Concentrated stock isn't a plan.
Here's how to turn it into one.

A new client showed me a spreadsheet last month. Total net worth: a number most people would be thrilled with. Then the breakdown: 62% of it was a single company's stock. The company he worked for. The company everyone he knew also worked for.

He wasn't asking whether to sell. He was asking how. And specifically, how without making the tax bill worse than the concentration risk.

This is the most common conversation I have with Austin tech workers. The vesting schedule built the wealth. The question is what comes next.

Concentration is a planning problem, not a market view

People hear "diversify your concentrated stock" and assume the advice is a bet against their employer. It isn't. It's a statement about risk you'd never accept anywhere else in your financial life.

If a stranger handed you the same dollar amount in cash today and said "put 60% of this in a single stock," you wouldn't do it. You'd think it was reckless. The only reason you did it with your own money is that it happened gradually, and the company kept paying you in shares while you were busy doing your job.

That's not a thesis. That's just how compensation works in tech. The thesis is what you do once you notice.

The tax knot

Here's why selling concentrated stock feels harder than it should. RSUs are taxed as ordinary income at vest. The shares you hold afterward have a cost basis equal to the fair market value on the vest date. When you sell, you owe capital gains tax on the difference.

If the stock has run up since vest, that gain is real. If you've held shares more than a year past vest, the gain is long-term — usually 15% or 20% federal plus 3.8% net investment income tax for higher earners. Texas has no state tax on that, which helps.

The mistake I see: people freeze because they think they're "losing" 20% to taxes. They're not. They're paying tax on a gain they wouldn't have if they hadn't held. The right comparison isn't gain-with-tax versus gain-no-tax. It's the cost of taxes today versus the cost of staying concentrated for another year.

A framework for getting back to a plan

I walk clients through four questions. They're not rules. They're a way to make the decision in the right order.

1. What's the target? Pick a percentage of your investable net worth you're willing to keep in your employer's stock. For most people I work with, that number ends up between 5% and 15%. Below 5% feels arbitrary. Above 15% means you've decided concentration is fine, which is a different conversation.
2. What's the holding period for each lot? Pull your statement. Every vest is its own lot with its own cost basis and acquisition date. Sell long-term lots first if you can. The tax difference between long and short term is usually larger than people remember.
3. What's the schedule? Selling everything tomorrow is a tax event. Selling over twelve months smooths the bracket. Selling over twenty-four months smooths it more but exposes you to more single-stock risk in the meantime. Pick a pace, write it down, and follow it.
4. Where does the proceeds go? Cash from a sale that just sits earning 4% in a money market isn't diversification — it's a different concentration. Decide where the dollars land before you sell, not after.

The 10b5-1 plan question

If you're an insider, or if your trading windows are tight, a 10b5-1 plan lets you set up automatic sales in advance. You commit to dates and prices when you're not in possession of material non-public information. The trades execute even during blackouts.

These plans aren't only for executives. Mid-level engineers at public companies use them too. They cost a little in execution flexibility and remove the temptation to time the market. For people who genuinely can't watch the stock without flinching, that tradeoff is worth it.

The tradeoffs nobody names

Diversification feels less satisfying than concentration when concentration is winning. That's the honest part. The flip side is that the people who got wealthy from concentrated stock are the same people who can afford to diversify out of it. Staying concentrated to chase more gains is a choice; it's just rarely the one a plan would recommend.

The other tradeoff: the cleanest tax outcome is usually not the cleanest portfolio outcome. Holding for an extra year to convert short-term to long-term gains is real money. So is the risk of the stock dropping 30% in that year. Both are true. The decision lives in the gap between them.

Here's what I tell clients. You didn't earn the wealth by being lucky. You earned it by showing up and doing the work. The next step — converting concentration into something you can actually live on — is a different skill. It's worth doing on purpose.