Concentrated Stock Position Strategies: The Executive's Guide to Protecting Wealth
- Wes English, CFP®
- 3 days ago
- 21 min read
You worked hard to get here.
Maybe it was years of RSUs vesting at a company that kept growing. Maybe it was stock options that turned into something real. Maybe you inherited shares, or made an early bet that paid off in a big way.
However it happened, you've built real wealth and a lot of it is tied up in one stock. That's not a bad thing, necessarily. But it is a financial planning challenge that most people underestimate until it's too late.
This guide is designed to be the most thorough, practical resource on concentrated stock position strategies available. Whether you're a tech executive managing equity compensation, a long-tenured employee with employer stock, or someone who simply held a winning position long enough to create a problem worth solving.
Let's dig in.
What Is a Concentrated Stock Position?
A concentrated stock position occurs when a single security makes up a disproportionately large share of your investment portfolio. Financial professionals generally define a position as "concentrated" when it exceeds 10–20% of a portfolio, but the reality for many executives and high earners is far more extreme.
It's not unusual for engineers, senior managers, or executives at fast-growing companies to discover that 40%, 50%, or even 60% of their net worth is tied to the company they work for.
And when you layer in the fact that their income also depends on that same company, you get what behavioral finance researchers call double exposure risk, which is a situation where both your paycheck and your portfolio are riding the same horse.
The problem isn't the concentration itself but that most people don't realize just how much risk they're carrying until the market reminds them.
The Two Risks That Catch People Off Guard
1. Volatility Risk: Even Great Companies Drop
Individual stocks are historically far more volatile than diversified indexes. This is a well-documented phenomenon.
Research shows that in 2023 and 2024 (two consecutive years when the S&P 500 rose more than 25%) roughly 70% of individual S&P 500 stocks still experienced a drawdown of at least 15% at some point during the year.
When the market had a down year in 2022, 96% of S&P 500 stocks fell at least 15%, and nearly a third fell more than 40%. [1]
The question to ask yourself is simple: if your concentrated position dropped 40% tomorrow, would your financial plan still work?
For many people, the honest answer is: not quite.
2. Tax Friction: The Cost of Doing Nothing
Here's the other side of the coin. Even when investors know they're overconcentrated, taxes often stop them from doing anything about it.
When you sell appreciated shares in a taxable account, the IRS wants a cut. The current federal long-term capital gains tax rates are 0%, 15%, or 20% depending on your income level. [2] High earners also owe an additional 3.8% Net Investment Income Tax (NIIT), bringing the federal maximum to 23.8%. [2]
Layer on state income taxes (New Jersey, for example, taxes capital gains as ordinary income at up to 10.75%), and combined tax rates can push past 30–37% for executives in high-tax states.
Put another way: sell a $4 million gain without planning, and you might write a check to the government for $1.2 million or more!
That's a painful number, which is exactly why so many people hold on too long. They tell themselves they'll diversify "eventually." But eventually has a way of arriving right after the 40% correction.
Why Smart People Stay Overconcentrated (It's Not Just Taxes)
Behavioral finance gives us a useful lens here. There are three well-documented psychological biases that keep intelligent, successful people overexposed to a single stock:
Familiarity Bias - We tend to overweight investments we understand well, especially our employer's stock. The logic feels sound: "I know this company from the inside. I believe in it." But deep familiarity with a business is not the same as protection from its stock price declining.
The Endowment Effect - Once we own something, we attach additional subjective value to it beyond what the market assigns. Studies consistently show that people demand more to sell something they own than they would pay to acquire the same thing. That attachment is emotionally reasonable but financially, it can lead to inaction at exactly the wrong time.
Career Loyalty - Selling company stock, for many executives, feels like a vote of no confidence in the company or leadership team. This is especially common among founders, early employees, and executives with deep identity tied to a single organization. But your financial security and your professional loyalty are two separate things.
The good news: there's no shortage of strategies to address concentrated positions thoughtfully without necessarily triggering a massive tax bill, and without feeling like you're abandoning ship.
11 Strategies for Managing a Concentrated Stock Position
There is no one-size-fits-all answer here.
The right approach depends on your tax situation, your timeline, your liquidity needs, your charitable intent, and whether you're an insider subject to trading restrictions. Often, the best solution combines multiple strategies in sequence.
Here are the most widely used and most effective approaches.
Strategy 1: Gradual Systematic Diversification
The simple version: Sell a little at a time, on a schedule, instead of all at once.
This is the most straightforward starting point: sell a portion of your concentrated position each year in a disciplined, pre-planned way. Instead of triggering one enormous tax bill in a single year, you spread the tax hit across multiple calendar years, staying within a specific capital gains "budget" that aligns with your income, tax bracket, and long-term portfolio goals.
Here's an example. Suppose you hold $2 million in a single stock with a very low cost basis. Rather than selling everything at once and potentially owing $500,000+ in taxes in a single year, you might sell $200,000–$300,000 per year over several years, reinvesting the proceeds into a diversified portfolio each time.
There's also a timing dimension worth knowing: during periods of market volatility, lower stock prices mean smaller capital gains and therefore a smaller tax bill on the same number of shares. That's counterintuitive, but it's real. Market dips can actually create more tax-efficient exit opportunities for investors who are already planning to diversify. [3]
The tradeoff is that gradual diversification still leaves you exposed to the concentrated position throughout the process. That's why it's often paired with one of the hedging strategies described below.
Strategy 2: Direct Indexing and Tax-Loss Harvesting
The simple version: Instead of buying an index fund, you own all the individual stocks inside it. When some of those stocks dip, your manager sells them to capture a tax loss and uses that loss to offset the taxes you owe when you sell your concentrated position.
This is one of the most powerful and underutilized tools available for managing concentrated equity and it deserves a thorough explanation.
Direct indexing means owning the individual stocks that make up a market index (like the S&P 500 or Russell 3000) directly in your taxable account, rather than through a mutual fund or ETF. You own actual shares of Apple, Microsoft, Johnson & Johnson, and hundreds of others, just proportionally to mirror the index.
Because you own the individual securities, your investment manager can do something an index fund can't: when one of those stocks dips, they can sell it to "lock in" a loss on paper, a process called tax-loss harvesting. They immediately replace it with a similar but not identical stock (for example, selling Coca-Cola and buying PepsiCo) to maintain your market exposure without violating the IRS wash-sale rule, which prohibits repurchasing the same security within 30 days of a loss sale.
Here's why this matters so much for someone with a concentrated position:
Those harvested losses don't disappear. They become tax credits that can be used to directly offset the capital gains you generate when selling your concentrated stock.
Let's say you sell $300,000 worth of your concentrated position and realize a $200,000 capital gain. In that same year, your direct index portfolio generated $80,000 in harvested losses. Your net taxable gain drops to $120,000. Over years of consistent harvesting, in virtually any market environment, because individual stocks in an index are always moving differently from each other, this can meaningfully reduce your total tax liability and dramatically accelerate your ability to exit the concentrated position. [4]
This is different from what you can do with a mutual fund or ETF. Those vehicles only generate harvesting opportunities in broadly falling markets. A direct index generates them continuously, because individual stocks within an index are always diverging from each other. [4]
In practice, a coordinated strategy might look like this: fund a direct index with the proceeds from each year's concentrated stock sale, let the manager harvest losses throughout the year, and use those losses to offset the gains from next year's sale. This creates a self-reinforcing cycle of tax-efficient diversification. [5]
Strategy 3: Long/Short SMA (The Leveraged Diversification Engine)
The simple version: Borrow money to buy a diversified basket of stocks around your concentrated position, and simultaneously "short" (bet against) other stocks to create losses on purpose. Then use those losses to pay the tax bill on selling your concentrated stock. Done right, you can diversify your entire position without paying a single dollar in capital gains taxes.
This is one of the most sophisticated and effective strategies available for investors with large, highly appreciated positions. It goes by several names: a long/short separately managed account (SMA), a 130/30 strategy, or a leveraged loss-harvesting strategy.
Here's how it works.
Step 1: You start with your concentrated position. Let's say you own $1 million in a single stock with a near-zero cost basis. You don't sell it.
Step 2: The manager borrows money (leverage) to buy a diversified basket of other stocks. These "long" positions are selected to closely track a broad market index, so your overall portfolio starts behaving like a diversified investor rather than a concentrated one.
Step 3: Simultaneously, the manager borrows shares of other stocks and sells them short. A short position makes money when the stock falls and loses money when it rises. These short positions are also selected to minimize how differently your portfolio behaves from the overall market (this is called minimizing "tracking error").
Step 4: The magic happens. Because both the long positions (the new stocks purchased) and the short positions (the borrowed stocks sold) are established at current market prices, their cost basis starts at those prices. As markets move, many of these positions will generate losses, which the manager harvests. Those losses accumulate and are used to offset the capital gains from gradually selling your concentrated stock.
The result: your concentrated position shrinks over time, your portfolio becomes increasingly diversified, and the tax bill on exiting the concentrated position is significantly reduced or eliminated entirely. [13]
The speed at which this works depends on how much leverage is used. Research has examined two common configurations: (1) where the long and short extensions each equal 30% of the equity value (a "130/30" structure), and (2) where they each equal 100% of the equity value (a "200/100" structure).
In backtests covering 380 different 10-year scenarios across different stocks and market periods, the higher-leverage version reduced any single stock's portfolio weight to 5% or less within five years in more than 90% of scenarios analyzed. [13]
The lower-leverage version diversifies more slowly, but also maintains more upside exposure to the concentrated stock for longer, which may appeal to investors who believe in the stock's long-term prospects but still want a responsible exit ramp.
What are the risks? Short selling involves real risk. A shorted stock can rise rather than fall, generating losses rather than gains. Leverage also introduces the possibility of margin calls (if your account value drops significantly, the lender can demand additional collateral or force liquidation). These are serious considerations, which is why this strategy is typically managed by professional investment managers inside a separately managed account with institutional-grade risk controls. [13]
Who is this right for? Investors with large, highly appreciated positions of typically $1 million or more in a single stock, who want to diversify as efficiently as possible from a tax standpoint, and who are comfortable with the mechanics and risks of a leveraged approach. It's particularly compelling when paired with a 10b5-1 plan for public company insiders.
Strategy 4: Covered Call Strategies
The simple version: You rent out the right to buy your stock to someone else. They pay you cash upfront. If your stock rises high enough, they buy it from you at a price you agreed to in advance, which is actually fine because that sale becomes part of your diversification plan.
A covered call works like this: you already own shares. By selling a call option on those shares, you give another investor the right to purchase your shares at a set price (called the "strike price") within a certain timeframe. In exchange, you receive an upfront cash payment called the option premium, which is paid to you immediately, regardless of what happens next.
Here's what can happen:
If the stock stays below the strike price before expiration: the option expires worthless. You keep your shares and the premium. You've essentially been paid to wait.
If the stock rises above the strike price: the buyer exercises their right to purchase your shares at the agreed price. Your shares are sold at that level, which generates a taxable gain, but one that was pre-planned and can be offset by losses from a direct index or long/short SMA running alongside it.
Think of covered calls as a way to set a disciplined, income-generating exit price that also creates a predictable tax event you can plan around in advance.
The primary limitation: you give up any upside above the strike price. If your stock surges well past that level, you've sold at a lower price than you could have gotten. For someone whose primary goal is reducing concentration rather than maximizing upside, that's usually an acceptable tradeoff.
Strategy 5: Protective Put Strategies
The simple version: You buy an insurance policy on your stock. If it crashes, you still get to sell it at a price that was agreed to upfront.
A protective put gives you the right (but not the obligation) to sell your shares at a specific price (the "strike price"), even if the market price falls far below it.
Here's how it works in plain terms: suppose your stock is trading at $100. You pay a premium to purchase a put option with a $90 strike price. Now, no matter what happens to the stock, you have the right to sell at $90. If the stock drops to $50, you can still sell at $90. Your downside is capped.
What you pay for this protection is the option premium, which is a real cost that reduces your overall return. But for executives approaching a significant liquidity moment (a retirement date, an IPO lockup expiration, a home purchase, or a major planned expense), having a guaranteed price floor is often worth the cost.
The protective put doesn't accelerate your exit and you still own the shares and face the same tax situation whenever you sell. What it does is eliminate catastrophic downside risk during the period before you're ready or able to sell.
Strategy 6: Equity Collar Strategies
The simple version: Combine a price floor (the put) and a price ceiling (the call) at the same time. The money you collect from the call helps pay for the put, so the protection costs you little or nothing out of pocket.
A collar strategy is exactly what it sounds like. It puts a collar on the range of outcomes your stock can produce. You simultaneously:
Buy a protective put (your downside floor - e.g., $90)
Sell a covered call (your upside cap - e.g., $110)
The premium you receive from selling the call offsets the cost of buying the put. In many cases, the two offset each other almost entirely, meaning you can achieve meaningful downside protection at little or no net cost.
The tradeoff: your potential upside is now limited to $110 per share. If the stock rockets to $150, you don't benefit from those gains above $110. But your losses are also capped at $90, meaning you've traded away uncertainty in both directions for the security of a defined range.
This is particularly popular among executives who are legally or reputationally constrained from selling shares immediately (for example, during a lockup period or in the months before a planned retirement), but who want real protection against a market downturn in the interim.
Strategy 7: Exchange Funds (Section 721)
The simple version: You and several other investors, each holding a different concentrated stock, pool your shares together into one big diversified fund. Nobody sells anything, so nobody pays taxes. After seven years, everyone gets a diversified slice of the pool instead of their single stock.
Exchange funds are one of the most elegant long-term solutions for tax deferral and they've attracted significant attention as the runup in technology and AI stocks has created a new generation of overconcentrated investors.
Here's the full picture. A group of investors (each with a large, appreciated position in a different company) contribute their shares into a private partnership. Investor A contributes Meta. Investor B contributes Nvidia. Investor C contributes Tesla. No one sells anything, so no taxable event is triggered. After a mandatory seven-year holding period, each investor can exit with a diversified basket of all the contributed stocks and still no capital gains tax is owed, because the cost basis on each investor's original shares carries forward. [6]
The result: you've achieved meaningful diversification without writing a check to the IRS.
The constraints, however, are significant:
The seven-year lockup is non-negotiable. You cannot access your contribution as a diversified basket before the seven-year mark without giving up the tax benefit. [6]
The fund must hold at least 20% in illiquid assets (typically real estate) to satisfy IRS qualification requirements. This means your portfolio will include some allocation to an investment you didn't choose and can't easily exit. [7]
Minimums are high. Most traditional exchange funds require $1 million or more to participate, though newer platforms are lowering that bar. [7]
Popular stocks may be excluded. If the fund already holds too much of a particular stock (e.g., Meta, Nvidia, Apple), it may be unable to accept additional contributions of that stock, meaning many of the most common concentrated positions can't be contributed. [8]
Exchange funds work best for investors who: (a) don't need liquidity from this position for at least seven years, (b) are comfortable with the illiquid real estate component, and (c) hold a stock that the fund is actively accepting.
Strategy 8: Section 351 Exchange Funds (The Newer, More Flexible Alternative)
The simple version: Imagine a group of investors pool their different stocks together to create a brand-new ETF. Everyone contributes their shares, no one pays taxes, and everyone walks away owning a piece of a diversified ETF instead of one concentrated stock with no seven-year waiting period.
Section 351 exchange funds are a relatively newer strategy that operates under a different part of the tax code than traditional exchange funds, and for many investors, the structure is more flexible and more accessible.
Here's how it works, step by step:
Step 1: A group of investors contribute their concentrated positions. Each investor brings a different appreciated stock into the transaction. You might bring Meta shares, someone else brings Alphabet, another brings Microsoft. Importantly, no single stock can represent more than 25% of the total contribution, and the top five stocks combined can't exceed 50% of the total. The IRS mandates this diversification test to qualify for tax-deferred treatment. [8, 9]
Step 2: Those pooled assets are used to launch a brand-new exchange-traded fund (ETF). The fund is structured to meet IRS Section 351 requirements, which means the exchange of your concentrated stock for ETF shares is a non-taxable event at the time of contribution. Your cost basis in your concentrated stock carries forward into the ETF shares, meaning the future tax liability is preserved, but it's deferred until you eventually sell the ETF. [8]
Step 3: You now own shares of a diversified ETF instead of your concentrated position. Those ETF shares are publicly traded, meaning they're liquid from day one. There is no seven-year lockup.
Think of it this way: imagine you're holding a single puzzle piece (your concentrated stock) and you trade it for a completed jigsaw puzzle (the diversified ETF). The IRS says: "Fine, we're not going to tax that trade right now but when you eventually sell the puzzle, you owe us based on what you originally paid for the piece." You've traded concentration for diversification, deferred your tax bill, and gained liquidity.
The key difference from a traditional exchange fund: Traditional Section 721 exchange funds are private partnerships with a seven-year lockup and an illiquid real estate requirement. A Section 351 exchange fund produces a publicly traded ETF that you can hold, sell, or estate-plan around without any holding period restriction. [8, 9]
What are the limitations? You must bring a mix of securities that meets the IRS diversification test. You can't simply contribute one giant single-stock position by itself. You also need to participate at the ETF's launch; this isn't something you can join after the fact. And unlike tax-loss harvesting or gradual selling, you're not eliminating the tax liability, you're deferring it. When you eventually sell the ETF, you'll owe capital gains taxes on the original appreciation plus any gains that have accrued in the ETF itself. [8]
Who is this right for? Investors who have a concentrated position they want to exit quickly for diversification purposes, who want the resulting portfolio to be liquid, and who are bringing a mix of positions (or can coordinate with others to form a qualifying pool). It's a compelling middle ground between the liquidity of a direct sale and the long lockup of a traditional exchange fund.
Strategy 9: 10b5-1 Trading Plans (For Public Company Insiders)
The simple version: If you work at a public company and know things about the business that the public doesn't know, you can't just sell your stock whenever you want. A 10b5-1 plan lets you set up a selling schedule in advance during a window when you're "clean" so the trades happen automatically later, even when you might otherwise be restricted from trading.
If you're an officer, director, or any employee with regular access to material nonpublic information (MNPI) at a publicly traded company, selling shares is meaningfully more complicated than it is for an ordinary investor. Trading windows are narrow. Blackout periods can stretch for months. And the legal stakes of getting it wrong are serious.
A Rule 10b5-1 trading plan is an SEC-sanctioned mechanism that creates a legal safe harbor for insiders who want to sell stock systematically.
Here's how it works:
During an open trading window (a period when you're not in possession of MNPI) you work with your broker and legal counsel to establish a written plan specifying: how many shares you want to sell, at what price or on what schedule, and over what time period. Once the plan is signed and locked in, trades execute automatically according to those instructions. You have no discretion over individual transactions after the plan is live. [10]
The key benefit: even if you later come into possession of material nonpublic information (which, for a senior executive, is effectively constant), the trades are protected by the affirmative defense of having been pre-planned when you were clean.
Under updated SEC rules that took effect in 2023, there's now a required cooling-off period of at least 90 days after establishing the plan (or until the next quarterly earnings release, whichever comes later) before the first trade can occur. This was designed to prevent executives from front-running known events by setting up plans immediately before them. [11]
In practice, 10b5-1 plans have become standard practice for senior executives managing ongoing diversification of equity compensation (RSUs, options, and employer stock grants) in a compliant, systematic way. [10]
Strategy 10: Charitable Strategies — Donor-Advised Funds and Charitable Remainder Trusts
The simple version: Instead of selling your appreciated stock and paying capital gains taxes, donate the stock directly to charity. The charity sells it tax-free, you get a tax deduction, and your favorite cause benefits, all without the IRS taking 30%+ off the top.
For investors who have charitable goals alongside financial ones, donating appreciated stock directly is one of the most tax-efficient moves in the entire planning toolkit.
Donor-Advised Fund (DAF): A donor-advised fund is like a charitable savings account. You contribute appreciated shares directly to the fund without a sale, and with no capital gains tax. You receive an immediate charitable income tax deduction for the full fair market value of the shares.
The fund then sells the shares internally (tax-free) and invests the proceeds. You can then recommend grants to any qualified 501(c)(3) charity you choose, on your own timeline (next month, next year, or over decades). [12]
Here's the math on why this is so powerful: if you own shares worth $200,000 with a cost basis of $20,000, selling them directly triggers $180,000 in capital gains. At a 30% combined rate, you lose $54,000 to taxes and donate $146,000.
If instead you contribute the shares directly to a DAF, you avoid the $54,000 capital gains tax and receive a $200,000 charitable deduction, and the full pre-tax value goes to your charitable goals.
Charitable Remainder Trust (CRT): A CRT is a more sophisticated option for investors who want both charitable impact and ongoing income. You contribute appreciated assets to an irrevocable trust, which sells them tax-free, reinvests the proceeds into a diversified portfolio, and pays you (and/or other named beneficiaries) an income stream for life or a set number of years. At the end of the trust term, whatever remains passes to designated charities. You receive a partial charitable tax deduction upfront and defer the capital gains tax on the sale. [12]
CRTs involve legal complexity and ongoing administration, but for the right investor they can be remarkably effective both financially and philanthropically.
Strategy 11: Family Gifting Strategies
The simple version: Give shares of your concentrated stock to family members who pay lower taxes than you do. If those family members sell the shares, the household pays far less in capital gains taxes overall.
For investors engaged in estate planning or wealth transfer, moving appreciated shares to family members in lower tax brackets is a straightforward and often overlooked strategy.
The mechanics: you can gift appreciated shares to a spouse, adult child, or other family member without triggering a taxable event at the time of the gift. The recipient takes on your cost basis. If they're in the 0% long-term capital gains bracket they can potentially sell those shares and pay no federal capital gains tax at all. [2]
Annual gifting is limited by the IRS annual gift exclusion though gifts above that threshold simply require filing a gift tax return and drawing against your lifetime exemption.
For larger estates, more sophisticated vehicles (including Grantor Retained Annuity Trusts (GRATs), Irrevocable Life Insurance Trusts (ILITs), and Qualified Personal Residence Trusts (QPRTs)) can be layered in to shift appreciation out of a taxable estate while managing the capital gains exposure.
These strategies involve meaningful legal complexity and should always involve both a CFP® and a qualified estate planning attorney working in coordination.
A Practical Case Study: The $5 Million Concentrated Position
Let's ground all of this in a real-world scenario.
Imagine a senior software engineer who has spent 12 years at a major technology company.
Between RSU grants, option exercises, and share appreciation, they've accumulated $5 million in company stock with a cost basis of $800,000. Their unrealized gain is $4.2 million.
Sold all at once with a 35% combined federal and state tax rate yields them $1,470,000 in taxes. Net proceeds are $3,530,000.
Instead, their advisor helps them build a multi-year coordinated plan:
Year 1: Establish a 10b5-1 trading plan to systematically sell $500,000 in shares per year during open trading windows.
Year 1 (concurrent): Fund a direct index SMA with the proceeds from the first sale, beginning tax-loss harvesting immediately to build a pool of losses that can offset the following year's sale.
Year 1 (concurrent): Contribute $300,000 in shares directly to a Donor-Advised Fund. This has no capital gains tax and a full charitable deduction at fair market value.
Years 2–5: Continue the 10b5-1 sales and harvest $80,000–$120,000 in losses annually through the direct index. Each year's losses reduce the taxable gain from that year's sale.
Throughout: Apply a protective collar on the remaining balance to protect against a major market downturn during the multi-year transition.
The outcome is a substantially diversified portfolio over five years, significantly reduced total tax exposure, meaningful charitable impact, and an executive who sleeps considerably better at night.
The Self-Assessment Every Investor Should Run
Before you decide whether any of these strategies apply to you, it helps to take an honest look at your situation:
Is more than 20% of my investable assets in a single stock?
Is my income also dependent on the same company?
Would a 40% decline in that stock materially change my retirement timeline?
Do I know my actual cost basis and the specific tax cost of selling today?
Have I reviewed this exposure in the last 12 months with a financial professional?
If you answered "yes" to most of the first four and "no" to the last one — that's your starting point.
Why This Planning Matters More Than Ever
The run-up in technology and AI-adjacent stocks over the past several years has created a new generation of high-net-worth individuals sitting on enormous unrealized gains. Many of them have never worked with a financial planner who specializes in equity compensation. Many have never modeled out their actual tax exposure. And many are one bad earnings report or market correction away from watching years of wealth creation evaporate.
The strategies described here are real, available, and used by sophisticated investors every day. But they require coordination across investment management, tax planning, estate planning, and (in the case of public company insiders) securities law. They require a plan that accounts for your personalized situation.
Ready to Take the Next Step?
At Vault Private Wealth, we work specifically with professionals navigating concentrated equity positions, complex compensation structures, and the intersection of investment management and tax efficiency.
If you've read this far, you're already doing the right thing by thinking carefully, asking the right questions, and refusing to let inertia make your financial decisions for you.
The next step is a conversation. with a CFP® professional who has helped people transform concentrated welath into lasting financial secuirty.
I offer a complimentary consultation for individuals who want to understand what a coordinated concentrated stock strategy might look like for their specific situation, using their cost basis, their tax exposure, their timeline, and their goals.
One question is worth sitting with before you go:
If your largest stock position dropped 40% tomorrow, would your financial plan still work?
If the answer is anything other than a confident "yes" — let's talk.
Sources
[1] Parametric Portfolio Associates. "Four Potential Solutions to Concentrated Stock Positions." https://www.parametricportfolio.com/blog/four-potential-solutions-to-concentrated-stock-positions
[2] Internal Revenue Service. "Topic No. 409: Capital Gains and Losses." https://www.irs.gov/taxtopics/tc409
[3] Fidelity Investments. "5 Ways to Diversify Concentrated Stock Positions." https://www.fidelity.com/learning-center/wealth-management-insights/diversify-concentrated-positions
[4] Financial Planning Association. "Tax-Efficient Ways to Diversify Concentrated Stock Positions." Journal of Financial Planning, October 2024. https://www.financialplanningassociation.org/learning/publications/journal/OCT24-tax-efficient-ways-diversify-concentrated-stock-positions-OPEN
[5] J.P. Morgan Asset Management. "Turn Concentrated Stock Risk Into Potential Tax-Savings Reward." https://am.jpmorgan.com/us/en/asset-management/adv/investment-strategies/separately-managed-accounts/tax-managed-solutions/concentrated-stock-risk/
[6] Wikipedia. "Exchange Fund." https://en.wikipedia.org/wiki/Exchange_fund
[7] Kitces, Michael. "When to Use Exchange Funds to Diversify Concentrated Holdings." Kitces.com. https://www.kitces.com/blog/exchange-funds-diversify-concentrated-securities-tax-deferral-section-721-cache/
[8] Gibson Capital. "Section 351 Exchange Funds: A New Diversification Tool for Concentrated Stock Positions." September 2025. https://gibsoncapital.com/2025/09/10/section-351-exchange-funds-a-new-diversification-tool-for-concentrated-stock-positions/
[9] Plancorp. "A Guide to 351 Exchanges: Tax-Efficient Diversification." https://www.plancorp.com/351-exchanges-guide
[10] NASPP (National Association of Stock Plan Professionals). "Rule 10b5-1 Trading Plans: What You Need to Know." March 2026. https://www.naspp.com/blog/rule-10b5-1-trading-plans-explained
[11] Mercer. "Executives and Director Trading Under New SEC Rule 10b5-1." https://www.mercer.com/en-us/insights/total-rewards/executive-compensation/executives-and-director-trading-under-new-sec-rule-10b5-1/
[12] Kiplinger. "Capital Gains Tax Rates 2025 and 2026." https://www.kiplinger.com/taxes/capital-gains-tax/602224/capital-gains-tax-rates
[13] BlackRock / Aperio. "Long/Short Extensions Diversify Concentrated Stock Tax-Neutrally." July 2025. https://www.blackrock.com/us/financial-professionals/insights/diversify-with-long-short
Wes English, CFP® is the founder of Vault Private Wealth, an independent Registered Investment Advisor based in Princeton, NJ. He holds the CFP® designation and previously served as a Strategist at BlackRock and as a Principal and Wealth Strategist at Merrill Lynch. Advisory services are offered through Vault Private Wealth, an investment adviser registered with the state of New Jersey. Advisory services are only offered to clients or prospective clients where Vault Private Wealth and its representatives are properly registered or exempt from registration.
The information on this site is not intended as tax, accounting, or legal advice, nor is it an offer or solicitation to buy or sell, or as an endorsement of any company, security, fund, or other offering. Information provided should no be solely relied upon for decision making. Please consult your legal, tax, or accounting professional regarding your specific situation. Investments involve risk and have the potential for complete loss. It should not be assumed that any recommendations made will necessarily be profitable.
The information on this site is provided "AS IS" and without warranties either express or implied and the information may not be free from error. Your use of the information provided is at your sole risk.
The information linked to on third-party sites is being provided strictly as a courtesy and convenience. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. When you access these websites, you are leaving our website and assume any and all responsibility and risk for use of the websites you are visiting.
Comments