What To Do When You Own TOO Much Company Stock
First, lets start with the fact that there is NO judgement here. When you work in tech, there are multiple ways to end up owning too much company stock -- be it you were an early employee and the company IPO'd, you didnt sell all your RSUs as they vested, ESPP plans, and more
It's a "good problems to have"
But -- if you're reading this -- then you you now have a large chunk of your net worth tied up in one single name. And that’s a risky situation to be in.
This post is a short-and-sweet guide NOT on how you ended up here -- but on how to fix it.
Is It Really Easy (You Can Sell With A Small Tax Impact)?
Not all tech stocks are up, and having a concentrated position doesn't always mean there is a large tax bill to be paid if you sell. So first things first, know what your purchase prices were for your stock (known as tax lots), and see if at least SOME of them can be sold with no or minimal taxes. I've even had a couple of clients where all of it could be sold with near $0 tax impact. So first and foremost -- know what each tax lot is, and what the tax impact (if any) would be if you sold (it could be easier than you fear)
Your "Menu Of Choices" If The Stock Is Highly Appreciated
If we aren't in "easy camp", then we have various choices we need to make. All the below have many various pros/cons, so I wont dive into the details for each item here. But knowing the menu and the major pros/cons is a strong first step. Then, I've included a link to more detail on each of the strategies if it feels like a possible right fit.
1. Sell and Pay the Taxes
I've never met someone who likes paying taxes, but sometimes paying them and moving on is the right choice. It’s straightforward and immediately reduces concentration risk.
Pros: Easy to implement; immediate de-risking
Cons: You owe taxes in the year you sold
NOTE: most times when you sell, you want to create a selling plan. This helps minimize regret (it's psychologically hard to sell company stock at times)
2. Aim for Long-Term Capital Gains
If you're planning to sell shares, at least optimize for long-term capital gains in order to capture the reduced capital gains rates.
Pros: Lower tax rates than short-term gains (taxed at income rates mostly)
Cons: If not already long-term, you need to hold until you are (taking on the concentration risk)
3. Harvest Losses
Cool thing about US tax law is you can offset gains with losses. So whether some of your shares are at a loss, or you have other investments at a loss, selling to "harvest" those losses allows you to sell some of your shares at a gain without incurring tax.
Pros: Lowers taxes you might otherwise need to pay
Cons: Requires you have stocks at a loss to sell. Also be aware of the wash sale rule
4. Hedging
In some cases, you want to protect against downside, even if just for a period of time. Use of financial tools like options, collars, or variable prepaid forwards can allow you to mitigate downside risk / lock in gains (assuming setup correctly).
Pros: Typically allows you to protect against downside (depending on strategy)
Cons: Fees, complexity can be high, ongoing monitoring is required
5. Build a Portfolio Around the Position (Direct Indexing)
We're getting a bit more advanced here, but depending on your investments that are not your company stock, you may be able to buy a bunch of other companies, so that all of them combined approximates a market index (e.g. the SP500). This is called direct indexing
Pros: Retains at least some of your company stock (reducing tax burden); diversification; likely will generate more future tax-loss-harvesting opportunities
Cons: Requires hands-on management; requires material capital to build a portfolio around the position; still wont exactly mirror the index you're targeting
6. Accelerated Tax Loss Harvesting/Direct Indexing with 130/30
One of the benefits of direct indexing is that since you own many stocks, some will likely decline, and you can capture those losses to tax-loss-harvest against other gains. You can accelerate the benefits of that by using a 130/30 (or 150/50) strategy, where you go 130% long on some stocks and 30% short on others.
Pros: Retains at least some of your company stock (reducing tax burden); diversification; generates more tax-loss-harvesting than direct indexing
Cons: Higher fees and complexity
7. Exchange Funds
These can be complex, but also interesting. At a very high level, you're able to swap your concentrated shares for a diversified portfolio within an exchange fund -- diversifying without incurring the tax on the capital gain
Pros: Instant diversification; Defers capital gains
Cons: 7 year holding period required; high minimum investment requirements; high fees
8. Section 351 Exchange
These can also be complex, but also can interesting. At a very high level, you contribute a more diversified portfolio of appreciated shares to an entity creating a new ETF -- and get back shares of the ETF in exchange, which can be sold instantly (if you so desired).
Pros: Instant diversification; Defers capital gains
Cons: Infrequently created; Requires a diversified portfolio to contribute (not just your concentrated position); ETF you get is unlikely to trade frequently
Putting It All Together
If you’re feeling overwhelmed by a giant block of tech stock, you’re definitely not alone. Many professionals in high-growth companies that have done well end up in a similar spot. The key is to acknowledge the risk and start taking steps to diversify. There’s no one-size-fits-all solution; your best move might be a combination of a few strategies above.
If you’re unsure where to begin, a financial advisor with expertise in tech equity comp can guide you through the trade-offs. The end goal is simple: a more balanced portfolio, fewer sleepless nights, and a plan for the future—no matter where your company’s stock goes next.
Ready to Explore Your Options/Talk To An Expert? If you’re ready to tackle your concentration risk, let’s talk about which approach might work best for you. A little planning goes a long way to ensure your hard-earned shares don’t become a source of anxiety. Feel free to reach out and we can discuss your unique situation in detail. You can book a free meeting with 30-40 Wealth here
Article Last Updated: April 18, 2025