Most executives with equity compensation programs don’t know their real concentration number. At Concurrent Wealth Management, Dr. Preston Cherry works with oil and gas executives and high-income professionals across industries, and the pattern is consistent: when all layers of single-company exposure are added together for the first time, the number is almost always larger than the executive expected.
The RSU vesting sitting in the brokerage account. The PSU units from three overlapping performance periods. The company stock in the 401(k) from years of employer matching. The shares purchased through the employee stock purchase plan. Each account looks manageable in isolation. Together they can represent 40%, 50%, or more of investable net worth in a single name.
That is not a market call or a vote of confidence in the company. It is a structural artifact of how equity compensation accumulates, layer by layer, grant by grant, without any single moment where the executive steps back and sees the total. This article provides the framework for measuring the real concentration number, understanding what it means, and building a diversification strategy that solves the problem without creating a new one in the process.
How Concentration Builds Without Anyone Deciding It Should
Equity compensation creates concentration through accumulation, not through a single decision. Consider a senior executive at an energy company who has been receiving equity awards for 12 years:
- Annual RSU grants vesting on a rolling 3-year schedule, with shares held after each vest
- PSU grants with 3-year performance periods, delivering shares at settlement
- 401(k) company stock from employer matching contributions over a full career
- Employee stock purchase plan shares purchased at a discount
- Shares purchased directly during periods of high conviction in the company
No single layer looks alarming in isolation. But an executive who has been with a company for 12 years, receiving equity consistently, and holding rather than selling the vested shares, can easily accumulate $800,000, $1.2 million, or more in a single name without ever making an active decision to concentrate.
For oil and gas executives specifically, this is compounded by the sector risk layer underneath the company risk. An executive concentrated in an upstream E&P company isn’t just exposed to that company’s performance. They’re exposed to the oil price, the commodity cycle, the regulatory environment, and the capital markets appetite for energy stocks, all through a single position. Sector exposure on top of company exposure is a meaningful difference from holding 40% in a diversified technology company.
How to Measure Your Real Concentration
The correct concentration calculation uses one number as the denominator: total investable assets. That includes all taxable accounts, all retirement accounts, all equity compensation (both vested and a reasonable estimate of unvested), and any other investment holdings.
The numerator is the total value of all positions in the single company, across every account:
- Vested shares held in a brokerage account
- Company stock inside the 401(k) or other retirement plan
- Unvested RSU shares (use the current stock price and the expected vesting value)
- Unvested PSU units at target payout (use a conservative estimate, not maximum)
- ESPP shares and any directly purchased shares
Divide the single-company total by total investable assets. That percentage is the real concentration number. Most executives who do this calculation for the first time are surprised.
The Concentration Threshold Framework
| SINGLE-STOCK % OF INVESTABLE ASSETS | RISK LEVEL | PLANNING RESPONSE |
|---|---|---|
| Under 10% | Manageable | Monitor. No immediate action required unless the position is illiquid or carries high volatility. |
| 10%–20% | Elevated | Begin building a systematic diversification schedule. Tax-aware sales over 2–3 years. |
| 20%–40% | High | Prioritize diversification. Consider tax-loss harvesting in other positions to offset gains. Review vesting calendar. |
| Above 40% | Severe | Diversification is urgent. Model all available tools: direct indexing, exchange funds, charitable strategies, and collars if appropriate. |
The 10% threshold is a planning benchmark, not a rule with mathematical precision. A 12% concentration in a large-cap company with low volatility and significant liquidity is a different risk than a 12% concentration in a mid-cap energy services company with high commodity sensitivity. The threshold is a starting point for the planning conversation, not a sell signal in isolation.
What the threshold does provide is a trigger for systematic planning. Below 10%, concentration is a monitoring issue. Above 20%, it is a priority. Above 40%, it deserves the same urgency as any other major financial risk in the plan, because at that level, the retirement plan’s success is meaningfully correlated with a single company’s stock performance.
The First Rule: Don’t Create a Second Problem
The most common mistake in concentrated stock planning is solving the concentration problem while creating a tax problem of equal or greater magnitude. Selling $500,000 in appreciated company stock in a single year, in a year when RSU vesting has already pushed W-2 income above $600,000, adds long-term capital gains to an already elevated income picture and potentially triggers the 3.8% Net Investment Income Tax on top of the federal capital gains rate.¹
The first question in any diversification conversation is not “how much do I sell” but “what are the tax consequences of selling in this specific year, given everything else happening in my income picture.”
The discipline required is treating diversification as a multi-year schedule, not a transaction. The schedule is built around:
- The executive’s current and projected federal and state income tax brackets
- The vesting calendar for RSUs and PSUs, which determines when additional company shares will arrive
- The cost basis of shares already held, which determines the taxable gain on sale
- The retirement timeline, which determines how many years are available to diversify before the plan needs to generate income
Tax-Aware Diversification Strategies
Systematic selling over time. The simplest approach is selling a defined percentage or dollar amount of the concentrated position each year, sized to fit within a tax bracket threshold. An executive in the 22% long-term capital gains bracket who has room below the next bracket threshold can realize gains up to that threshold each year without triggering a higher rate. This approach is predictable, automatic, and avoids the regret that comes from trying to time the market.
Tax-loss harvesting coordination. If the diversified portion of the portfolio contains positions with unrealized losses, harvesting those losses in the same year as concentrated stock sales can offset the capital gain. This requires coordinating the two decisions, which most advisors handle separately.
Charitable giving with appreciated shares. Donating appreciated company stock directly to a donor-advised fund or qualifying charity allows the executive to avoid the capital gains tax entirely on the donated shares, while taking a full fair market value charitable deduction. For executives with charitable intent, this is one of the most tax-efficient diversification tools available at any concentration level.²
Net Unrealized Appreciation (NUA) strategy. For executives with company stock inside a 401(k) plan, the NUA strategy may allow distributing the stock in-kind from the plan and paying ordinary income tax only on the original cost basis, with the appreciation taxed at long-term capital gains rates rather than ordinary income rates when eventually sold. See the full discussion in the NUA article.
Exchange funds. For very large concentrated positions in a single name, exchange funds allow the executive to contribute shares to a partnership and receive a diversified portfolio interest in return, deferring the capital gain on the contributed shares. These structures are complex, have minimum investment requirements, and require a multi-year holding period, but for executives with positions in the $2 million+ range, they deserve evaluation.
Options strategies. Protective puts and collars can provide downside protection on a concentrated position during the period required for a systematic diversification, though these strategies require specific circumstances to be cost-effective and should be evaluated by someone who understands the tax treatment of the options themselves.
How Equity Compensation Changes the Calculation
For executives receiving ongoing equity grants, diversification is not a one-time exercise. Every RSU and PSU vest adds to the concentration unless the shares delivered are sold or otherwise deployed. An executive who sells 10% of their concentrated position each year but receives new vested shares equivalent to 8% of the portfolio each year is effectively running in place.
The diversification schedule has to account for the ongoing inflow of new shares, not just the existing stock pile. A dollar-based flat fee advisor has no incentive to keep concentrated stock in place. The recommendation reflects the plan, not the advisory fee structure that benefits from a larger managed balance.
For oil and gas executives specifically, the PSU payout range creates an additional variable. In a strong commodity cycle year, PSU payouts may come in above target, delivering more shares than the base projection assumed. The diversification schedule should be set to accommodate an above-target vest year without requiring a reactive decision under time pressure.
What to Do Next
- Calculate your real concentration number today: add all single-company exposure across every account, vested and estimated unvested, and divide by total investable assets.
- Identify which threshold range you fall into and whether the current planning response is proportionate to the actual risk level.
- Pull your vesting calendar for the next 3 years and identify when new shares will arrive and at what projected value.
- Model the tax cost of selling a defined amount of appreciated shares in the current tax year, given your full income picture for that year.
- If concentration is above 20%, this deserves a formal diversification schedule, not a series of reactive decisions made at each vesting date.
Related Reading
Final Key Takeaways
- Real concentration is the total single-company exposure across all accounts divided by total investable assets. Most executives who calculate this number for the first time find it is larger than expected.
- The 10% threshold is a planning benchmark. Above 10%, systematic diversification deserves a schedule. Above 20%, it deserves urgency. Above 40%, it is a primary retirement planning risk.
- The first rule of diversification is not creating a second problem. Tax-aware selling coordinated with the income picture, vesting calendar, and retirement timeline is more effective than a single large sale.
- For executives receiving ongoing equity grants, the diversification schedule has to account for the inflow of new shares, not just the existing position. Running in place is not diversification.
About Dr. Preston Cherry
Dr. Preston Cherry is a Houston-based flat-fee fiduciary financial advisor and founder of Concurrent Wealth Management. He works directly with high-income Gen X professionals and oil and gas executives on retirement, tax strategy, and investment decisions during major life transitions.
Concurrent Wealth Management provides all-inclusive comprehensive financial planning with integrated investment management, delivered through a transparent flat-dollar fee based on complexity and value, not a percentage tied to portfolio growth.
You can also explore how flat-fee compares to a 1% advisor fee.
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Common Questions About Concentrated Stock Risk
How much company stock is too much?
A commonly used planning threshold is 10% of investable assets in a single stock. Above that level, concentration risk deserves a systematic diversification response. Above 20%, it deserves urgency. Above 40%, single-company exposure represents a primary retirement planning risk that needs to be addressed before almost anything else in the financial plan. At Concurrent Wealth Management, Dr. Preston Cherry calculates the real concentration number across all accounts and builds a tax-aware diversification schedule specific to each executive’s vesting calendar and income picture.
Should I sell my company stock when it vests?
It depends on the tax picture in that specific year. Selling immediately at vest avoids the risk of the stock declining after vesting, which is the most straightforward approach. Whether that sale creates a meaningful tax event depends on your other income sources in the same calendar year. For executives with RSU or PSU vesting that already creates significant ordinary income, the capital gains from selling additional vested shares may land in a high bracket. Modeling the full year income picture before the vest date is the right approach, not deciding reactively at the vest.
What is the tax on selling concentrated stock?
The tax treatment depends on how long the shares have been held after vesting. Shares held for more than one year after the vesting date are taxed at long-term capital gains rates, currently 0%, 15%, or 20% depending on income, plus the 3.8% Net Investment Income Tax for high earners.¹ Shares sold within one year of vesting are taxed at ordinary income rates. The cost basis for tax purposes is the fair market value of the shares on the vesting date, which is the same amount taxed as ordinary income at vest. The taxable gain on a subsequent sale is the difference between the sale price and that cost basis.
What is an exchange fund and should I use one for my concentrated position?
An exchange fund is a partnership structure that allows investors with concentrated positions to contribute shares and receive a diversified portfolio interest in return, deferring the capital gain on the contributed shares. They typically require a minimum contribution of $1 million or more, a 7-year holding period, and careful structuring to qualify for deferral treatment. For executives with very large concentrated positions, they deserve evaluation as part of a broader diversification strategy. They are not appropriate for every situation and require working with an advisor who understands both the tax treatment and the fund mechanics.
How do I diversify company stock without paying a lot of taxes?
The short answer is that some tax cost is almost always part of a responsible diversification plan. The goal is not zero tax but tax that is proportionate to the risk reduction achieved. The tools that minimize tax include: systematic selling spread over multiple years to stay within favorable bracket thresholds, tax-loss harvesting in other positions to offset gains, charitable giving with appreciated shares to avoid capital gains entirely on donated amounts, and the NUA strategy for company stock inside a 401(k). Concurrent Wealth Management coordinates all of these tools within a formal, multi-year diversification schedule.
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References
¹ Internal Revenue Service. Topic No. 409, Capital Gains and Losses. irs.gov/taxtopics/tc409. 2025.
² Internal Revenue Service. Publication 526, Charitable Contributions. Internal Revenue Service. 2024.
³ U.S. Securities and Exchange Commission. Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio. SEC Office of Investor Education and Advocacy. 2014.
