Mariner Wealth Advisors' Guide to How Much Company Stock Is Too Much

The loss gets larger before the decision feels urgent

The table makes one point visible: the dollar loss rises directly with the position, but the return needed afterward rises faster. A 5% decline needs about 5.3% to recover; a 22.5% decline needs about 29%; a 30% decline needs about 43%.

The 50% drop is a stress test we chose, not a prediction about your employer or anyone else's. Single stocks have historically suffered sharp declines more often than diversified portfolios. Mariner Wealth Advisors sizes the position so a shock of that size stays survivable, and it does not try to guess the next company headline. Investing involves risk, including loss of principal.

Where the one-fifth line starts to matter

The practical rule: once one company's shares exceed about 20% of net worth, cut that holding first. Picking funds, rebalancing other accounts or directing new savings can wait. Count everything tied to the employer: vested shares, the company-stock fund in your retirement plan, RSUs vesting soon and in-the-money options.

Your home can be part of net worth, but it cannot absorb a portfolio loss unless you sell it or borrow against it. Your paycheck, annual bonus, deferred pay and future awards also come from the same employer. Your real exposure is therefore larger than the percentage on a brokerage statement.

Below 10%, stopping new purchases may be enough. Between 10% and 20%, the right response depends on how much of your next several years of pay is tied to company equity. This rule is a starting point for executives, not a law for every household.

• Vested shares in a brokerage account
• The company-stock option in your 401(k)
• RSUs scheduled to vest during the next 12 months
• In-the-money options, using a reasonable current value

Kwame's position keeps rebuilding itself

Hypothetical: Kwame, 44, is a divorced general counsel at a biotech company and shares custody of two children. His net worth is $2,000,000, including $900,000 of vested employer shares, or 45%. The vest-day value of those shares was $720,000, so the gain is $180,000, equal to 20% of the position.

Kwame's target is 20% of $2,000,000, or $400,000. Getting there means selling $500,000 ($900,000 less $400,000). Because 20% of the position is gain, that sale realizes $100,000 of gain. We assume a 23.8% federal rate on long-term gains purely as an example; on $100,000 that comes to $23,800.

The tax is meaningful, but it is smaller than the $250,000 loss a 50% fall would create on the $500,000 sold. RSU shares generally take a basis equal to their value on the vest date, so a later sale is usually taxed only on the price change since then. The separate article about an RSU withholding shortfall covers why a flat withholding rate can leave an April balance; sale proceeds can reserve cash for that bill.

There is another trap. Kwame receives about $600,000 of RSUs each year, and his next net vest is about $360,000. If he sells nothing, his shares rise to $1,260,000, while his net worth rises to $2,360,000. That is $1,260,000 divided by $2,360,000, or roughly 53%. A sale without a future-vest rule only postpones the problem.

The trade-off is concentration versus tax and regret

Keeping a large position preserves upside and avoids an immediate tax payment. It also leaves one employer in charge of several parts of your financial life. Selling reduces that shared risk, but it is not free: tax lots, short-term gains, preclearance, and an inconvenient trading window can change the order of sales.

We would rather accept the regret of selling before a further rise than accept a 22.5% hit to net worth from the 45% position in the table. A missed gain is frustrating. Rebuilding a large loss while your compensation is under pressure is harder.

• Keep the shares: no immediate sale-related tax, full participation if the price rises, and a visible ownership stake may matter to a board.
• Keep the shares: one company's bad year can reduce pay, awards, and savings together; a 50% fall requires a 100% gain to return to the starting value.
• Sell part: the maximum loss becomes smaller, and proceeds can fund an emergency reserve, college savings, or the April tax balance.
• Sell part: you may owe capital-gains tax above basis, need trading-window approval, and regret selling if the price continues upward.

Four beliefs that keep executives overexposed

The common error is selling once and forgetting the vest calendar. Suppose Kwame sells down to $400,000 today and pays the $23,800 tax, leaving net worth of $1,976,200. Next year's net vest of about $360,000 lifts his stock to $760,000 of roughly $2,336,200, about 33%. A 50% drop would then cost him about $380,000, while he believes the concentration was fixed.

Tax, employment rules, and securities restrictions still matter. The point is not to sell blindly. It is to put the percentage, the tax lot, and the next permitted action on the same page.

• “I know the business, so the shares are safer.” Knowledge of operations does not remove price risk, and insider restrictions can reduce your chances to sell.
• “I will wait until the stock returns to its old high.” A past price is not a valuation method. Each quarter of waiting leaves the same concentration in place.
• “The retirement-plan holding does not count.” It counts economically. Selling company stock within the plan generally does not create current income tax, which can make that account an efficient place to reduce exposure.
• “A sale creates a huge tax bill.” For RSUs, the vest-day value is usually basis. In Kwame's example, the gain is 20% of the shares sold, not the full sale proceeds. Shares held longer than one year generally receive long-term treatment, subject to the tax rules that apply to you.

A five-step reduction plan

The work starts with an inventory, not a market opinion. Mariner Wealth Advisors can compare the employer shares with your other accounts, then show the dollar amount that must move and the tax attached to each possible lot.

The one-fifth rule applies to future awards too. A standing instruction might sell newly vested shares, direct proceeds to a diversified allocation, and pause automatically when company policy or a trading window prevents action. The exact instruction depends on your plan documents and tax situation.

• You: list every company-linked holding, its current value, basis, and holding period. Include the retirement-plan stock option and the next 12 months of vesting.
• The advisor: calculate the percentage and the dollar amount above 20%. For Kwame, $900,000 minus $400,000 equals $500,000. Before Mariner Wealth Advisors suggests a sale, it estimates the tax for each lot.
• Together: rank the sale choices. Retirement-plan company stock generally has no current sale tax, while high-basis lots held more than a year may create less taxable gain. Low-basis and short-term lots usually need closer review.
• You: set a standing instruction for new vests. An executive subject to trading restrictions may ask about a 10b5-1 trading plan, which is covered on the related page.
• The advisor: review the percentage at each vest date and after a large price move, not only at the annual portfolio meeting.

Use these numbers at your next review

Bring a one-page inventory to the conversation. It should show the percentage, basis, vest dates, trading limits, and destination for proceeds. Mariner Wealth Advisors can then discuss an action sequence rather than treating the position as one undifferentiated number.

The company's ownership guidelines may require a separate review; the relevant guidelines page covers that topic. The central question remains practical: what percentage will you hold after the next vest, not merely what percentage appears today?

• Write total company exposure as a percentage of net worth.
• Record basis and holding period for every lot.
• Mark the next open trading window and preclearance dates.
• List the next three vest dates and expected share values.
• Check any ownership guideline that applies to your role.
• Name where sale proceeds would go, such as cash reserves or college funding.
• Ask which lots would be sold first, the tax on each, and how future vests will be handled.
• Ask what changes if the stock falls 30% before the reduction is complete.
• Ask whether donating long-held, low-basis shares could reduce both the gain and the concentration this year.

What to put on your calendar this week

Start with one number, not a prediction: company-linked exposure divided by net worth. If the result is above 20%, pause new purchases while you check the next permitted trading date and calculate the excess.

A review cannot replace company trading rules or lot-by-lot tax work. Someone with very large unrelated wealth may reasonably hold more than one-fifth, while an executive whose pay is heavily equity-based may need a lower ceiling. Mariner Wealth Advisors reviews the facts before discussing a sale.

• Calculate vested shares plus the 401(k) company-stock holding plus RSUs vesting within 12 months, then divide by net worth.
• If the result exceeds 20%, write down the dollar excess. Kwame's excess is $500,000.
• Check the next open trading window and ask the general counsel's office whether preclearance is required.
• Stop adding to the position by turning off company-stock reinvestment and retirement-plan contributions directed to that fund.
• Use the request form to ask Mariner Wealth Advisors for a review, attaching your latest brokerage statement and vest schedule.

How Mariner Wealth Advisors can help with the calculation

Mariner Wealth Advisors can review the brokerage statement, retirement-plan holding, vest calendar, basis, and trading restrictions together. The discussion can show what a 20% target means in dollars, which lots create the least tax, and how future awards would affect the percentage.

Clients nationwide meet with the firm by video and phone. A request through the website is the appropriate next step; the $500,000 investable-asset minimum applies.