RSUs have become one of the primary ways technology and corporate professionals build wealth over a career. They vest, they accumulate, and when the company performs well, the numbers grow in a way that feels like validation that everything is working.
The problem is not the RSUs. The problem is what happens when no one is actively managing the concentration they create over time.
How concentration builds without anyone planning for it
Most people do not set out to have 40% or 50% of their net worth tied to one company. It happens gradually, and usually during a period when things are going well, which makes it easy to rationalize.
The pattern is predictable. RSUs vest on a regular schedule and get added to a brokerage account. The stock performs well. Selling feels unnecessary, maybe even premature. Taxes create a friction point that discourages action. More RSUs are granted. The position grows. Years pass.
By the time most professionals step back and look at the full picture, the concentration is already significant. What started as a component of compensation has become the foundation of a financial plan that was never designed to work that way.
Concentration risk does not announce itself. It accumulates quietly during the same period that company performance makes it feel like the right decision to hold.
This is not a character flaw or a failure of financial discipline. It is a natural consequence of how equity compensation works and how human beings respond to recent performance. Recognizing it is the first step toward addressing it intentionally.
Why single-stock risk is different from ordinary market risk
Holding a diversified portfolio carries market risk, meaning your assets can decline when the broader market declines. That is an unavoidable feature of investing in equities, and historically it has been a risk that rewards patient investors over long time horizons.
Single-stock concentration adds a different and more severe layer of risk on top of that. A company can underperform or decline sharply for reasons that have nothing to do with the broader market: a failed product launch, a regulatory investigation, an accounting restatement, a change in competitive dynamics, a leadership crisis, or simply a shift in investor sentiment about the sector.
A diversified portfolio rarely goes to zero. A single stock can. The outcomes at the extremes are fundamentally different, and that asymmetry matters when it is your retirement on the line.
For employees, the concentration risk is compounded by income risk. Your paycheck, your benefits, your unvested equity, and your investment portfolio are all tied to the same company. If the company runs into serious trouble, multiple parts of your financial life can be affected simultaneously. That is a risk profile that no amount of individual stock performance justifies indefinitely.
A practical way to think about where you stand
There is no universal threshold that determines exactly how much company stock is too much. The right answer depends on your income stability, time horizon, liquidity needs, and how much volatility you can genuinely absorb without it affecting your decisions or your life. But reference points are useful for calibrating where you are.
These are not rules that automatically trigger action. They are reference points that help you understand how much of your long-term financial outcome is currently tied to one company’s performance. Where you fall on that spectrum should inform how urgently you think about a plan to address it.
Why Seattle and Denver professionals face this so often
In cities like Seattle and Denver, equity compensation is not a perk. It is a central part of how compensation is structured at companies like Amazon, Microsoft, Lockheed Martin, and many others. Over a career, the accumulation can be substantial.
The professionals most exposed tend to share a few common characteristics. They joined a company early or during a period of strong growth. They have held RSUs long enough that the position has compounded meaningfully. They have stayed because the compensation is strong and leaving would mean walking away from unvested grants. And they have not had a specific reason to sell because the stock has continued to perform.
None of those are bad decisions in isolation. But together they can create a financial profile that is far more concentrated than it appears from the outside, and far more concentrated than the individual would choose if they were building their portfolio from scratch today.
The tax friction that keeps people stuck
One of the most common reasons people delay addressing concentration is taxes. And the concern is legitimate. Selling a large, appreciated position can trigger a significant capital gains tax bill in a single year, particularly if the position has been held long enough to qualify for long-term treatment but has grown substantially.
But the tax concern, while real, is often overstated as a reason to defer action indefinitely. Paying taxes on a gain means you have a gain. The relevant comparison is not between selling and paying taxes versus holding and paying nothing. The relevant comparison is between the after-tax outcome of a managed diversification strategy and the potential outcome of continuing to hold a concentrated position through a period of company-specific decline.
Several tools exist to address concentration in a tax-aware way. Spreading sales across multiple tax years can reduce the impact in any single year. Harvesting losses elsewhere in the portfolio can offset gains from the sale. Donating appreciated shares directly to a donor-advised fund eliminates capital gains tax on the donated amount while generating a charitable deduction. In some cases, charitable remainder trusts or exchange funds may be appropriate for larger positions.
Taxes are a cost of managing concentration risk. They are not a reason to leave the risk unmanaged.
What a systematic approach looks like in practice
Addressing concentration does not have to mean liquidating everything at once or making a dramatic portfolio shift. For most people, the most practical approach is a systematic plan executed over time.
That might mean establishing a target for the maximum percentage of net worth you are willing to hold in a single stock, and then selling enough each year to stay within that target as new RSUs vest. It might mean using each vesting event as a prompt to review the overall exposure and make a deliberate decision rather than defaulting to holding. It might mean coordinating the timing of sales with your tax situation, your other income, and any charitable giving plans.
The key is that the decision to hold or sell is made deliberately, with full awareness of the concentration it creates, rather than by inertia. Doing nothing is also a decision. It just rarely feels like one.
The question that clarifies everything
There is one question worth sitting with honestly when thinking about RSU concentration risk:
If your company stopped outperforming tomorrow, would your financial plan still work? Not the stock going to zero. Just stopped outperforming. Went sideways for five years. Gave back some of the gains from the last cycle. That is a realistic scenario for any company, including ones that feel dominant today.
If the answer makes you uncomfortable, that discomfort is useful information. It means the concentration is doing more work in your financial plan than you may have consciously intended, and that a conversation about how to address it is worth having sooner rather than later.
If a large portion of your net worth is tied to company stock and you have not had a deliberate conversation about managing that exposure, let’s talk through what a practical plan could look like for your situation.
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