How Much Company Stock Is Too Much?
For many mid-career tech professionals, company stock quietly becomes the largest position on their balance sheet.
RSUs vest year after year. ESPP shares accumulate. A 401(k) may already include employer exposure. Meanwhile, the rest of the portfolio grows more slowly.
No single decision feels risky. But concentration builds gradually, often without intention.
Why RSUs Create Hidden Concentration Risk
RSUs are compensation. But once they vest, they become taxable income and concentrated equity exposure.
If you work for a successful company, it is natural to feel confident holding shares. The problem is not belief in the company. The problem is correlation.
- Your income depends on your employer.
- Your bonus may depend on performance.
- Your career trajectory is tied to the company.
- Your investments may now be heavily concentrated in the same firm.
When employment and investment risks overlap, your financial exposure is much larger than it appears.
Calculating Your True Exposure
Many professionals underestimate the amount of company stock they hold.
True exposure includes:
- Vested RSUs held in brokerage accounts
- Unvested RSUs expected to vest in the next few years
- ESPP shares
- Company stock inside a 401(k)
- Deferred compensation tied to company performance
When these pieces are viewed together, the concentration can easily exceed 30-50 percent of total net worth.
That may or may not be intentional. Often, it is simply unmanaged.
There Is No Universal “Right” Percentage
Investors often ask whether 10 percent, 20 percent, or 30 percent is the right cap.
The answer depends on:
- Total net worth
- Time horizon
- Future earning power
- Risk tolerance
- Tax considerations
A professional early in their career with strong earning power may tolerate more concentration temporarily. A professional within ten years of retirement may not.
Diversification should be deliberate, not reactive.
Diversification Frameworks That Actually Work
Instead of guessing, diversification works best when guided by a framework.
Common approaches include:
- Percentage cap strategy: Set a maximum percentage of net worth in company stock, and reduce exposure when that limit is exceeded.
- Time-based reduction: Sell a portion of shares each vesting cycle to gradually reduce concentration.
- Goal-based diversification: Use vested shares to fund specific goals such as college savings, home purchases, or taxable portfolio allocation.
- Tax-coordinated sale:s Align RSU sales with overall income planning to manage marginal tax brackets.
The right framework depends on the full financial picture, not just the stock price.
Balancing Tax Efficiency and Risk Reduction
One reason professionals delay selling RSUs is the fear of taxes.
It is true that selling shares triggers taxable events. But holding concentrated stock carries risk that is not visible on a tax return.
Often, the conversation should not be “How do I avoid taxes?” It should be “What level of concentration risk am I comfortable carrying?”
Tax planning and diversification should be coordinated, not treated as competing priorities.
When Delegation Makes Sense
Managing RSU diversification is not a one-time decision. Vesting schedules change. Income fluctuates. Markets move.
For mid-career tech professionals with growing equity compensation, concentration risk needs ongoing coordination.
That is where structured equity compensation planning for tech professionals becomes valuable. Diversification decisions are made in the context of retirement planning, tax strategy, and long-term investment management rather than in isolation.
If company stock has become a meaningful percentage of your net worth and you want a coordinated strategy rather than reactive decisions, it may be time to revisit how much exposure you are intentionally carrying.