If a meaningful slice of your net worth is tied up in a single stock — usually a current or former employer’s shares, sometimes an inherited holding, occasionally a long-held position whose cost basis is now nearly zero — you have a planning problem worth solving carefully. Done well, the unwind preserves wealth and reduces risk. Done badly, it generates a large tax bill and locks you into a worse position than you started.

Why concentration is a real problem

Single-stock risk is the kind of risk no rational investor takes voluntarily. A diversified portfolio of 30+ uncorrelated holdings has dramatically lower volatility than any single stock. The historical record on individual companies is humbling: most stocks underperform Treasury bills over their lifetime; the index returns come from a small minority of names. Holding one is a bet against statistics.

The classic concentration scenarios:

• Employer stock acquired through ESPP, RSU vesting, options exercise, or 401(k) employer match
• Founder or executive shares in a company you built or led
• Inherited holdings from a parent who held a single stock for decades
• A long-held winner that grew to dominate the portfolio simply by appreciating faster than everything else

The constraint that makes it hard

The reason this isn’t just “sell tomorrow” is tax. Long-held positions usually have low cost basis. Selling triggers capital gains tax — at federal rates of up to 23.8% (20% LTCG + 3.8% NIIT) plus state. On a $2M position with $200K basis, that’s $429K of federal tax just to unwind it. The instinct is to wait — but waiting means continuing to hold concentration risk.

Five strategies that get used, alone or in combination:

1. Staged sales over multiple tax years

The simplest answer: spread the sale across years to fill the lower long-term capital gains brackets each year. Pair with tax-loss harvesting elsewhere in the portfolio to offset gains. Useful when there’s a long runway and no urgency.

2. Charitable contributions of appreciated stock

Gift the appreciated shares directly to a donor-advised fund or a public charity. Avoids capital gains entirely, generates a deduction at fair market value, and lets you redirect what would have been a tax payment into your charitable giving plan. For households already planning meaningful giving, this is often the single best tool.

3. Direct indexing for tax-loss harvesting

Build a separately managed account that tracks a broad index using individual stocks. The harvested losses on the rest of the portfolio offset gains realized when selling the concentrated position. Modern direct indexing platforms can systematically generate losses that are then used to retire concentration over time.

4. Exchange funds

A specialty vehicle: contribute your concentrated stock alongside other investors with their own concentrated positions, receive a share in a diversified pool, and defer capital gains tax for at least seven years. The exit at year 7+ is staged and complex but avoids the immediate tax hit. Exchange funds have meaningful fees and lock-up periods — they’re not for everyone, but they exist as a tool.

5. Hedging with options or structured strategies

For positions that can’t be sold immediately (lock-up restrictions, founder optics, etc.), various option strategies can reduce downside without triggering a sale. Costly and complex. Sometimes the right answer; often not.

What we generally recommend

For most concentrated positions, the right answer is a combination:

• Begin a multi-year unwind, sized to fill the 15% LTCG bracket each year
• Direct part of charitable giving toward gifting appreciated shares
• Avoid adding to the concentration (stop reinvesting dividends in the same name; redirect new ESPP/RSU income into diversified accounts)
• Re-evaluate annually as the position shrinks and tax brackets shift

The goal isn’t zero exposure — it’s reducing concentration to a level where a 50% drop in the stock wouldn’t materially threaten your plan.

If you have a concentrated position you’ve been meaning to unwind but haven’t, we can model the tradeoffs — the right path almost always combines several of these tools rather than picking one.

General educational information about concentrated stock strategies. Specific tactics depend heavily on your tax situation, holding period, basis, and goals. Not personalized investment, tax, or legal advice.