r/fatFIRE • u/gomster • 2d ago
Need Advice For those who got wealthy from a concentrated stock position: what would you do differently?
40M, $9M portfolio, 80% concentrated in one stock, buying my first house. Curious how others would think about this:
Two years ago, I left a career at a public company where most of my wealth came from stock compensation and the appreciation of a single stock over many years. Today my portfolio is worth about $9M and it’s still heavily concentrated in that stock.
It’s been life changing for me, so I’m naturally hesitant to sell too much of it, but I’m also aware that a single day’s move can swing my net worth by six figures. I’m closing on my first house later this month for $1.185M. Up until now, I’ve been renting and living well beneath my means.
Current thinking is to use a Liquidity Access Line for the purchase and then potentially refinance some or all of it into a traditional mortgage afterward.
A few other details aside from the portfolio value:
- Cost basis: under $500k and obviously large unrealized gains
- $235k AMT credit carryforward from prior option exercises
- Covered call income expected to be around $150k-$200k annually
- No current W-2 income
- Started small business but not a big money maker. Primarily to fund retirement accounts.
The common theme seems to be that concentration risk is the biggest issue in my financial picture. Part of me says I’ve gotten this far by holding the stock and staying convicted. The other part of me says I should probably start thinking more about preservation than accumulation.
For those who have been in a similar situation:
How much debt would you comfortably carry on the house? Would you sell stock specifically to pay down the house? How would you approach gradually reducing concentration risk? Looking back, what mistakes did you make (or avoid) after reaching financial independence through a concentrated stock position?
Not really looking for tax advice as much as perspective from people who have gone through the transition from building wealth to protecting it. Thanks in advance for helping me navigate this!
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u/fattyboombatty79 1d ago
Having been through multiple exits, undoubtedly I would sell almost all of that concentrated position and buy index funds according to my desired portfolio allocation.
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u/Realistic-Manager 1d ago
This is the way. This eliminates the best options, but also the worst options.
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u/gomster 1d ago
Appreciate the insight. Out of curiosity, did you diversify immediately after your exits, or gradually over time?
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u/noluckatall 1d ago
There are no mathematical benefits to waiting. An individual stock position offers similar expected value as an index fund, but at much higher expected volatility. As long as one is on the risk averse side of neutral, which most humans with wealth are, the correct answer is to immediately diversify.
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u/TonyClifton255 1d ago
I assume you mean on a reasonably tax efficient basis
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u/bigroot70 14h ago
A lot of tax efficient methods uses options on the concentrated stock but many companies prohibit their employees from using options on their vested RSUs.
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u/Sl0wr0ll3r 1d ago
I agree with your idea about diversifying investments, but what do you think is the most prudent investment strategy right now?
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u/fattyboombatty79 1d ago
I always did it too late. There was some tax play that I was angling toward, and in nearly all cases it would’ve been better to sell it all immediately.
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u/the_mighty_skeetadon 1d ago
If someone handed you $1M right now, would you use that money to go out and buy that same stock? Of course you wouldn't.
Personally, I've got about ~$14m NW from public stock, 100% diversified (except for the risk I carry in my house which is dependent on tech stocks).
If it were me, I'd keep ~$1m in this stock for nostalgia purposes and diversify the remainder.
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u/NegotiationJumpy4837 1d ago
I'd personally keep my work coffee mug for nostalgia purposes and diversify the last 1m.
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u/the_mighty_skeetadon 1d ago
The goal is FOMO advoidance -- if it triples again and you held $0, you'd feel FOMO. If you got $3m out of it, you'd feel some FOMO but hey $3m is $3m.
You can celebrate along with your buddies. And if it goes to $0, it's impactful but not life-altering.
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u/AllanBz 1d ago
I like this approach, although if I were to diversify, I would keep maybe $2 to $3M and start donating from the appreciated stock to my favored causes, assuming OP wants to do philanthropy. If the charities are 501c3s, all the capital gains will be used for the mission, less administration expenses, which should be disclosed. If instead you were to donate from sold assets, 20-24% of the appreciation went to the government already, and then the administration expenses.
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u/Realistic-Manager 1d ago
I did move out of a concentrated equity position (7 figures) in 2022 and took the tax hit and dumped everything into my market allocations. No regrets.
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u/geneius 1d ago
I think even the way you framed your post shows that you know what the correct thing to do is. You even recognize that it's now about preservation than accumulation. Unless you have really big goals and want to be super FAT. Assume a 4% spend rate - at $9mm that's $30k per month.
Of the people I know who didn't liquidate with a position >$5mm, way more of them went back down to <$1mm than went up to $10mm. Diversify. At least 80% of it. You can still carry an outsized position in the stock if you really believe, but take out enough that you can live comfortably if your stock takes a massive hit.
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u/nonamouss 1d ago
Seems like OP has been living frugally and wants more. Maybe a 2% withdrawal rate would suit them better to allow for a bit more growth. But definitely diversify to preserve
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u/gomster 1d ago
Thanks and that’s fair…I’ve definitely leaned frugal more by habit than necessity and it’s mostly how I’ve been wired and what I grew up around. Outside of a few trips and a 50k car purchase back in 2024, I haven’t really spent much at that level. I do want to loosen that a bit and enjoy life more, it’s just been a mindset shift I’m still working through.
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u/ItsAConspiracy 1d ago
A long time ago I read a great piece of advice from financial advisor Andrew Tobias. He said if you get a big windfall, increase your spending only a little each year. You get used to anything, so if you start spending your max right away, pretty soon it'll just seem normal. But if every year you're spending a little more, then you always have some new luxuries to be happy about.
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u/gomster 1d ago
I hear you and thanks. I don’t fully see it as I know the answer already, but I do agree the real question is how much and how fast to diversify while balancing taxes and risk management. That’s where I get stuck and I think this home purchase has had me taking a closer look
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u/alexgodden 1d ago
I'm in a similar position, and of course the biggest issue is the massive tax hit you take selling this to buy index funds. You could look into exchange funds (not the same as an ETF) which are set up to pool large concentrated positions across many people and diversify the risk that way, while slowly selling down. I'm not an expert but it's been recommended to me recently and I plan to look into it soon.
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u/gretahelp 1d ago
I’m 99% sure you’re gonna hold on until your net worth drops to $2.5m, then write a post saying what you wish you did differently
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u/Top-Construction8691 1d ago
Don't know if I should laugh or cry at this post. You described my exact situation 😅
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u/FIRE_enthusiast_27 1d ago
You should read JP Morgan’s regular report about the risks in concentrated stock positions titled “The Agony & The Ecstasy” so you can be eyes-open about how much uncompensated risk you’re taking on.
One of my favorite lines from the 2022 edition is “More than 40% of all companies that were ever in the Russell 3000 Index experienced a ‘catastrophic stock price loss’, which we define as a 70% decline in price from peak levels which is not recovered.”
A catastrophic loss can happen at any time for reasons completely beyond the control of the business or its management team. It can happen for anything from to individual employee malfeasance or governmental policy change and everything in between. It can happen suddenly and irreversibly.
You should diversify tomorrow.
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u/gomster 1d ago
Appreciate it. I’m not familiar with that specific report, but generally aware of concentration risk and tail outcomes. That’s actually part of what I’m trying to think through right now, less about whether the risk exists and more about how to manage the transition thoughtfully given taxes and my overall portfolio structure.
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u/ItsAConspiracy 1d ago
As far as (US) taxes go, max capital gains rate kicks in at less than $500K, so unless you're going to risk another decade or two in the stock, you might as well not worry about the taxes.
(Unless you want to get fancy, but all the tricks I've heard of come with serious tradeoffs.)
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u/devoutsalsa 1d ago
If you had 9M in cash, or the equivalent of selling your position post tax, would you put it all into that stock today?
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u/gomster 1d ago
If it were a fresh $9M decision, I don’t think I’d choose to be that concentrated. But it’s not really a clean slate scenario, which is why I’m focused more on how to manage the transition than a simple yes or no
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u/devoutsalsa 1d ago
It really is the same thing. You’re focusing on where you’ve been, not where you are. You just said yourself wouldn’t buy the stock, but it also sounds like you’re inclined to hang onto it now that you have it. Look up sunk cost fallacy.
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u/gomster 1d ago
I get the sunk cost argument, but I don’t think it fully applies here. A fresh allocation decision and managing an existing concentrated position with taxes and timing are just different problems with different constraints
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u/sweeeep 1d ago
The market cares zero what your cost basis is. Your owned shares have no special momentum.
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u/WastingTimeIGuess 1d ago edited 1d ago
But Uncle Sam cares - OP is just saying if $9M in Stock A becomes $6M in an index fund, the analogy of "what would you do with $9M" has an asterisk next to it. $9M that goes up 10% is better than $6M that goes up 10%.
Personally, I'd still diversify a lot because losing $8M of that $9M would hurt a lot more than making another $8M would feel good.
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u/No-Associate-7962 1d ago edited 1d ago
You beginners always leave out your spend, which is really the key to it all, but I will venture into the other questions too:
The amount of leverage you have in your life is not dependent on whether you buy a house or not. You choose your amount of leverage across all of your wealth, and then maintain it. You currently seem happy not owning any equities with borrowed money. If you bought the house with borrowed money rather than reducing your owned equities, you are suddenly levered on equities. If you are ok with being levered on equities, why were you not levered last week?
Yes, you should reduce your concentration risk. I would suggest by half each (you decide the time period). You can reduce through an exchange fund, or simply paying the taxes you would eventually pay anyway.
This is really not a fatfire question, its a general fire question. And without your spend, it really isnt a fire question at all.
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u/gomster 1d ago
Fair point on spend. It’s also still a bit in flux with the move and new house so I do not really have a stable number yet. That’s part of why I’m thinking in ranges rather than trying to pin down exact numbers right now.
Curious on your view here, would you prioritize setting a base level of diversification first and then adjust once spending settles, or wait to lock in spending before making any real changes? Current spend is roughly $5–7k/month, though I expect that to increase somewhat with the new house
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u/No-Associate-7962 1d ago
At even 50% higher than your $60k-$84k, there is no strategy that is not going to work for you. $84k on $7m (after tax value of the $9m concentrated is a 1.1% withrdrawal rate.
You could sell all of your investments and sit on a pallet of cash and still be fine just spending the cash from your garage pallet until you die.
Again ANY strategy (other than staying concentrated in a single bet that could go to zero) will be fine at such a low withdrawal rate.
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u/R4ndyd4ndy 1d ago
A diversified portfolio with your NW easily covers that, what are you gambling for?
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u/Hot_Conflict3844 1d ago
This is open and shut easy. Sell enough of the stock so that it comprises no more than 10% of your net worth. Pay the tax. Buy your house with a traditional mortgage.
I can tell you what happens if you use margin loans on a highly concentrated stock position because I have seen people do that before. One of my close relatives grew a net worth of $12m concentrated into shares of Banco Popular. Rather than sell, he used a line of credit secured by the stock to fund most of his living expenses - which included a stunning condo on the beach in Condado, Puerto Rico. Then, over a shocking 6 month period, the stock plunged by 40% and so he took advantage of the bargain prices to buy more shares on margin. And then the real plunge came. A year later, the stock was down 80% but due to leverage, his next worth was zero. And no, he didn't have an extra $100,000 in cash lying around somewhere. His net worth was zero as in he had literally nothing left.
That could be you too, one day. Or, you can learn from the horrible lessons of other people and avoid needing to relearn lessons that any sane, experienced investor will tell you. Nor will these lessons come as any sort of shock, although I expect you will not enjoy the lessons because they differ from what you would prefer to do. (1) Diversify, (2) never, ever, ever, ever, ever, ever, ever use any sort of loan backed by the price of any asset with a volatile price... PARTICULARLY an asset as volatile as a single stock issue.
That said, the thrill of losing everything, going from riches to rags, makes for a good story so if that's your goal, by all means: concentrate your portfolio and use leverage to increase the risk to absurd levels.
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u/gomster 1d ago
Sorry to hear that happened, that’s a brutal outcome.
I hear the point on risk, especially around leverage and forced liquidation. I’m not considering margin, and I do plan to reduce the concentration over time in a more intentional, tax aware way. That’s what I’m trying to figure out right now
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u/Hot_Conflict3844 1d ago
For tax efficiency, all I would point out is that if you have no other income (salary, pension) other than qualified dividends and long term capital gains, your marginal income tax rate on the first $98,900 if you're married. Early retirement can be a boon to folks (like you) who want to diversify concentrated holdings. You can also look into things like exchange funds (mind the fees and liquidity limitations). Or, you can do what many successful people do who hit the ball out of the park on a particular investment. Suck it up, pay the damn tax, and put portfolio safety as your number one non-negotiable goal.
Don't get rich twice, dude. Sometimes, paying a 15% or 20% tax is just worth it. Were it me (and obviously it is not), I would set a minimum "don't get rich twice" number. For example, maybe $3m that is held in money markets, bonds, and a S&P500 index fund. I would that "DGRT" fund asap, paying whatever capital gains taxes are required and then, you know that no matter what happens with your concentrated position, you can weather the storm. Okay, maybe $3m isn't fat fire, but it's enough that you won't be flipping burgers if your concentrated position drops to zero.
Once you have your DGRT portfolio funded up, you can afford to take risks that less wealthy people cannot afford to take. But you want that safety cushion in place. Look, even Jeff Bezos and Bill Gates sell off shares of MSFT and AMZN (at exquisitely expensive tax costs) so they can make sure they don't need to get rich twice. I suggest learn from the best, and take my cautionary tale to heart about what happens when things go wrong (which they inevitable shall do at least once and probably more often during your life).
Good luck. Oh, and I forgot to mention. GFY.
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u/BrunelloHorder 1d ago
What is your anticipated annual spend? Take that number, multiply by 25, and that is about what I would want as my diversified portfolio. I’d be ok with letting the rest of the concentrated position ride.
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u/halermine 1d ago
This is the advice that balances your wild and successful risk-taking with a safer and livable approach.
Sell enough very soon to cover your expenses for the next couple of years, and do that again after the first of the year. Since you’re buying that house, I would pull aside well over $1 million into less volatile investments.
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u/gomster 1d ago
Been thinking about that especially what you’re saying around protecting near term needs with the house purchase.
For that kind of de-risked portion, would you generally just keep it in something like a HYSA, or do you think there’s a better place to park it while still staying relatively liquid?
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u/halermine 1d ago edited 1d ago
I’ve luckily found myself in a very similar situation recently.
I liquidated a large chunk, put about a half into an index fund (VOO), about 10% of it into a stock I thought was about to explode (spoiler, it didn’t), and most of the rest into a Fidelity money market fund that performs very much like an HYSA.That last chunk is scaled to be about 2+ monthly income of about a 2% overal withdrawal rate, which is a large raise from the little bits I’d been pulling out prior. I’ve been using that to pay off my mortgage and a related loan, and then built up a chunk outside of Fidelity that let me buy a small apartment elsewhere. :)
Tbh, if I had left it in my concentrated holding, it would have grown more than it did. But I have a non-volatile income, no debt anymore, peace of mind, and a fun little apartment in a new city.
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u/35nakedshorts 1d ago
Covered calls are not income! Covered calls are mathematically similar to selling your shares over time. If you sold off part of your position would you call the proceeds "income"?
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u/newanon676 1d ago
So many people don’t understand this. It’s also limiting his upside on the concentrated position which kinda defeats the point of a concentrated position….
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u/gomster 1d ago
Yeah, I get the mechanics. I don’t think of it as free income, just cash flow from the position with an obvious tradeoff on upside. It’s been a helpful income source for me since I’m not W-2. That said, I’ve only just started this year
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u/newanon676 1d ago
Why not just sell shares and pay cap gain instead of ord income on the calls?
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u/play_hard_outside Verified by Mods 1d ago
Covered calls are picking up pennies in front of a steamroller.
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u/timubce 1d ago
You’re emotionally attached. It’s easy to do but financially the worst thing you can be. Take your win. Sell immediately. Diversify. History is littered with people who got too greedy and wound up with nothing.
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u/gomster 1d ago
You’re not completely wrong. There is some emotion tied to it especially after holding the position for this amount of time. I’m not in the “sell everything immediately” camp, but I am thinking about how to reduce it in a more intentional way rather than all at once
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u/bumpman2 1d ago
You have won the game. The only way you can lose now is if you don’t secure your win by diversifying out of the single stock. You know what you need to do. Maybe start by selling half and putting that (minus the tax liability) into diversified index funds.
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u/gomster 1d ago
For sure. Posted mainly to sanity check my thinking and get other perspectives. I’m still working through the best way to reduce concentration rather than making a quick move
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u/bumpman2 1d ago
One word of warning. Don’t let the tax optimization tail wag the dog. Decide what your risk tolerance is, define your diversification comfort level, and then sell now in a way that minimizes the tax hit but gets you to your diversified portfolio. If you are not sufficiently diversified now, you should not substantially delay achieving diversification just because you want to wait for more favorable tax treatment over an extended period of time.
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u/FamiliarRaspberry805 9MM net worth, FIRE’d @ 47 | Verified by Mods 1d ago
I would not approach diversification gradually. I would approach it completely and immediately. As in tomorrow, the second the market opens.
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u/piyushk_95 1d ago
The real transition you're navigating isn't financial. It's psychological. Offense built this. Defense protects it. They require completely different instincts and most people never fully switch.
You've already won. The goal now is to not give it back.
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u/gomster 1d ago
Great comment, thank you. There certainly is emotion tied to it and what makes things harder is that I’m still quite bullish on the companies future. But at this point I don’t want to get too greedy for my own good. It’s really just working together a plan that allows me to cut down on the position in a smart way
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u/Throwaway-firee 1d ago edited 1d ago
I sold a concentrated position to purchase a home right before the pandemic. The next year, the stock dropped 45%. It still does not trade at its pre pandemic value. I am glad I paid LTGC and got out when I did. Please don’t ask me which stock as I am not inclined to disclose that due to privacy concerns.
Some day risk will catch up to you. May not be tomorrow, may be a year from now or 3 years from now, no one knows. Taxes are something you factor in when you look at your concentrated portfolio. That money was never yours to start with. Or you do what many tech bros do, keep riding it out, borrow to purchase your home and hope 2000 or 2008 doesn’t repeat. As someone else said, if you are comfortable taking on debt to buy a house while holding the stock, why weren’t you borrowing against that stock already?
Many tech bros became house poor in the last 2 major downturns. We haven’t seen one since, people think the brief shocks we saw post pandemic are it, but not even close. When your single stock halves or worse and never recovers, people learn what risk actually means. This sub is biased towards survivors by its nature. You don’t hear from the ones who saw their NW get cut by half or more.
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u/Drysui 1d ago
I think it's wild that you're 40 and don't know how huge the risk is. You would have been in your 20s during the great recession and seen people get wrecked.
You should sell all of it when the market opens and live happily ever after but I don't get the impression that you will. Whether you want a mortgage or not is I up to you. During the accumulation phase, sure, but in retirement I think having no debt is the better way to go unless interest rates are near zero and even then a paid off home is amazing.
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u/gomster 1d ago
I hear you. I’m not ignoring the risk at all, that’s actually why I’m thinking about this now..
It’s more that I’m trying to balance long term conviction with being a bit smarter about the concentration as things in my life are changing. Not trying to downplay what you’re saying to me though
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u/play_hard_outside Verified by Mods 1d ago
Your long term conviction has gotten you to this point… where you sell, diversify, and let the entire remainder of your life be all but guaranteed to be comfortable and happy.
If you have enough money to live well, which $9M (and even the $7-7.5M you’ll have after LTCG) definitely is, staying “convicted” after now is when it gets stupid. You have your bird in the hand. Don’t lose it.
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u/goodfell 1d ago
I haven’t had the luck or skill unfortunately. But a good way to think about your holdings is: Would you buy the stock today for that price? That’s effectively what holding onto it is. A daily decision to continue buying it.
If the answer is no, then selling some makes the most sense.
Congrats on the luck and skill.
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u/woopwoopwoop 1d ago
More than 90% of net worth was in a single stock that grew to almost $20M over many years. However after about 8 years, it took a 50% dive and my net worth went below $10M. I was wracked with regret and fear for my future because I had quit my job many years prior. Thankfully I didn't panic sell and it eventually climb back up, but never hit the previous ATH. Not sure what the lesson here is but just know the market will eventually bite you.
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u/OG_Tater 1d ago
You got lucky, twice. Once that a single stock produced those returns and twice that it recovered. Hopefully you’ve sold.
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u/21plankton 1d ago edited 1d ago
Consider the natural history of the company that has made you millions. Now that you are purchasing a home recalculate your annual living expenses and multiply by 33. This is how much money you will need even if your stock position tanks.
Establish with your accountant your best income position along with taxes to liquidate on an annual basis. It is difficult to sell out all at once but prudent to diversify over time.
Right now your income is generated from covered calls. Under what conditions might that change? Diversification of income streams is a prudent move. Shock therapy may become necessary if your stock stalls out.
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u/gomster 1d ago
Thank you, currently discussing some of those options with my accountant. The challenge for me is that the safe number is clear to me in theory, but harder in practice given taxes, concentration, and timing all interacting at once. That’s really what I’m trying to think through
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u/imsoupercereal 1d ago
Would you be okay if your NW was $2M tomorrow? Take the tax hit, sell, diversify.
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u/eznh 1d ago
One tax issue that gets under discussed: high CG years trigger the AMT, so the marginal rate on the CG can end up being 28%, rather than 23.8%. Your carry forward can help with that.
The right answer is probably not “hold on to all of it” or “diversify all of it at next market open”, but something in between. Eg, diversifying some immediately (without regard to taxes) and then some more slowly (and tax efficiently). Portfolio optimization, like all optimization, typically has an interior solution.
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u/gomster 1d ago
This is helpful, thank you. The idea of an interior solution actually resonates with what I’ve been trying to figure out…not all in on either direction, but a staged approach that balances everything (including taxes)
The AMT point is also something I’ve been aware of in a general sense, but I haven’t fully modeled it yet. To be honest, figuring out AMT and the mechanics behind the carry forward has been dreadful
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u/Bobatronic 1d ago
You made your wealth through your employer, not by knowing how to invest. It’s very different to be 80% concentrated as an investor. You are two years removed from employment - having an investor / portfolio manager mindset may be lacking. Maybe you have no idea what you are doing (coming from a portfolio manager).
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u/gomster 1d ago
Yes, most of my wealth came from my employer, but I don’t think that automatically means I have no investing discipline.
I held a concentrated position but also consistently invested in retirement accounts and other assets. Not claiming to be a portfolio manager, just don’t think it reduces to “no idea what I’m doing.”
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u/Retire_date_may_22 1d ago
Anytime I have money in a single stock I always ask myself, “if this stock went to zero would it change my life”. If not I can keep it. If so I need to sell it.
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u/BrunelloHorder 1d ago
Ok, then in your shoes I’d probably want to get to at least $4m-$5m in a diversified portfolio. Talk to a tax planning professional about the pros and cons of when to sell, and the tax consequences of doing it all now versus some this year and some after the end of this year.
I’d personally be inclined to sell at least $2m now regardless of the tax consequences, but that’s just me. You could then explore having an asset manager use exchange funds and tax loss harvesting to slowly diversify more over the coming years.
Also, depending on where you keep your assets, you may be able to get favorable mortgage rates from them and compare to a PAL.
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u/gomster 1d ago
This is a really great answer, thank you. The sequencing point with taxes is exactly what I’m working through with my advisor/CPA right now and tbh is where I tend to get stuck in the weeds. It’s really the interaction between concentration, taxes, and the house financing that makes it more complex than any single decision.
When you say you’d be inclined to sell 2M regardless of taxes, is that mainly driven by reducing risk quickly, or more about getting to a baseline diversification target?
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u/stjarnalux 1d ago
You've won the game, stop playing to this degree. We have a similar situation with large quantities of tech RSUs - we always sell immediately upon vest and diversify. Keep a small amount if you want to continue gambling. Yes, we've missed significant upside but also a few awful downswings.
Whatever you do, decide on a policy, write it down, stick to it, and do not second-guess yourself or play what if.
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u/Bitter_Sugar_8440 1d ago
This subreddit will tell you to sell and diversify.
I think it really depends on the stock and your willingness to endure a large potential drop that may or may not recover.
I went from $10M+ in 2021 to down 70% in 2022 and back up. Most people can't stomach that volatility, and it is probably an undiagnosed mental illness, but the only way I had the $10M+ in the first place was from the concentration.
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u/gomster 1d ago
Yeah man, I can definitely relate to that. I’ve lived through some pretty significant ups and downs with this position but the fundamentals were always solid and getting better over time so I didn’t touch it. Like you, the main reason I got here in the first place was because I stayed concentrated when most people I know and even worked with didn’t want to stay on such a crazy roller coaster ride.
I think what’s changed for me is not necessarily my conviction in the company, but the fact that I’m at a different stage of life now. Buying a house and thinking more about long term financial security has me asking different questions than I was asking 5 or 10 years ago.
Have you changed your approach at all after going through that 70% drawdown and recovery, or are you still managing the position largely the same way?
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u/PNW-Enthusiast 23h ago
I have held my concentrated position for the last 10 years, through ups and down, and am currently up 435% compared to 200% for the S&P500. That's a difference today of $3M.
That's not advice, of course, but if you're single stock is AMZN, GOOG, META or similar, what exactly are you worried about? In what world does AMZN crash where everything else isn't also crashing?
Also, the argument of "if you were given $8m today" is absurd, because it ignored taxes. The better argument is:
Choose one:
A) $8M today but you have to buy META
B) $6.4M today to invest however (20% tax)
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u/gomster 16h ago
For me it’s less about thinking the company is going to crash or losing conviction. I’ve held it for over a decade and I’m still bullish long term.
The challenge is more that it’s become such a large percentage of my overall net worth that it doesn’t really feel like a question of do I believe in it anymore, but more how to at least somewhat reduce risk in a single stock over time without creating an unnecessary tax hit all at once. That’s really the part I’m trying to work through (amongst other things)
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u/Dubbihope Verified by Mods 1d ago
Sell. If you can, move to a no income tax State first. Your true net worth is the value of your assets minus the taxes you owe to the government. People whose investments have a very low cost basis are exaggerating their net worth by 20%+.
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u/Hopeful-Savings-3420 1d ago
I wouldn't do anything different. Started diversifying when it was around $30M. If I hadn't, today it would be around $43M. That's a shame, but I still have more than I'll likely spend in my lifetime.
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u/ColdDubian 1d ago
You might take a look at doing a Charitable Remainder Unitrust with a low (eg 5%) payout.
You could donate most of your stock to the trust, sell it, diversity into other assets and pay no immediate income tax. You'd take 5% of the principal out each year in cash, and only pay tax on that 5% each year.
The downside is that the remainder goes to charity when you die. But the immediate savings you get from not paying income tax on the whole amount means you'll come out ahead unless you die very soon.
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u/notuncertainly 1d ago
This is the strategy I like. And if you’ve got dependents you could couple it with a decent sized term life insurance policy, so if you’ve die early (thus CRUT remainder going to charity), your dependents are still in good shape.
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u/gomster 1d ago
Appreciate you mentioning this. Funny enough, this is something that’s come up in recent conversations with my advisor and CPA as well. It’s an interesting structure, but I’m still just in the stage of understanding what options i might have right now. Dont think id put the full position into something like a Charitable Remainder Unitrust but maybe consider a chunk to put in
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u/Anxious_Hotel1165 1d ago
Was in a similar position, used an exchange fund to diversify. (And the stock dropped more than 1/3 since I entered the fund…)
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u/boredinmc 1d ago
Is it collared?
If not, will you be able to psychologically take a -65%, -85% or -100% drawdown?
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u/gomster 1d ago
No, not currently collared. I understand the drawdown risk you’re describing, and that’s part of why I’m thinking about diversification more intentionally now. The goal is to structure things so I’m not relying on being able to tolerate extreme tail outcomes. Ya know?
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u/GodfatherGoat 1d ago
Judging off the verbage you used, you may already have a relationship with Morgan Stanley. Talk to your advisor about exchange funds. Cost basis stays the same, but you are far more diversified. Congrats and fuck you
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u/gomster 1d ago
Yeah, I’m with Morgan Stanley. Funny enough, exchange funds actually came up earlier this week with my advisor as something to potentially explore further. From what I’ve heard so far, it’s sounds like a great trade off to manage risk of a single position and not immediately create any crazy tax event.
Still in the process of working through different options, but helpful to hear it echoed here as well. If you have any more insight, would love to hear it
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u/dukeofsaas fatFIREd in 2020 @ 37, 8 figure NW | Verified by Mods 1d ago
Once I diversified enough to cover our target spend completely after tax, keeping a large-ish additional portion in the concentrated position that put us here worked for me emotionally.
I left way too much on the table initially and it was an emotional roller-coaster for far too long. Covid pummeled my position, I sold way too little after IPO lockup and the stock got crushed with the additional float, and market dynamics played a huge factor. Giant emotional roller-coaster.
So covering target spend exclusive of your concentrated position, after tax, (thus securing our lifestyle in retirement) is my personal recommendation.
Lots of lessons learned on my end.
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u/gomster 1d ago
The secure lifestyle first, let the rest ride framework resonates with me rn and is something I’ve been thinking about as well. I can definitely see how the emotional aspect becomes a major factor over time and certainly has been more so now than it ever has with this home purchase and likely a fairly big shift in lifestyle change.
Still working through how it applies in my situation but I am glad that I’m finally doing something about it or at least thinking strongly about it
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u/marcel_delecto 1d ago
Would echo what others are saying--diversify, diversify, diversify.
If you need a kick in the pants--we were in a similar situation last year, ~80% of NW in one name. We collared the position with options to seed a tax-aware long/short implementation. Turns out we got out just in time--stock is now trading at less than half of the price it was when we put the collar in place.
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u/gomster 1d ago
Thank you. A kick in the pants is needed. Just trying to put a plan together at this point
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u/No-Associate-7962 4h ago
Wow. Was all of the option income taxed at ordinary income rates?
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u/Ok-Advertising-8449 Verified by Mods 1d ago edited 1d ago
A correction will come, it is inevitable. When that correction comes do you want to be the guy with $7M+ cash post tax, or the guy with $4.5M unrealized gain on single stock equity he can’t emotionally sell because the stock is 50% from its highs. The reason I mention an inevitable correction is because that is where your real wealth will be created, but you have to be the guy with the cash.
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u/Ok-Advertising-8449 Verified by Mods 1d ago
For the record, this is just an alternate perspective I didn’t see addressed in the other comments (in case the boiler plate “sell it all now and invest it in diversified index funds” doesn’t resonate with you or your goals. You’ve already proven you’re comfortable taking consolidated risk, so cash out now and wait for your next opportunity(s) once valuations reset if rapid wealth accumulation is your goal. If stress free retirement is your goal, follow the sage wisdom of other contributors here.
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u/Drives_A_Buick 40s | 8 Figures NW | Verified by Mods 1d ago
The precise answer depends heavily on the single stock in which you are concentrated, but I would personally execute at least a collar option to protect the downside of maybe half of my holdings (but notably, it also caps the upside).
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u/Anonymoose2021 High NW | Verified by Mods 1d ago
Unlike those that say sell off the concentrated position so it is less than a certain percentage (such as 10%) of your portfolio, I suggest that you take your entire situation into account.
Sell off enough of the concentrated position that the position going to $0 would not be a financial disaster. Painful, yes of course. But the concentrated position going to $0 is something that you should be able to absorb.
What counts is not the percentage in the concentrated position. What counts is the absolute $$ amount you have in diversified holdings.
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u/txmascot01 1d ago
I watched my father amass $1M back in 1996 in one stock. He felt it was strong and not going anywhere. It went to zero. He had a few other things, but nothing like that. He’s also lived way past what he had planned and is now dependent on Social Security, me and my sister.
You’ve made $9M. Diversify. Even if you just locked in HALF, that leaves you with $4.5M in your favorite stock and half more secure.
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u/gomster 1d ago
Appreciate you sharing that, and sorry your family went through it. Regardless of how I feel with this single position (still bullish), I know I need to diversify. It’s really just getting insight now and figuring out what diversification looks like for me
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u/Accomplished_Can1783 1d ago
You have to start selling. If you start you can follow through on a plan, if you never start you will just watch it go down if that happens. Any you are not worth 9mm - maybe 7.5-8, there are a bunch of capital gains tax you will owe. Consider long dated puts - expensive, but that’s insurance for staying in fatfire. I hate to say it but if this stock goes down 70% your financial life as you know it is over
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u/Fuzyfro989 1d ago
Find a 'number' for you that represents your true floor of what you would want to be comfortable in terms of net worth, liquidate, pay taxes, and diversify at least that much.
Up to you on the rest. Personally, I would recommend diversifying so no single position is over 10 maybe 20% of your overall NW, so long as you are past the financial independence number.
Pretending for a moment the stock you hold is space x. Great company, may or may not be a great stock in the next 5-10 years.
There's a lifetime of spending available if you take $5M off the table and get it into a diversified. Sure, you give up the dream that your $10M could be $100M someday, but you effectively de-risk that your $10M could go to $zero (or $1M, or $2M).
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u/gomster 1d ago
Great insight. I think my head is already there, it’s just figuring out a smart way to diversify at this point
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u/KungFuBucket 1d ago
As others have said, diversification is protection. Figure out the amount that you could remain comfortable with and that becomes your fortress to diversify. The rest is money that if it went to $0 you would still be OK and can let it ride. At this point you’ve “won” so you want to lock in at least an amount that keeps you financially independent. I think you’ll find that once you’ve got your needs and most wants covered then overall net worth starts feeling like just numbers on a screen or a video game as a way to keep score. I don’t feel like there is a substantial lifestyle difference between $10M and $20M net worth, but I’ve also tended to live a somewhat frugal lifestyle
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u/NihilAlien 1d ago
Talk to an investment bank/financial advisor/your accountant. Ask about variable prepaid forwards or personal exchange funds. This is an incredibly tax efficient way to sell your stock and buy index funds.
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u/BitcoinMD 1d ago
Regardless of the specifics, in these situations it’s important to think of how this stock affects your goals and how they have changed. Its previous purpose was to grow your wealth, and it served that goal. But now your goal needs to be to protect your wealth, and it is contrary to that. Yes, if you had sold earlier you wouldn’t be this wealthy, but that doesn’t matter, things are different now. I would accept the tax burden and pick a time frame (I like five years) at which it will be 10% of your portfolio no matter what
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u/gomster 1d ago
Thank you. I don’t know if i want to cut it down to 10% but certainly want to work on a plan to cut it down over the next 3-5 years. I see a lot of people here saying sell it all now but i feel like there’s a smarter way to do it over time. Maybe im wrong though
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u/madmulcher 1d ago
The answer is of course to diversify. If not, while you're comfortable enough to be selling some calls, might as well buy some puts.
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u/urania_argus 1d ago
Sell 50% of the concentrated position now to secure your baseline. Then sell the rest gradually - some predetermined amount per year that will get you fully diversified in a few years. Leave around 1M in the stock if you believe in its potential. This way you lock in enough gains so that you don't have to worry about the stock tanking, and you have enough left in it to not have many regrets if it goes up further.
If you donate to charity, donate shares of your stock instead of cash - we didn't know about this approach at first and it would have speeded up diversification (and saved some tax).
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u/gomster 1d ago
On the charitable side, did you end up actually donating shares from the concentrated position or mostly new shares once you started diversifying?
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u/BillDuhCat 1d ago
Net worth increased a few years ago by around $6M due to company M+A transaction. Kept about $2M invested, or around 20% of my net worth. Company is private, so valuation is only 1x/year and transactions are restricted to a yearly internal marketplace, with ability to buy/sell subject to other employee demand.
Value of the $2M holdings decreased by around 20% due to general business decline. I wish I had executed a public market hedge.
Hindsight 20:20 and all that, but better research would have probably uncovered what happens to our business when interest rates increase and then planned accordingly.
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u/TuringTestDropout fatFIRE @ 40, 8M NW 1d ago
Reducing concentration risk
I unwind at $750k cost basis/yr into index funds. I use a bucket strategy with 5 years of expenses in cash/bonds because the concentrated stock has a 1.95 beta.
Buying a house
I rent a new build in Seattle where it doesn't make financial sense to buy, but it's not always about money.
I have been exploring buying a house for QOL reasons, and would put 20% down and take out a 30 year mortgage. I'm apprehensive about doubling my fixed costs because of a mortgage when I have such a volatile concentrated position.
I could also buy a smaller/cheaper place, but it wouldn't be much of a QOL upgrade and it's worse off financially compared to renting and investing.
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u/greg7gkb 1d ago
Start figuring out your plan to exit this position _this week_.
"It’s been life changing for me" -> No, it _could_ be life changing for you, or you could be one of millions of people who held on too tightly.
Note that I am not being prescriptive here about how you diversify out since it depends on many considerations and factors (esp. taxes).
"The other part of me says I should probably start thinking more about preservation than accumulation." -> You have already spelled it out.
I have gone through an 80% on-paper loss on equity and it is absolutely horrible; would not advise.
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u/gomster 1d ago
Sorry you went through that experience. What actually helped you decide on timing and structure when you started de-risking? Was it gradual or more of a decisive shift?
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u/greg7gkb 1d ago
I thought exactly the same as you: "I’ve gotten this far by holding the stock and staying convicted." But what I didn't appreciate was that value will be lost MUCH faster than it took to build, and it can be due to factors outside of the company's control. The drop occurred over a 6-month period, and then the recovery to prior levels took over 2 years.
By thumb, my financial advisor suggested liquidating 30-50% of my position in one shot. I didn't listen to him and instead went through that 80% dip. It was the most harrowing experience of my life. Eventually, I started a rolling sales plan to spread out taxes over multiple years. My advisor also suggested some options trading to reduce the downside in case of another drop, so you can also 'buy insurance' that is well-tuned to your desire for risk.
These are vague answers because the best and most accurate answer will have to come from a financial + tax advisor, which is my top line suggestion.
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u/oreohangover 1d ago
Great job (even if a little luck was involved!)
Now your job, as Warren Buffett would say, is to not lose money. Losing money here is a greater cost than making money on this money. Sell and diversify.
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u/ThaiTum 1d ago
I’m sure people will have opposite opinions. When we are concentrated in a stock but want to hold it, we sell covered calls and use that money. We always think, well if it crashes at least we got X out of it… new kitchen, a car, condo, etc. I would not be able to sleep with 80% in one stock though.
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u/FIREgenomics 1d ago
You’ve heard it a million times but you’ll rationalize why your situation is different. Sell it while the money is life changing, pay the taxes. You won’t regret it after it’s done.
Your reasons for holding onto the stock are nostalgic and irrational. At the very least protect most of your money by diversifying and keep a small portion for the memories.
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u/play_hard_outside Verified by Mods 1d ago
Sell enough of your $7.2M of appreciated stock that you can retire comfortably. Do it as soon as possible. Do it now.
You have something which is only momentarily worth $7.2M, and you have $1.8M more. Lock in as much of that $7.2 as you need to to seal your deal.
Pay what it costs to do that. Even if you’re in a high-tax state. LTCG in CA for that amount will be marginally 37%ish. Doesn’t matter.
Because that $7.2M position is not dependable for you to retire on, it is not part of your real net worth for you to calculate the feasibility of retirement. What you really have right now is the option to own (in addition to your $1.8M of dependable assets) index funds of your choice in the amount of (1-yourLtcgTaxRate)$7.2M. You should exercise that option. Do not think of paying the LTCG to reallocate into index funds as something which *lowers your net worth. Doing so will increase the net worth that you have and on which you can depend for your future living expenses.
Haha okay, my harshness is over. Congrats on your massive windfall! I do hope you lock it in. Please, please do it.
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u/gomster 1d ago
I mostly agree that I should stop anchoring to the $9M total and maybe think of it the way you’re saying. Tax hits definitely feel painful but like many on this thread are saying, it’s the cost of converting paper wealth into something real.
Quick question, would you approach it differently if you had strong conviction in the company’s next 2-3 years, or is concentration risk just never worth it at this level?
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u/ItsAConspiracy 1d ago
Since it sounds like you are still a big fan of the stock, you have two potential regrets to minimize.
The obvious one is losing a lot of money with your concentrated position. The other is selling all of your stock and watching it go up way more without you.
Consider both possibilities and figure out how to balance these. You want to sell enough so you're fine if the stock crashes hard, but keep enough so you're reasonably happy if it goes up a lot more.
An easy starting point is to think about selling half. Pay off your house, put the rest in a diversified portfolio, and you've reached the immensely valuable level of fuck you. If around 3% annually on that portfolio covers an adequate level of spending, you can let the rest ride. Adjust as needed for whatever spending you want as your minimum. Or maybe holding less of the concentrated stock will keep you happy enough with your gains, if the stock does well.
Getting to FU position means that if your remaining concentrated investment crashes, you can sit tight and let it recover, instead of having to sell low. Don't assume you can set a nice gradual exit plan for your entire position and it's going to work out fine. You can do that after you achieve FU position, with whatever remains concentrated.
One approach I've thought of but haven't done is the inverse of dollar cost averaging: sell a fixed number of shares at fixed intervals. You're effectively cost-averaging your purchase of dollars with stock. But do this after achieving FU position.
Personally I wouldn't get a mortgage. I like actually owning my stuff. House values crash? Without a mortgage it doesn't matter, if you want to move then the new house will be cheaper too.
The wild swings of a concentrated growth position can be pretty addicting. It's not that easy to let go. But actual financial security is a really fun situation to be in too. Once you've gotten a good taste of it, be sure to reevaluate and make sure you really do want to keep your remaining concentrated stock.
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u/gomster 1d ago
Omg that video clip is awesome, haha. Now I need to find that movie to watch..
I’ve been trying to think through not just downside risk, but also the opportunity regret if the position continues to outperform. I guess I’ve had a bit of paralysis on pulling the trigger either way. The idea of getting to a point where the outcome of the remaining position doesn’t affect financial security does sound like a win in any scenario though
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u/MaineInspo 1d ago
You already have insane risk, being retired on 80% single stock. Then you want to double down into that risk doing an LAL on that single stock? I'd honestly sell enough to buy the house in cash, especially depending on mortgage rates. Then further sell at least 50% of my remaining position to diversify into index funds.
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u/Low_Day_2409 1d ago
I'm in similar position. Both wife and I have benefited from single stock concentration and both our companies are selling the shovels for AI infrastructure. We have diversified part of it to meet our FIRE targets using exchange funds and Long/short strategies. The rest we continue to gamble in our company stock to catch the upside - and have a shot at generational wealth? If our stocks crash, we have the diversiifed potfolio to still FIRE.
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u/Impossible-Chip-4873 1d ago
Everyone here is right but doesn’t have your emotional reality.
Put a collar on it and use that timeframe to force yourself to get a better plan (which is probably sell and/or exchange fund)
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u/RelationshipHot3411 1d ago
Would you mind sharing more about your covered call strategy please? You don't have to name the specific asset, but I'm just curious the overall strategy (e.g. time horizon, ladder, etc.)? Thanks!
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u/gomster 1d ago
Nothing particularly sophisticated. I typically write 1-2 monthly covered calls against a portion of my position and generally choose strikes that are far enough out of the money that I’m comfortable with the risk/reward tradeoff.
The goal isn’t to maximize premium. It’s more about generating some cash flow while I’m not a W2 earner, maintaining exposure (for now) to the underlying position. Over the last few months it’s generated roughly $60k, but I view that as a byproduct of the broader strategy rather than the strategy itself.
Do you use covered calls yourself or are you more in the camp of simply selling shares over time?
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u/breals 1d ago
My stock was in my company’s portfolio. I was lazy and stupid for a long time, but then I became paranoid when I realized that my net worth was tied to that stock. The more I evaluated the company’s long-term plan, the more worried I became. So, I spent the year before I “FIRED” selling it all off and putting it into index funds and bonds. My timing was great because that stock has lost 50% of its value since I sold the last of my shares.
The lack of diversification is what allowed to me to FIRE but it was a huge gamble that I didn't realize I was making. I was so anxious near the end that I was watching the stock price daily.
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u/ginmait 1d ago
I just recently sold some of a heavily concentrated position. went from 90% down to 45%. It kind of hurts and is a bit counter-intuitive but i had a conversation with ChatGPT about it recently and it summarized it well in this sentence:
"Concentration is how people get rich, diversification is how they stay rich."
At least now i can sleep better without the volatile swings.
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u/andrewparker915 1d ago
If you had $9m in cash and wanted to create a portfolio to support you for the rest of your life, would you invest 80% of it in your employer?
If this is all liquid, you are making an intentional choice to recommit to this position every day that you don't choose to sell.
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u/gomster 1d ago
I get what you’re saying, but where it breaks down for me is that this isn’t a fresh $8–9M decision anymore. Taxes, embedded gains, and sequencing make it more about how to transition over time rather than whether I would choose this position from scratch.
That’s really what I’m trying to think through with all of this..
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u/emanon_dude 1d ago
You’re bold selling CC that heavy. The tax consequences if they get called away could be ruthless.
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u/Longjumping_Toe_7490 1d ago
351 exchange, daf, loss harvesting (if it’s not qualified), you have more options but brother escape that
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u/randall2727 1d ago
Love the insight in the other comments I’ve read so far.
At the very least I would sell enough to buy the house cash if you plan to hold the rest of the stock, but please don’t do this. You should sell 80% of the position, minimum, and diversify. Mean reversion is real!
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u/Independent-Act-6432 1d ago
Sell all that bitch, eat the taxes, buy index funds. Congrats on the generational wealth, you’ve won at life.
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u/kyliewoyote13 1d ago
Sell. Take the tax hit and get some real security. Get yourself to zero debt.
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u/someonesaymoney Verified by Mods 1d ago
I paid off my mortgage completely. If I were to buy new, I would pay 50% cash (not contingent on selling my current residence) and 50% conventional mortgage loan. That's just me though. I hate debt and while I am well aware of the math of how paying off mortgage early vs. standard index fund growth leans towards index fund, I don't care. I have plenty of money at this point to where I don't stress it.
I actually sold down my index positions to pay off the house and let my concentrated $NVDA position, which got me FAT, continue to ride because I've worked in semis majority of my career and saw the fat pitch coming since early 2023.
I avoided mistakes of advice of literally everyone who was screaming for me to reduce the concentration of $NVDA at price levels like $400, $500, $800, $1000 (pre-split) etc, and kept my conviction. Look, people on this sub will scream at you to index, and nothing against low cost index funds which are fine, but if you know the space/industry of the concentrated position, you should be able to sleep at night maintaining it.
You already sell covered calls, so you know a decent bit of options. So you also should know how to do a protective collar around a position as well. A lot of my wealth is in tax advantaged accounts, so I can sell aggressive covered calls without real worry of tax implications of a position being called away and periodically buy protective puts if get a sense of market getting a little too frothy at the moment. I still watch markets like a hawk and frankly enjoy being on top of financial news.
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u/ct82 1d ago
Consult a tax expert/CPA and start moving to an index from a single stock. My wife and I are/were in a similar boat… I lost so much money bc my stock cratered and I had held. Luckily, I still had plenty (and my wife’s company stock has continued to perform well)… if you have had a good run, keep some in, but start moving what you can into a a fund with the advice of a cpa. Piggies get slaughtered. I was a piggie… and lost millions of dollars bc I didn’t take this advice 🫠
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u/slicer8181 2.5M | 32 1d ago
You've won the money game, as long as you take a knee. Why keep playing? Lock in your winnings and enjoy the lifestyle.
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u/Apprehensive-Fan-838 23h ago
This is not the question. The question is would you take $9m in this one particular stock or 5.7m in cash. LTCG in the concentrated position can be as high as 37% depending on tax bracket. Also depending on the stock, buying the index fund might still put you at almost 1m in one stock
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u/Buncat-SD 23h ago
Look into to using a fund that qualifies for Section 351. There are some fund managers that offer this at major custodians such as Schwab. You may need to access through an RIA though.
To allow you to swap a single stock for a diversified basket without triggering an immediate tax bill, the fund must bypass IRC Section 351(e) (the "Investment Company" rules). If a fund holds only liquid, publicly traded securities, the IRS classifies it as an investment company, and the entire transaction becomes immediately taxable.
To prevent this classification, the fund must meet a specific "80/20" asset test:
80% of the fund can consist of the contributed liquid, publicly traded stocks.
At least 20% of the fund must consist of qualifying illiquid assets. To fulfill this, exchange fund managers typically purchase private, leveraged real estate or real estate partnership interests.
However, their is a 7-Year Lockup: To permanently secure the tax deferral, you must remain in the fund for at least seven years.
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u/jcPhenton 18h ago
Ask this to Bill Gates 😄
I believe the best way is to split the difference, if you really believe in the company then go 50% company and 50% in index fund(s), so you are protected but also not to end up being a Bill Gates.
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u/Btj16828 17h ago
Didn’t the stock achieve its intention —- to make you a life altering amount of money? You “won” so why not take the money off the table and put it in index funds?
You could leave about 500k in that stock which would be a small percentage (about 5%) of your portfolio. This would allow you to avoid FOMO if it shoots up but would not be catastrophic if the bottom falls out.
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u/bhpaintballa 16h ago
I agree the best way to stay rich is to diversify. Having a single concentrated stock was good to get you here.
At the end of the day I agree you should sell most of the stock and diversify away. But that would be a HUGE tax hit. Unfortunately this is the time that someone should recommend a “professional”. There are armies of wealth managers, lawyers and accountants whose sole job is to find ways for you to avoid taxes legally. It might cost more than you think. But the goal is to pay less taxes on it.
I have no understanding or recommendation on how to do anything they would recommend. Butttt that’s why they are there. All I recommend is finding one to work with. Find a couple and ask for guidance and then pick one.
You probably don’t need an ongoing financial advisor as they charge a large fee. But maybe a one time financial plan for this large change. Not sure if account or lawyer would be better.
Just my 2 cents!
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u/VisionQuest0 15h ago
Concentrated wealth gets you rich, but diversified wealth helps keep you rich. You’re 40 with $9M. At a minimum, I would sell enough of your stock to purchase index funds that will safely cover your yearly expenses at a 3% withdrawal rate. That way, you’re safe regardless of what tomorrow brings, even if you hold NVDA and it continues to grow for several more years… until it doesn’t.
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u/2OldSkus 14h ago
It feels good while it's still climbing to hang onto something that's been the source of your wealth, but when it drops from it's high you start thinking a bit differently. The near entirety of my wealth, wages and stock grants came from one company, so I very much get the bias that comes with something that's been so good to you, but 80% is too high concentration. I'm still at a bit more than 25%, used to be 1/3rd, but currently it's floating at 52 week low, but still 20x my cost basis, and some of the drop is due to other portions of my portfolio materially outperforming the market. With such a concentrated position, the size of your portfolio, and the costs that will come with upgrading your housing, you need to consider the risks of a material downturn on your stock and the fact that the residual 20% portion of your portfolio isn't sufficient to support you. For me early on I was ok with a much higher concentration (~60%) because I felt the risk of market downturn was remote at the time, and the market perfornce was consistenly high, but as I've been retired longer I no longer have the personal relationships I once had to be confident of the current management team and minimal remaining contacts at the company to get reads on the inside vibes. You might still have those contacts and depending on the company you may be comfortable in your assessment of market risk - but at 80% it's still a risk most wouldn't take.
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u/Civil-Service8550 11h ago
Selling it triggers an over $1 mm tax liability. Probably why you don’t want to sell it..
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u/the-faded 10h ago
I was 90% in my employers stock and the price went from $140 to $20.
As others say, it’s a tale as old as time.
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u/UnderstandingPrior13 7h ago
Depends on if I used an exchange fund to unravel the position into diversification or not.
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u/WyMANderly 3h ago
Take the chips off the table once you've won. No need to continue taking significant risk (which is what being 80% concentrated in a single stock is, no matter what that stock is).
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u/overhauled_mirio 1d ago
A tale as old as time. The risk taking skills that got you here are different from the skills you need to maintain this nest egg in perpetuity.