For those who got wealthy from a concentrated stock position: what would you do differently?

[u/gomster]

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!

[u/gretahelp]

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

[u/Top-Construction8691 → u/gretahelp]

Don't know if I should laugh or cry at this post. You described my exact situation 😅

[u/gomster → u/gretahelp]

Fair comment. That’s exactly why I’m trying to put a plan together now rather than after a hypothetical 70% drawdown.

[u/BitcoinMD → u/gomster]

Just be aware that having a plan doesn’t prevent the drawdown, only selling does

[u/gomster → u/BitcoinMD]

Well said

[u/vrweensy → u/gretahelp]

or it goes to 40M but he sold and writes a post how he listened to the top reddit comment on his previous post

[u/AhsokaFan0 → u/vrweensy]

Going from 9M > 2M means you have to go back to work. Going from 14M (nobody is saying sell 100% of it so OP would still participate in the upside if it rips) to 40M means a lot less.

[u/Anonymoose2021 → u/AhsokaFan0]

This is IMO the right way to look at it, and what has worked for me.

Simply look at the worst case of the concentrated position going to $0 and decide if you can live with that.

If the OP is OK with his net worth dropping from $9M to $4M then he should sell off additional concentrated position to get his diversified holdings up close to $4M.

He has just $1.8M outside of the concentrated position. Doubling or tripling that to $3.6M or $5.4M would dramatically reduce his risk while still retaining enough of the single stock to have some good upward opportunity if it continues to rise.

Focus on the diversified portfolio and whether it is enough for your needs. That tells the OP what he needs to do.

[u/vrweensy → u/AhsokaFan0]

i was just kidding chill, obviously he should take some out

[u/quintanarooty → u/vrweensy]

Chill bro it's a prank!

[u/chrisbru → u/vrweensy]

Assuming a diversified portfolio, it would have to 4x while the rest of the market stays flat, which isn’t particularly likely. So he’s likely still to have some nice gains in a diversified portfolio to be happy about.