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Concentrated Wealth

Over the years, we’ve seen how Equity Awards like Options and Restricted Stock Units (RSUs) can be powerful wealth creators for some clients. A key part of our work involves developing strategies for managing the concentrated wealth that can accumulate in the stock of the company where a client works. While it’s exciting when the stock price goes up, it carries risk and can be stressful when it drops, as we’ve often seen occur over time with many companies.

If a large portion of your net worth is tied up in your company’s stock, it might be wise to diversify your investments. Consider how much of your life is linked to the success of one company: your job, income, benefits, social circle and net worth. What if the company faces hard times? Are you comfortable having all your “eggs” in one basket? Another question to consider is this: If you were given a large amount of cash to invest today that equaled the after-tax value of your current holdings, would you invest it all into your company stock?

One strategy we often see resonate is to consider setting a time frame and stick to a plan of selling a fixed number of shares at regular intervals (monthly, quarterly, etc.), regardless of the price. This approach can help mitigate the emotional impact of stock price fluctuations and allow for gradually diversifying away from a concentrated stock position. No one solution is perfect for everyone and we always welcome these discussions to be considered in the context of one’s overall financial plan.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.