The silent risk of employer stock concentrations

As a financial advisor, I regularly meet successful bay area professionals whose wealth is tied up almost entirely in one company's stock - usually their employer's. It's the classic story here: years of equity compensation, an IPO, or simply staying loyal to a stock that took off. But the same concentration that builds wealth can just as easily undo it.

Here's the sobering part: over any rolling 10-year period, roughly three out of four individual U.S. stocks have underperformed the S&P 500. And the typical single stock swings with volatility more than double that of the broader market. None of this means avoid risk - markets reward risk-taking. It means asking a harder question: if you didn't already own this stock, would you buy $1 million of it today?

The real obstacle is usually taxes, not conviction. Deeply appreciated stock, often with a near-zero cost basis, makes selling feel like its own kind of loss. I see this hesitation constantly - people who understand the risk intellectually but freeze at the tax bill.

The encouraging news is that diversifying doesn't have to be all-or-nothing. Phased selling, charitable strategies, and tax-loss harvesting techniques can all reduce concentration gradually, without one painful tax event.

If a large slice of your net worth rides on a single stock, that's worth a conversation, not necessarily a sale.

Diversification is a process, not an event.