How to Reduce The Risk in Owning Too Much of One Stock & Save Taxes

Retired-ish

Having too much of your net worth tied up in one or a couple individual stocks can be a dangerous game to play. It’s one that relies heavily on luck and can present a significant risk to your life savings.

Things can either turn out really well, or very poorly. Sadly, many people often let their emotions and the potential tax ramifications dictate their next move, but should they?

In this episode, we discuss the risk of relying on one or two companies’ success to dictate your financial future, and how you can begin to mitigate that risk while saving taxes.

More specifically, I discuss:

• Why are large, concentrated stock positions a potential problem?
• What types of investors might have highly concentrated stock positions?
• What if the majority of my compensation is via employer stock?
• The dangers of relying on one company and overconfidence
• How to diversify your concentrated stock position
• Examples of methods you can use to divest of shares
• Tax efficient example of reducing concentrated stock positions, diversifying, and saving taxes
• A little-known strategy to consider if you have appreciated company stock positions inside your 401(k)

Resources:

• Access Show Notes and Sign Up for the Retired·ish Newsletter HERE
• Free Retirement Jump-Start Analysis
• Ask Cameron A Question!

Key moments:

00:00 Diversify investments to minimize risk and avoid emotional biases

05:34 Active management and stock picking often fails to outperform benchmarks.

07:59 Timing markets is risky; consider long-term goals.

10:31 Diversification benefits

16:44 Expect intra-year stock market declines

18:54 Strategy for controlling taxes and staying diversified in the market with concentrated stock position