Has one stock taken over your investment portfolio? Maybe it’s a company you’ve believed in for years. Maybe it’s a lucky break from an IPO or an inheritance. But now it’s become your biggest financial asset—and your biggest financial risk.
In Episode 84 of the Last Paycheck podcast, CERTIFIED FINANCIAL PLANNER® professionals Rob and Archie Hoxton break down the very real dangers of concentrated stock positions—and the smart strategies that can help you protect your wealth without rushing into a decision.
Why Concentration = Risk
A concentrated stock position is when a single holding makes up a significant percentage of your overall investment portfolio—often 50% or more. That kind of concentration introduces extreme volatility and risk.
Even great companies stumble. Markets shift. News hits hard. And when your net worth is tied up in one ticker symbol, it doesn’t take much to knock your plan off course.
Step 1: Acknowledge the Risk
This isn’t about doubting the stock—it’s about understanding the math. If your one stock falls 40%, there’s no diversification to cushion the blow. Rob and Archie emphasize that even long-term success stories like Apple or Amazon have had periods of steep decline.
Step 2: Weigh Your Options Thoughtfully
If you’ve been holding a concentrated position for years, unloading it all at once may not be smart—or tax-efficient. Here are more nuanced approaches discussed in the episode:
- Sell in stages: Spread your gains over several tax years to manage exposure and liabilities.
- Tax-loss harvesting: Use losses in other parts of your portfolio to offset gains from the concentrated stock.
- Charitable giving: Donating appreciated stock lets you avoid capital gains taxes while supporting a cause you care about.
- Hold until death: If legacy planning is the priority, holding the stock may offer a stepped-up cost basis for heirs—but that’s not always the right move.
Step 3: Explore Advanced Strategies
For those with larger positions, there are even more sophisticated solutions:
- Exchange funds: These allow you to pool your concentrated stock with others in similar situations, achieving diversification without a taxable sale.
- Options hedging: Advanced traders can use put options to limit downside risk, but this is not DIY territory—professional guidance is essential.
- Direct indexing: Replacing index funds with individual stocks enables more customized tax-loss harvesting while slowly reducing concentrated exposure.
Step 4: Don’t Ignore the Emotional Side
Concentrated stock decisions are rarely just financial. They’re personal. Especially for couples, the emotional attachment to a stock—or the fear of “missing out”—can create tension.
Rob and Archie stress that the role of a financial advisor isn’t just to suggest numbers. It’s to facilitate honest conversations that lead to clear, confident decisions both partners can live with.
Ask Yourself:
- If this stock fell 40% tomorrow, how would my retirement plan change?
- What am I afraid to lose—wealth, opportunity, or identity?
- Am I holding this stock out of strategy or out of habit?
Final Thought
A concentrated position isn’t always bad—but it is always risky. And risk without a plan isn’t a strategy—it’s a gamble. Whether you sell, hold, donate, or diversify, what matters most is that your decision is intentional, informed, and aligned with your long-term goals.