Concentrated Stock Strategies

Single equities are volatile. By owning multiple companies, the risk of a single equity is reduced substantially. Research shows, you can achieve significant risk reduction by owning as few as 16 different companies.*

For owners of concentrated stock, we take a completely customized approach. We find equities that move differently than the company you own. We want low correlation. As share prices move around, we optimize the portfolio for your real-life financial plan.

*Sources verified March, 2024.

With a concentrated equity position, taxes are often a big obstacle to selling and becoming more diverse, and safe. Taxes can eat up a lot of the pie!

To overcome this challenge, we use tax harvesting. As time goes by, some of the equties will experience a temporary loss. We can capture that loss for tax purposes. Then, sell some of the concentrated equity without a taxable gain. As the concentrated equity position moves around in price, we can follow a similar process and reduce the tax burden.

Owners of concentrated equity can experience more choice and control over when, and how much, to pay in taxes. Working within your personal financial plan, you can take advantage of life events to realize gains opportunistically, and reduce your overall lifetime tax burden.

A successful investment in a concentrated equity position can be a life-changing financial decision for you and your family. We proceed with two absolute truths:

1. First, we want you and your family to be financially safe.
2. Second, after your financial plan is secure, we want you to have the confidence to become even more wealthy.

We often say that we would like to see at least as much money outside of your company as you have inside the company—just in case something happens it doesn’t completely wipe you out. For some people, this may be difficult because of the amount of wealth inside the single stock is so great. It still remains a good long-term, real-life goal. And if we get enough money outside the company to keep you and your family safe, then you may choose to take the risk of keeping the rest in the concentrated position. Your financial plan and planner provide you the confidence to possibly become very wealthy.

For some people, half of your wealth outside the concentrated equity position may still be too much risk. This is completely understandable—and normal. As a company grows, the influence of a single person declines, and so does our control and ability to affect the outcome. So it is natural to want to reduce that risk as we age. In these situations, we continue the diversification and tax mitigation strategies discussed elsewhere for many years—perhaps the entirety of your life.