Equity compensation can quietly transform your balance sheet, especially if you’ve been at a successful company for a long time. Over the years, RSUs vest, stock options accumulate, ESPPs build, and suddenly, a single company represents a huge percentage of your net worth. For many professionals who are nearing retirement or major life transitions, this raises an uncomfortable question: “Am I too concentrated in company stock and what do I do about it?” Let’s talk through how to assess concentration risk, weigh your options, and diversify without triggering regret or a surprise tax bill.
Why Concentration Happens
Company stock tends to build up quietly and incrementally:
- You receive annual RSU grants that vest on autopilot
- You participate in ESPPs but don’t sell
- You exercise and hold options for long-term tax treatment
- You avoid selling to avoid looking disloyal or just because you’re busy
None of these actions are wrong, but together, they can result in 20%, 30%, even 50% of your liquid net worth tied to one company. This is fine when the stock is soaring, but it becomes a problem when it isn't.
Risk Cuts Both Ways
Many clients remember colleagues who held onto stock during a run-up and made millions, but fewer talk about those who held on too long and watched value evaporate. The truth is single-stock concentration can generate enormous wealth, but it can just as easily erase it. Think of former industry leaders like GE, Nokia, or the regional banking institutions during financial downturns. Past performance is not a moat, and when your job, bonus, and investments are all tied to the same company, you’re not just betting on growth, you’re doubling down on volatility and correlation.
What's the Right Amount?
There's not a one-size-fits-all answer, but here are some general guidelines:
- If more than 10–15% of your net worth is in a single stock, it’s time to review
- If your company stock represents a major part of your retirement funding plan, you may be overexposed
- If you'd feel sick watching it drop 30%, then it’s probably too much
Concentration risk isn't just about the downside, it’s about fragility. Even if you're confident in your company, your financial plan should be able to survive unexpected changes.
Three Scenarios to Help Illustrate
1. Overweight: Risk Exceeds Comfort
Meet Maria, a 55-year-old executive, who holds $3 million of her company's stock, about 40% of her total portfolio. On paper, that looks like strength. But with retirement only five years away, her concentration is risky. Maria's company stock shows an average daily volatility of about 2%, which means her position can swing by $60,000 in value in a single trading day. In a choppy week, half a million dollars may appear or disappear. For Maria, those fluctuations are more than unsettling, they directly threaten her retirement security. Volatility also compounds over time. A series of down days or a rough quarter can magnify losses in ways that aren't intuitive. For example, a 30% decline followed by a 30% rebound does not put her back where she started, it leaves her with only 91% of her original value. That math works against concentrated positions, especially when the clock to retirement is short. Diversification, through staged sales or a 10b5-1 plan, can reduce that risk, lowering both the day-to-day swings and the long-term fragility of her plan.
2. Just Right: Balanced Exposure
James, age 45, has $400,000 of company stock as part of a $4 million portfolio, about 10%. That allocation is meaningful, but not overwhelming. What makes James's case stand out isn't just the numbers, but how he navigates the emotional side of stock ownership at work. At his company, colleagues regularly compare notes about their holdings. Some boast about never selling, others swap strategies for timing sales, and a few carry the unspoken belief that selling signals a lack of faith in the business. For many professionals, this creates political and emotional pressure to hold more stock than is financially prudent. James avoids those traps by being clear on his goals. He doesn't view selling as disloyalty; he sees it as stewardship of his family's wealth. When peers brag about doubling down, he can acknowledge their excitement without feeling compelled to follow. His discipline comes from treating his company stock as a supplement to his diversified portfolio, not the centerpiece. If the stock rallies, James benefits. If it stumbles, his broader plan remains intact. By staying grounded in his own financial strategy rather than the office chatter, James keeps company stock in its proper place: valuable but not defining.
3. Underweight: Minimal Impact
Sophia, age 38, has $50,000 of ESPP stock in a $2 million portfolio, about 2.5%. On paper, that's a rounding error. Yet, like many professionals, she sometimes gives the position more weight in her mind than it deserves. For Sophia, the stock carries emotional value. It feels like a badge of her hard work and connection to the company. At times she worries: “Should I be doing more with this? What if I sell and miss out?” The reality is that whether the stock doubles or gets cut in half, the effect on her overall plan is negligible. A 50% drop would reduce her net worth by just 1.25%, the kind of movement she could see in a single year of normal market fluctuations. But there's another angle. By keeping her allocation so low, Sophia is also underutilizing an opportunity. Her company offers an ESPP with a 15% purchase discount and favorable holding rules. Participating more fully could generate a reliable, low-risk source of return enhancement, provided she sells shares methodically and avoids letting the position snowball into real concentration. For Sophia, the lesson isn't about chasing upside or ignoring company stock. It's about calibrating. She doesn't need to double down, but she also shouldn't overlook benefits that her employer is offering. A disciplined, rules-based approach to her ESPP would allow her to capture that value while still keeping her broader portfolio well diversified.
How to Begin Reducing Risk
We don't believe in all-or-nothing decisions. We believe in taking the time and helping our clients think through several scenarios to help them land on the best course of action. That includes:
- Modeling the tax consequences of partial sales
- Using 10b5-1 plans to sell gradually over time; this can be especially helpful for insiders or executives
- Reinvesting proceeds in diversified strategies aligned with the broader goals
- Documenting a process so that no single decision ever feels high stakes
The goal isn't to sell everything. Bringing your financial plan back into balance is a way to install some guardrails so your future doesn’t depend on one stock continuing to deliver.
Emotional Hurdles Are Real, But Not Always Rational
For some clients, holding company stock can be about more than a return. It can be about perceived loyalty, a signal of belief in the company, or even part of a personal “brand”. This is understandable, but we also remind clients that they’ve already earned the stock, so their job is to protect the value it represents. Selling stock doesn't mean you’re abandoning your company. It means you're building a more resilient financial life so you can be prepared to weather any market, job change, or life event confidently.
Concentration Without Intention is Just Risk
There's a difference between holding a stock because it's part of a plan and holding it because you haven't decided what else to do. One is strategy and the other is inertia. We help clients move from indecision to action, without pressure or binary thinking. You don't have to sell everything, but you do have to choose.
Wealthspire Advisors is the common brand and trade name used by Wealthspire Advisors LLC and its subsidiaries, separate registered investment advisers and subsidiary companies of NFP Corp., an Aon company. © 2025 Wealthspire Advisors
This material should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The information provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use.
Wealthspire Advisors and its representatives do not provide legal or tax advice, and Wealthspire Advisors does not act as law, accounting, or tax firm. Services provided by Wealthspire Advisors are not intended to replace any tax, legal or accounting advice from a tax/legal/accounting professional. The services of an appropriate professional should be sought regarding your individual situation. You should not act or refrain from acting based on this content alone without first seeking advice from your tax and/or legal advisors.
Certain employees of Wealthspire Advisors may be certified public accountants or licensed to practice law. However, these employees do not provide tax, legal, or accounting services to any of clients of Wealthspire Advisors, and clients should be mindful that no attorney/client relationship is established with any of Wealthspire Advisors’ employees who are also licensed attorneys.
Please Note: Limitations. The achievement of any professional designation, certification, degree, or license, recognition by publications, media, or other organizations, membership in any professional organization, or any amount of prior experience or success, should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results or satisfaction if Wealthspire is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Wealthspire Advisors by any of its clients or a third party.
Registration of an investment advisor does not imply that Wealthspire Advisors or any of its principals or employees possess a particular level of skill or training in the investment advisory business or any other business.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
