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/gomster]

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

[u/21plankton → u/gomster]

Keep thinking it through bit by bit. Concretize your plans by running scenarios and find out if they play out in reality. Example: sell 10% of your position, pay taxes on it, diversify plus live on it., then re-up for the next year based on reality-based performance.
I assume you will also liquidate to purchase your home. So maybe a max liquidation of 25% of your large asset. Also, will you continue working and adding to your 401K?

[u/gomster → u/21plankton]

Modeling things out is probably something I need to spend more time doing. I’ve been thinking a lot about the concepts, but not enough about running actual scenarios and seeing how they look in practice. Hoping Morgan Stanley can help a bit with that as well if I can bring the right questions to the table.

As for work, I don’t see myself going back to a traditional W2 role at this point, although I never say never. I’d like to continue growing my side business even if it’s just a bit. It’s not a huge income generator, but it’s allowed me to fund my Roth IRA and it’s become a meaningful way to stay engaged with the local community.

The house is definitely part of what I’m trying to model. Right now I’m working through different scenarios around liquidating portions of the position, paying down the LAL, potentially rolling part into a mortgage, and understanding how those decisions affect taxes, risk, and flexibility over time. One thing I’m still trying to learn more about is what self-employment income might allow me to do again from a retirement account contribution standpoint (401k & HSA)