Most people default to "hold and hope." There are better options, and most plans use a combination, not just one.
If you have ever worked at a public company that paid you in equity, or you know someone who has, you know the pattern. The shares vest over years, the position grows, and one day you look at your statement and realize a single stock is somewhere between 40% and 80% of your net worth. The conversation that follows usually goes one of two ways: "I should diversify, but the tax bill" or "I love this company, why would I sell?"
Both responses skip past the actual question. The actual question is not whether you should sell, hold, or do something more clever. The question is what specific combination of strategies is right for your situation, given your cost basis, your concentration, your state of residence, and your other income sources. There is no single right answer. There are four structured approaches that, in some combination, almost always form the right plan.
The default answer to a concentrated employee stock position is rarely a single strategy. It is almost always a combination, sequenced over multiple years, calibrated to specific tax events and life events as they happen.
This article walks through the four strategies most often used to manage concentrated employer stock positions. Each one solves a different problem. Each one has tradeoffs. Most well-executed plans use two or three of them in combination.
Who This Is For
- You hold a concentrated position in your employer's stock (RSU, ESPP, ISO, NSO, or similar)
- The position represents 25% or more of your investable net worth
- You have heard "you should diversify" from at least three people, and want a more nuanced answer than "sell everything and pay the tax"
The Four Strategies, At A Glance
Each of these is a tool, not a complete plan. The right plan for you almost certainly draws from more than one. The point of laying them out side by side is to give you a working vocabulary so the conversation about your specific situation can move past "sell or hold" and into something more useful.
1 Sell & Diversify (LTCG Harvesting)
The most direct approach. Sell the concentrated position systematically over a defined window (often 3-5 years) at long-term capital gains rates and reinvest in a diversified portfolio. Lowest complexity, cleanest outcome, highest immediate tax cost.
This strategy is sometimes dismissed as "too obvious," which is unfair. For many people, the right plan really is some version of this, executed deliberately rather than chaotically. The question is not whether to sell; it is how much, on what schedule, and around which other income events.
2 Borrow Against The Position (SBLOC)
A securities-backed line of credit lets you borrow against the value of the stock without selling it. You keep the position, get liquidity at competitive rates (often comparable to mortgages), and defer any tax event indefinitely. Useful when you have strong conviction in the stock or specific cash needs that would otherwise force a sale.
The tradeoff is real: you still carry full concentration risk, and if the stock drops sharply, the lender can require additional collateral or force a sale at the worst possible time. SBLOCs are a tool, not a replacement for diversification. They work best as a bridge or as part of a broader plan.
3 Options Overlay (Collars, Covered Calls)
Use options around the position to define specific outcomes. A protective put limits your downside. A covered call generates income while capping your upside. A collar combines both, defining a range of acceptable outcomes for the position. Specialized services like SpiderRock manage these strategies on concentrated positions across many shareholders.
This is the most complex of the four strategies and the most precise. It lets you keep the position while reducing the risk profile in specific, defined ways. The tradeoffs are ongoing cost (or capped upside), complex tax treatment, and the need for active management or a manager who handles it for you.
4 Build Portfolio Ex-Sector
Leave the concentrated position alone, but deliberately construct the rest of your portfolio to exclude the sector you already have implicit exposure to. If you have a concentrated tech stock position, your remaining portfolio should underweight or exclude tech. Over time, as you continue saving and adding to other positions, your total portfolio concentration declines without you having to sell anything.
This is mitigation, not elimination. You still carry full single-stock risk on the concentrated position today. But for someone who cannot or will not sell (whether due to vesting schedules, tax cost, or genuine conviction), this is a way to gradually reduce the impact of concentration over years rather than days.
There is also a fifth consideration that runs across all four: don't make avoidable tax mistakes. Harvesting losses elsewhere in the portfolio to offset gains, timing sales around bonus or vesting events, using donor-advised funds to charitably give appreciated shares instead of cash, electing 83(b) where applicable on early-stage equity. These are not strategies. They are table stakes. But they often determine whether the plan you chose actually delivers the outcome you wanted.
Compare The Four Side By Side
The tool below lets you click through each of the four strategies to see the pros, cons, and who each approach is best for. There are no inputs and no calculations to run, because the honest truth is that the right answer depends on details no calculator can capture. But understanding the four options side by side is the starting point for any real conversation.
What the tool assesses: the comparison tool walks through four strategies for managing concentrated employee stock positions (sell and diversify via long-term capital gains harvesting, borrow against the position with a securities-backed line of credit, use options overlays such as collars and covered calls, or build a sector-excluded portfolio around the position) and presents the benefits, tradeoffs, and ideal-fit scenarios for each, without recommending any specific approach.
A Common Scenario
Consider a hypothetical example. A software engineer at a public tech company has $2.8M in vested employer stock, representing about 65% of her net worth. Her cost basis on most of it is near zero, because the bulk of the position came from RSUs that vested years ago when the share price was much lower. She has been holding because every advisor she has talked to has said "you should really diversify," but nobody has given her a clear path that doesn't just mean "pay a huge tax bill and move on."
The right answer for her is almost certainly some combination, not a single move. A defined sales schedule that takes a chunk off the top each year at LTCG rates, sized to keep her in a manageable bracket. An SBLOC for liquidity needs in the meantime, so she is not forced to sell at a bad time when expenses come up. A small collar around part of the remaining position to protect against a catastrophic drop. A donor-advised fund for any charitable giving, funded with her most appreciated shares.
Not one strategy. Three or four, sequenced deliberately, calibrated to her specific tax brackets and goals. That is what an actual plan looks like, and it is rarely what someone arrives at on their own.
Is A Single Stock Deciding Your Financial Future?
When 40, 50, or 60% of your net worth depends on one company, that company is making your financial decisions for you. There are multiple ways to reduce that dependency, and most plans use more than one. A 15-Minute Discovery Call is a quick way to talk through what combination might apply to your situation.
Book Your 15-Minute Discovery CallFrequently Asked Questions
What percentage of my portfolio in a single stock is too concentrated?
Many planners use 10 to 15% as a working ceiling for any single position before concentration risk starts dominating portfolio behavior. Above 25%, the single position effectively determines the outcome of your financial plan, which is rarely the bet you actually want to be making.
How are RSUs taxed when they vest?
When restricted stock units vest, the full value is treated as ordinary income, which is typically subject to federal, state, FICA, and Medicare taxes at the moment of vesting. Any subsequent appreciation after vesting is then taxed as capital gains when you eventually sell.
What is an SBLOC and how much can I borrow?
A securities-backed line of credit lets you borrow against the value of your investment portfolio while keeping the underlying positions intact. Typical advance rates range from 50 to 70% of the portfolio value depending on the holdings, with rates that are usually competitive relative to other secured borrowing.
What's the difference between a covered call and a collar?
A covered call is selling an option that gives someone else the right to buy your stock at a higher price, generating income but capping your upside. A collar pairs a covered call with the purchase of a put option, which uses the call income to fund downside protection, defining a specific range of outcomes for the position.
Can I donate my employer stock to charity to avoid taxes?
Donating appreciated long-term shares directly to a qualified charity or donor-advised fund avoids the capital gains tax you would owe on a sale, while generally allowing a deduction for the full market value. This is one of the most tax-efficient ways to charitably give from a concentrated position.
How do I think about employee stock I haven't vested yet?
Unvested shares are not really "yours" yet for portfolio planning purposes; they are a form of compensation that may or may not arrive. Most planning treats vested shares as the actual concentrated position to manage, and unvested shares as future cash flow to plan around as it crystallizes.
This article is produced by Ceva Capital LLC dba Ceva Advisors. The information contained herein is intended solely to provide educational content to our clients and other readers that we find relevant and interesting. Opinions expressed are as of the date of publication and are subject to change. Nothing in this document should be construed as investment, tax, or legal advice; we provide advice on an individualized basis only after understanding your circumstances and needs. Information provided comes from sources we believe are reliable, but accuracy is not guaranteed.
