Holding Your Company Stock Is Not a Strategy. Here's What Is.

If your company gave you $500,000 in cash tomorrow, would you put all of it into your employer's stock?

Most people would say no. They'd diversify. They'd spread it across different investments. They'd think carefully about concentration risk.

But that's effectively what happens every time RSUs vest and you decide to hold every share.

The decision isn't whether to sell. The decision is whether to buy, and most people never frame it that way.

Why "hold" feels like the safe choice

There's a reason holding feels safer than selling. You didn't go out and buy the stock. It came to you as compensation. Selling it feels like giving something up, like making a bet against your own employer, like ingratitude.

None of that is a financial argument. All of it is psychology.

The research on this is consistent: people feel losses more acutely than equivalent gains. Selling shares that later go up feels worse than holding shares that go down by the same amount. So the default becomes hold, not because it's the right financial decision, but because it's the one that feels safer emotionally.

Understanding that bias is the first step in making a better decision.

The concentration problem

Here's what the picture actually looks like for most tech employees who default to holding.

Your salary depends on your employer. Your bonus depends on your employer. Your unvested equity depends on your employer. Your career trajectory, at least in the near term, depends on your employer.

And now your investment portfolio depends on your employer too.

That's not diversification. That's concentration stacked on concentration. If the company hits a rough patch, a single bad quarter doesn't just affect your stock price. It can affect your compensation, your bonus, your next promotion, and the value of everything you've been holding.

The financial planning term for this is correlated risk. Your human capital and your investment portfolio are moving in the same direction, driven by the same underlying force. When things go well, everything goes well. When things go badly, everything goes badly at once.

A portfolio built around a single concentrated position isn't a financial plan. It's a bet.

A framework for thinking about it clearly

The goal isn't to tell you to sell everything immediately. The goal is to give you a way to make the decision deliberately rather than by default.

Here are the four questions worth working through before your next vest date.

Question 1: What percentage of your net worth is in your employer's stock?

Count everything: vested shares, unvested shares at current value, and options. If that number is above 20 to 25 percent, you have a concentration problem by most standard financial planning definitions. If it's above 40 or 50 percent, the risk is significant regardless of how much you believe in the company.

There's no universal right answer here. Some people are comfortable with higher concentration, particularly if they have strong conviction about the company's trajectory and the rest of their financial life is solid. But the number should be a deliberate choice, not something that happened by accident because you never sold anything.

Question 2: Would you buy this stock today with this much of your net worth?

This is the most clarifying question in equity planning, and it's worth sitting with for a moment.

Strip away the fact that the shares came to you as compensation. Strip away the vesting schedule and the emotional attachment. If someone handed you a check for whatever your stock is currently worth and asked you to invest it, would you put all of it back into your employer?

If the answer is no, that's important information. It doesn't mean sell everything today. But it means your default to hold isn't actually a considered investment decision. It's inertia.

Question 3: What is your time horizon for this money?

This matters more than most people realize. If you're planning to use this money within five years, for a home purchase, a career transition, or financial independence, the risk profile of a concentrated single-stock position is very different than if you're investing for thirty years.

Concentrated stock can work out well over long time horizons. Over shorter ones, a single bad year can meaningfully set back a specific goal. Matching your investment risk to your actual time horizon is one of the most basic things financial planning does, and it almost always argues for more diversification than the default hold position creates.

Question 4: What's your plan if the stock drops 40 percent?

Not if the company fails. Just if the stock corrects, which happens to good companies regularly. What does that do to your net worth? Does it change your plans? Does it keep you up at night?

If the answer to any of those is yes, that's a signal your current concentration level is higher than your actual risk tolerance. The time to find that out is before a correction, not during one.

What a selling strategy actually looks like

A selling strategy isn't a single decision. It's a structure that removes the emotional weight from each individual vest event by establishing a framework in advance.

The most common approach is systematic selling: selling a defined percentage of shares on vest, on a schedule, regardless of what the stock is doing on that particular day. This does a few things. It eliminates the temptation to time the market. It creates consistent diversification over time. And it removes the psychological burden of making the same decision over and over again.

The percentage depends on your situation. If you're already significantly concentrated, selling a larger portion on each vest makes sense while you work down toward a target allocation. If you're earlier in your tenure and concentration is lower, a smaller systematic sale might be appropriate.

Some people also hold a portion deliberately, either because they have strong conviction about the company's near-term trajectory or because they want to maintain some upside exposure. That's a reasonable choice, as long as it's a choice and not a default.

The key is having a plan before the shares vest, not after. Decisions made in advance are almost always better than decisions made in the moment when the stock happens to be up or down and emotions are running in one direction or another.

A note on taxes

One thing that comes up in every conversation about selling RSUs: taxes.

The tax concern is real but often overstated. RSUs are taxed as ordinary income at vest regardless of whether you sell. If you sell immediately after vest, there is no additional income tax consequence. The only tax consideration for shares held beyond vest is capital gains on any appreciation after the vest date, which is typically modest in the short term.

In other words, taxes are rarely a good reason to hold concentrated stock. They can inform the timing and structure of a selling strategy, but they shouldn't be the reason you hold a position that makes your financial plan fragile.

The bottom line

Holding your company stock isn't a neutral decision. It's an active choice to maintain concentration, and it deserves the same deliberate analysis you'd apply to any other significant financial decision.

The framework is simple. Know your concentration level. Ask whether you'd buy the stock today with this much of your net worth. Match your risk to your time horizon. Have a plan for a correction before it happens.

If you've never worked through those questions with a clear picture of your full financial situation in front of you, that's worth doing before your next vest date.