Strategies for a concentrated stock position

A concentrated stock position is when a single company represents a significant fraction of your net worth — often because it's your employer's stock, accumulated through RSUs, options, or an ESPP. Concentration creates returns but also creates risk: a company-specific catastrophe can wipe out a huge piece of your wealth overnight. Diversifying is the rational move, but it often comes with a big tax bill from embedded gains. Here are the ways to thread the needle.

1. Stop adding, start selling on vest

The simplest first step: make sure you're not making the concentration worse. Stop any ESPP contributions, decline optional employer stock purchases, and sell RSUs the moment they vest (they're taxed as income either way, so holding adds no tax advantage). This cuts off the supply side.

2. Gradual, scheduled sales

Instead of selling all at once, sell a fixed percentage or dollar amount on a recurring schedule — quarterly or monthly. This spreads the tax hit across multiple years, smooths out timing risk, and is psychologically easier than one big exit. 10b5-1 plans can formalize this for employees with material non-public information restrictions.

3. Donate appreciated shares

If you give to charity, give appreciated stock instead of cash. You avoid capital gains tax on the appreciation and get a full market-value deduction. Donor-advised funds let you bunch these donations and take advantage in high-income years.

4. Exchange funds

Exchange funds pool concentrated positions from many investors and swap them for diversified fund shares, tax-deferred. Usually require a 7-year lockup and have high minimums ($1M+). Good for very large concentrated positions where the tax savings justify the complexity.

5. Options strategies (advanced)

Covered calls, protective puts, and collars can reduce the downside risk of a concentrated position without triggering a sale. These are complex, have ongoing costs, and often require broker approval. Worth the learning curve only if the position is very large and very appreciated.