If your employer’s stock dropped 40% tomorrow and your team’s headcount got cut the same week, would that be a bad month or a redrawn life?

For a lot of Bay Area tech employees, the honest answer is the second one, and they have never actually said it out loud. The stock has only gone up. The RSUs keep vesting. The position keeps growing. Nobody made a decision to bet half their net worth on one company. It just happened, one vest at a time.

This is the article on how to think about that bet on purpose. Not a rule handed down from on high, but a framework you can apply to your own balance sheet today, with specific thresholds worth reacting to and a clear way to measure what you are actually holding.

Concentration by decision versus concentration by default

There is a meaningful difference between choosing to hold a large position in your company and simply ending up with one.

A deliberate concentration decision sounds like this. You understand the company deeply, you have a view on its prospects that you can articulate, you have sized the position against the rest of your balance sheet, and you have decided the upside is worth the risk of a large drawdown. You know the number and you chose it.

Concentration by default sounds like nothing at all, because no decision was ever made. The RSUs vested and you held them because selling felt like a tax event you did not want to trigger. The position grew because the stock went up. You never picked a target, so you never noticed when you blew past one.

The problem with concentration by default is not that the position is large. It is that no one is steering. We made the case previously that holding your company stock is not a strategy. This is the same idea applied to the size of the position rather than the fact of it. A 50% concentration you chose with open eyes is a position. A 50% concentration that accumulated while you were not looking is an accident that happens to be working so far.

Calculate your true single-stock exposure

Most people dramatically understate how concentrated they are, because they only count the shares sitting in their brokerage account.

Your true exposure is larger than that. Start with vested shares you already hold. Add the shares you will receive from RSUs that have not yet vested but almost certainly will, since for most tenured employees that is real future wealth already spoken for. Add the in-the-money value of vested stock options, and the likely value of unvested options you expect to keep. Add any shares sitting in your ESPP. If you early-exercised, add those too.

Now put that total in the numerator. In the denominator, use your full investable net worth. That means your brokerage accounts, your 401(k) and IRAs, your cash beyond an emergency reserve, and any other liquid investments. Your primary residence is usually left out, since you cannot easily spend it and it is not correlated with your employer.

The number you get is almost always higher than the one in your head. We walked through the diversification side of this recently. The calculation here is the front half of that work, because you cannot manage an exposure you have not measured. Run it once and write the percentage down. That single number is the input every other decision in this article depends on.

The correlated risk most people miss

Single-stock risk is only half of the exposure. The other half is that your paycheck and your portfolio are bets on the same company.

For most Bay Area tech employees, the employer is not just a large holding. It is the source of the salary, the bonus, the future RSU vests, the health insurance, and the equity position all at once. When the company does well, all of those move up together. When it does poorly, they fall together, and they tend to fall at the same moment.

That correlation is the part standard diversification math misses. A financial model might tell you a 30% position in one stock is aggressive but survivable. It does not know that the same company also pays your mortgage. If the stock falls because the business is struggling, that is frequently the same quarter the layoffs get announced and the refresh grants shrink. You can lose the portfolio and the income in one move, which is exactly when you would otherwise have leaned on one to ride out trouble in the other.

This is why a tech employee should treat a given concentration level as riskier than the same percentage would be for someone whose income comes from an unrelated source. The stock and the salary are not two bets. They are one bet, made twice.

Specific thresholds worth thinking about

Numbers help, as long as everyone understands they are guidelines for reflection rather than rules of law. There is no regulation that sets a correct concentration level. These are the thresholds where the conversation should change.

Below 10% of investable net worth in a single stock is a position most people can hold without it threatening the plan. This is the zone where concentration is a preference, not a risk-management problem.

Between 10% and 20% is where it becomes a deliberate choice that deserves a deliberate answer. At this level you should be able to state why you are holding it and what would make you trim.

Above 20%, and certainly approaching 30% or more, you are in territory where a single bad year at the company can reshape your financial life. This is not a reason to panic-sell, since that creates its own tax and timing problems. It is a reason to have a written plan to bring the position down over time.

The exact number that is right for you depends on your income stability, your other assets, your time horizon, and how much volatility you can absorb without changing your behavior. The point of the thresholds is not precision. It is to convert a vague unease into a concrete trigger, so you act on a number rather than on a feeling after the stock has already moved.

The bottom line

The question is not whether holding your employer’s stock is good or bad. It is whether the size of the position is a decision you made or an outcome that happened to you. Measure your true exposure including unvested equity, remember that your income and your investments are riding on the same company, and pick a threshold you will actually act on before the market picks one for you.