Your Company Stock Isn’t a Retirement Plan
You’ve worked hard, delivered value, and built a reputation inside your company. Maybe your comp package includes RSUs, ESPPs, or ISOs. You believe in the mission. You trust the leadership. And over time, your portfolio starts to reflect your career: heavy in company stock.
There’s a logic to it—until you look under the hood.
Here’s the problem: too much company stock isn’t a sign of loyalty. It’s a concentration risk. One that could undermine the very financial stability you’ve been working toward. This article will show you why holding too much of your employer’s stock could backfire, where your thinking may be flawed, and how to create a more resilient financial plan—without abandoning the company you helped build.
Where the Thinking Breaks: The Loyalty Fallacy
“I know the company better than anyone.”
Yes—and that’s why you’re biased. You see the inner workings, the strategic roadmap, the potential. But that insider perspective creates a false sense of control. It’s easy to forget that markets don’t always reward great products or strong culture—especially in short time frames.
“I want to hold until it rebounds.”
Understandable—but that’s market timing. If your company’s stock dropped 40% and you’re still waiting to sell at the peak, you’re not managing your wealth. You’re clinging to sunk costs.
“Why would I sell a good investment?”
Because your financial security shouldn’t be tied to the same company that cuts your paycheck. If things go sideways, you could lose your job and a big portion of your portfolio in the same quarter.
“It feels like betrayal to sell.”
This one’s hard to admit—but it’s emotional, not rational. You can support the company and diversify. Your loyalty should be to your long-term financial goals.
What Could Go Wrong (And What Already Has)
Let’s be clear: we’re not talking about hypotheticals.
- Enron. Employees lost their jobs and their retirement savings.
- Silicon Valley Bank. Stockholders—including employees—saw equity wiped out in days.
- Meta, Amazon, Tesla. Even dominant companies saw stock prices drop 40–70% in recent cycles. Imagine retiring the year that happens.
A portfolio heavily concentrated in company stock is not a plan. It’s a gamble.
Here’s what can go wrong:
- Your stock tanks—and takes a chunk of your net worth with it.
- You get laid off during the same market correction.
- Your restricted shares vest at a lower valuation—locking in less value.
- Tax implications get messier the longer you delay diversification.
Smarter Strategies to Reduce Risk Without Overreacting
Diversification doesn’t mean dumping all your company stock tomorrow. It means creating a systematic strategy that aligns with your broader goals.
1. Establish a Diversification Schedule
- Sell a portion of RSUs or ESPP shares on a pre-set cadence (quarterly, semi-annually, annually).
- Automate the decision to reduce emotional bias.
2. Use Tax Planning to Your Advantage
- Time sales to maximize long-term capital gains (12+ months of holding).
- Offset gains with tax-loss harvesting.
- Consider donating appreciated stock to charity for a double benefit: avoid the capital gain and get a deduction.
3. Deploy a Reinvestment Framework
- Shift company stock proceeds into a diversified portfolio.
- Include U.S. and international equities, bonds, alternatives (if appropriate), and sector balance.
- Create a portfolio that mirrors your risk tolerance and goals—not your employer’s stock performance.
4. Track Concentration Metrics
Keep an eye on:
- % of your total portfolio in company stock
- % of liquid net worth in that single ticker
- Total equity comp exposure vs. cash and diversified assets
A good rule of thumb? Keep company stock under 10% of your investable portfolio.
When It Might Make Sense to Hold
We’re not anti-company stock. We’re anti-blind-loyalty-with-no-plan.
Here are scenarios where holding makes sense:
- You’re anticipating near-term developments that may impact the stock and are not restricted from trading
- You’re diversified elsewhere, and company stock is a smaller portion of your overall net worth
- You’re doing planned giving and using the stock for charitable purposes
- You’re in a low-income year and want to convert vested options at favorable tax rates
But again—it’s about strategy, not hope.
FAQs: Company Stock and Wealth Strategy
How much of my portfolio should be in company stock?
Ideally no more than 10%. Higher concentrations increase your exposure to unnecessary single-stock risk.
Should I sell RSUs immediately when they vest?
In most cases, yes—especially if you’re already overexposed. RSUs are taxed as ordinary income when they vest, so there’s no additional tax hit to sell right away.
What’s the difference between RSUs and ISOs?
RSUs are taxed at vesting (W-2 income). ISOs offer more favorable tax treatment if held long enough but require planning to avoid AMT (Alternative Minimum Tax).
What if I believe the stock will rebound?
That belief is a market prediction—and most professionals overestimate their ability to time recoveries. A disciplined sell schedule is safer than a gut call.
Can I still support the company if I diversify?
Absolutely. You’re managing your wealth, not shorting the business. Selling stock doesn’t make you disloyal—it makes you smart.
A Better Way to Think About Loyalty
If you’re an engineer, executive, or technologist who’s built wealth through your company, that’s worth celebrating. But building concentrated wealth and keeping it are two different skillsets.
Your job is to protect the life you’ve worked for—not hope it rides on a single ticker. At Truly Aligned, we help high-income professionals like you build strategies around equity comp, tax planning, and diversification—so you can stay confident and protected, no matter what the market (or your company) does next.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk.
Stock investing includes risks, including fluctuating prices and loss of principal.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through The Wealth Consulting group, a registered investment advisor. The Wealth Consulting group, WCG Wealth Advisors and Truly Aligned, INC are separate entities from LPL Financial.