How much company stock is too much?

Imagine you have $1.5 million invested.

About $550,000 is stock in the company you work for. Another $100,000 of RSUs is scheduled to vest over the next year.

The stock has done well. You believe in the company. Selling feels uncomfortable, especially when doing so could create a large tax bill.

So how much company stock is too much?

There is no percentage that works for everyone.

But once a meaningful portion of your wealth depends on one company, the decision deserves more attention than simply asking if you think the stock will continue going up.

For executives and other high-income professionals, company stock can affect your investments, taxes, cash flow, retirement plans, and family goals at the same time.

That makes company stock concentration a financial planning decision, not simply an investment decision.

What is a concentrated stock position?

A concentrated stock position occurs when one company represents a significant portion of your investment portfolio or net worth.

That can happen intentionally if you believe strongly in the company and continue holding shares.

But for many employees with busy lives, concentration creep can balloon without anyone noticing.

You receive RSUs. More shares vest next year. You participate in an employee stock purchase plan. Stock options become valuable. The shares appreciate.

A position that once represented 5% of your portfolio can gradually become 15%, 25%, or considerably more.

There is no universal percentage that determines when you own too much company stock.

As a general reference point, begin paying closer attention when a single stock represents more than 10% of an investment portfolio.

The bigger question: What happens if you are wrong?

Imagine that $550,000 company stock position falls 50%.

You lose $275,000.

Now consider what might be happening at the company at the same time.

A falling stock price could coincide with:

• Lower bonuses
• Reduced future equity awards
• Layoffs or restructuring
• Fewer opportunities for promotion
• A job search at exactly the wrong time

Your salary, bonus, future RSUs, career, and a large portion of your investment portfolio can all depend on the same company.

The question I ask my clients is:

How would your family’s financial plan change if the stock fell significantly at the same time your income became less certain?

The answer matters much more than picking an arbitrary percentage.

Your future RSUs count too

One mistake is looking only at the company shares you own today.

Suppose you currently have:

• $400,000 of vested company stock
• $150,000 of RSUs vesting during the next 12 months
• Another $250,000 of unvested grants scheduled over the following three years

Even if you sell some shares today, your employer may continue adding company stock to your income.

An executive earning significant annual equity awards may choose to diversify existing shares more aggressively because new company stock continues arriving.

Another person approaching retirement with less future grants may make a different decision.

Your company stock is part of your household portfolio

Your investment accounts should not be evaluated independently.

Imagine a couple with:

• $500,000 in one spouse’s 401(k)
• $300,000 in the other spouse’s 401(k)
• $200,000 in IRAs
• $400,000 in a taxable brokerage account
• $500,000 of employer stock

Looking at the $500,000 company position by itself does not tell you enough.

You need to see how it interacts with the other $1.4 million.

Your 401(k) could also own your employer indirectly through an index fund.

You may own additional companies in the same industry.

Your spouse may work in the same sector.

Your income and bonus may already depend heavily on the health of that industry.

This is why I prefer looking at investments as one household portfolio rather than a collection of separate accounts.

“But I believe in the company”

You probably do.

You may know the business better than most investors. You may work with talented people. You may see opportunities that make you optimistic about the future. None of those things automatically make the stock a bad investment.

But there is another question worth asking:

If you received the same amount in cash today, would you choose to invest all of it in your employer’s stock?

Suppose $300,000 of RSUs vest.

If your employer deposited $300,000 of cash into your brokerage account instead, would you immediately use all $300,000 to buy company stock?

If the answer is no, continuing to hold every vested share deserves a closer look.

Doing nothing and holding is still a daily decision to invest that income into your company stock.

Taxes are important, but they should not make the entire decision

This gets harder when the shares have appreciated substantially.

You may look at the unrealized gain and think:

“I don’t want to sell because I’ll owe taxes.”

That’s understandable. But avoiding taxes and reducing investment risk are different goals.

A tax bill may be the cost of turning a concentrated asset into money that can support other priorities.

The better question is:

How can we reduce concentration while managing the tax consequences thoughtfully?

Possible approaches may include:

• Selling over multiple tax years
• Coordinating sales with other income
• Using capital losses when available
• Donating appreciated shares as part of an existing charitable plan
• Prioritizing higher-basis shares when appropriate
• Coordinating sales with RSU vesting and other equity compensation

The right approach depends on the type of stock you own, how you acquired it, its cost basis, your income, charitable goals, and the rest of your tax situation.

For high-income families, investment decisions and tax planning need to happen together.

What about RSUs?

RSUs create another common source of confusion.

When RSUs vest, the value is generally treated as compensation income for federal income tax purposes.

After vesting, you own shares of company stock. From that point forward, the decision to keep those shares becomes an investment decision.

Many executives mentally treat vested RSUs differently from cash they used to purchase a stock themselves.

But after vesting, the question becomes similar:

If you had the same amount of cash today, would buying this much company stock be the best use of it?

Maybe the answer is yes.

Maybe you want some continuing exposure to the company.

But the answer should come from your financial plan rather than inertia.

How much company stock should you keep?

Instead of starting with a universal percentage, I would work through several questions.

1. What percentage of your investments is company stock?

Calculate the position relative to your total investable assets.

Then calculate it again relative to your household net worth.

2. How much additional company stock is coming?

Include future RSUs, stock options, ESPP purchases, and other expected equity awards.

Your exposure may continue rebuilding even after you sell shares.

3. How dependent is your income on the same company?

Consider:

• Salary
• Bonus
• Future equity awards
• Benefits
• Deferred compensation
• Pension benefits, if applicable
• Career prospects

Your employment itself represents major economic exposure to the company.

4. What would a large decline actually change?

Don’t stop at:

“I’d hate losing the money.”

Ask what the loss would mean.

• Would it delay retirement?
• Change your college funding plans?
• Affect a future home purchase?
• Prevent one spouse from stepping back from work?
• Force you to reduce spending?

The more important the stock has become to goals you cannot easily postpone, the more concentration risk matters.

5. What tax cost would selling create?

Estimate the actual tax impact. Don’t assume the tax bill is too large before calculating it.

Then compare that known cost with the investment risk you would continue taking by holding the stock.

6. How much concentration can you live with?

There is a difference between your ability to take risk and your willingness to take it.

A family with $4 million invested and modest spending may have greater financial capacity to hold a concentrated position than a family depending on those shares for a home purchase in two years.

You do not necessarily have to sell everything

Diversification does not have to mean selling every share tomorrow.

You might decide you want to continue owning some company stock.

For example, you might create a policy such as:

“We are comfortable keeping company stock around 10% of our investable assets and will diversify shares above that level as additional RSUs vest.”

Another family may choose a different threshold. The value comes from deciding in advance.

Otherwise, each vest creates the same debate:

• Should we sell?
• Should we wait?
• What if it keeps going up?
• What about taxes?
• Maybe next quarter?

A written strategy can turn a recurring emotional decision into part of your investment process.

What should you do with the money after you sell?

Selling company stock is only half of the decision. The proceeds need another job.

Depending on your financial plan, that could mean:

• Building or replenishing cash reserves
• Diversifying into your long-term investment portfolio
• Funding college accounts
• Paying for a home purchase or renovation
• Increasing charitable giving
• Preparing for one spouse to leave work
• Funding an earlier retirement
• Reducing debt

This is another reason I do not view company stock concentration in isolation.

The best reason to diversify often is not simply that one stock feels risky.

You may have something more important for the money to accomplish.

Why this matters for Dallas executives

Dallas-Fort Worth has a large corporate base, with major employers across technology, financial services, airlines, healthcare, engineering, energy, and other industries.

For executives building careers at these companies, compensation can increasingly include bonuses, company stock, deferred compensation, and other benefits.

Over time, your employer can become connected to several pieces of your net worth at once.

That makes coordinating your employee benefits, equity compensation, taxes, and investments increasingly important as your career progresses.

There is no single answer.

A 10% position may deserve attention.

A 20% position deserves an even closer look.

And a family with 40% or 50% of its investable wealth tied to one company should understand exactly what risk it is choosing to take.

But I would not start by asking:

What percentage is allowed?

I would ask:

How much of our family’s future are we comfortable tying to one company?

Then consider your current portfolio, future equity awards, taxes, cash needs, career exposure, and family goals together.

The goal is not to predict what your employer’s stock will do next.

It is to decide how much your financial plan needs to depend on that prediction.

Want another set of eyes on your company stock?

Motif Planning works with high-income families who want ongoing financial planning and investment management.

I look at company stock alongside your taxes, other investments, equity compensation, benefits, retirement plans, and family goals.

If you want to understand the strategy without personally managing every financial detail, schedule a 15-minute discovery call to see if Motif Planning is a good fit.

This article is for educational purposes and does not constitute individualized investment, tax, or legal advice. Examples are hypothetical. Investment decisions should be based on your individual circumstances.

Written by Spenser Liszt, CFP®

Spenser is the founder of Motif Planning, a flat fee financial planning and investment management firm in Dallas, Texas.

He works primarily with high-income families managing investments, equity compensation, taxes, employee benefits, and major family financial decisions.

Learn more about Spenser and Motif Planning.