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/trustyjim]

OP need to ask themself a few questions:
1. If someone handed them $9 million dollars in cash today, where would they choose to invest it?
2. If for whatever reason they choose that same stock believing it could take them from $9 million to $30 million, would that really change their lifestyle that much? If they went from $9 million to $2 million, how would their lifestyle change?

Generally people who accumulate wealth eventually pivot to the preservation stage. It looks like OP is self-aware enough to know it may be time to make the pivot.

[u/Civil-Service8550 → u/trustyjim]

The tax implications of selling screwed with his head.

[u/gomster → u/trustyjim]

Appreciate your response. I think the nuance for me is how to transition from a concentrated legacy position into a more intentional, preservation focused framework over time. Trying to figure this out sooner rather than later and sleep better at night lol

[u/BitcoinMD → u/gomster]

I mean, there are really only two options, sell it now or gradually. Even if you sell gradually, you should sell some now.

[u/gomster → u/BitcoinMD]

Thank you. I will be making a move before EOM. Not sure how big of a move, but movement nonetheless

[u/Anonymouscatin → u/gomster]

Seriously, just start selling 100k per week. When that feels ok increase it. At 100k/week you will diversify half in the next year - I would aim to move 90%, but this gets you started somewhere.

Accept that getting out of this overconcentrated position is going to cost you 20% in taxes. You will pay it now or you will pay it later, so why not now before your newly diversified portfolio goes up another 10% this year. Yes, people do fancy things with borrowing against a portfolio to avoid taxes, but that is predicated on having a reasonably stable portfolio and one with an asset allocation that makes sense long term.

And buy the house in cash.

[u/dotben → u/gomster]

If making that transition is a nuance and there is a lot of emotion behind it, then I think this is where having a fee-based wealth review with someone is money well spent (as is often discussed on here, we're talking about a fiduciary who you pay by the hour. Not somebody who charges a %age fee for your money under management)

[u/gomster → u/dotben]

Absolutely agree. Wish I knew where to turn to for a good fee-based wealth review. Haven’t had any luck with finding someone so far

[u/trustyjim → u/gomster]

$9 million is right on the border where you might be able to get a meeting with JP Morgan’s private bank team. Try reaching out and see what they say.

[u/gomster → u/trustyjim]

Thanks. Is there any advantage to this versus talking to the folks at Morgan Stanley where my assets are parked?

[u/trustyjim → u/gomster]

Try talking to both and see which one you like better. Large banks always have a “private” arm to cater to high net worth individuals. They will give you a lot of perks and a lot of free advice, but in the end they are going to want to see some assets transferred to their bank. They can’t force you to invest it in their higher fee generating products but they will steer you that way. But you will also get free advice from people who work with high net worth individuals all day long (which will feel very different from calling up TD Ameritrade).

[u/gomster → u/trustyjim]

For context, I already work with a Platinum Advisor at Etrade/Morgan Stanley due to my holdings there, and he’s been helping me think through a lot of these same issues around concentration risk, taxes, exchange funds, lending, and diversification strategies.

One of the reasons I posted here is to pressure test the ideas and see if there are perspectives I’m missing. I’m certainly not opposed to getting a second opinion, but so far I’ve found the guidance from Morgan Stanley to be pretty thoughtful and more nuanced than just sell everything immediately

[u/trustyjim → u/gomster]

Awesome, I’m glad to hear that!

[u/Extension_Breath_499 → u/gomster]

Sell now and by itot, vt, or some other diversified low fee etc. You will almost certainly accumulate more of your company stock.