RSU Concentrated Position: Managing Too Much Company Stock

Holding too much company stock creates multiple layers of risk:

• **Single company risk:** Company failure wipes out both job AND savings
• **Industry risk:** Tech crashes affect income, stock, and 401k simultaneously
• **Opportunity cost:** Concentrated positions underperform diversified portfolios long-term
• **Volatility drag:** Single stocks are 3-5x more volatile than diversified portfolios
• **Emotional decisions:** Hard to sell stock in company you work for
• **Career correlation:** Your human capital is already "invested" in employer

Multiple approaches to reducing concentrated positions:

• **Systematic selling:** Sell fixed percentage of RSUs as they vest
• **Time-based selling:** Sell fixed dollar amount monthly/quarterly
• **Price-target selling:** Sell portions at predetermined price points
• **Rebalancing triggers:** Sell when position exceeds threshold (e.g., 20%)
• **Hedging:** Options strategies to protect without selling
• **Exchange funds:** Pool shares with other concentrated holders (accredited only)

10b5-1 plans allow pre-scheduled selling to avoid insider trading concerns:

• **What it is:** Written plan specifying future sales while not aware of material nonpublic information
• **Cooling off period:** Must wait 90 days (officers) or 30 days (others) before first trade
• **Good faith requirement:** Cannot adopt plan while possessing inside information
• **Modification rules:** Changes require new cooling off period
• **Single trade plans:** Only one single-trade plan per 12 months
• **Company approval:** Most employers require legal review before adoption

Minimize taxes while diversifying:

• **Long-term gains:** Hold shares 1+ year for lower capital gains rates
• **Tax-loss harvesting:** Offset gains with losses elsewhere in portfolio
• **Charitable giving:** Donate appreciated shares to avoid capital gains entirely
• **Qualified small business stock:** Some startups qualify for exclusion
• **Installment sales:** Spread gains over multiple years
• **Opportunity zones:** Defer and potentially reduce gains with OZ investments

Financial advisors recommend limiting single-stock exposure:

• **Maximum 10-15%:** No single stock should exceed this percentage of portfolio
• **Including employer:** This applies especially to employer stock
• **Total concentration:** Consider all correlated assets (same industry, etc.)
• **Gradual reduction:** Don't need to hit target immediately
• **Rebalance regularly:** Check quarterly, rebalance when necessary