not dramatic. It’s not uncommon for the unwinding plan to be spread over multiple years to avoid triggering unnecessary tax bracket jumps. That needs to be thoughtfully modeled and not fixed by panic selling.
A concentrated position is often the result of success. The next step is making sure that success does not quietly dictate the future of the entire portfolio. The roadmap is not actually complicated. It just needs to be deliberate.
