Many high-earning tech professionals find themselves in a precarious financial situation, often without realizing it. They hold a significant portion of their wealth—sometimes 40%, 50%, or even 60% of their total portfolio—in the stock of their employer, largely due to Restricted Stock Units (RSUs). This concentration often happens simply out of inertia. They let the RSUs vest, pay the taxes, and then hold onto the remaining shares, hoping the stock price continues its upward trajectory.

While it’s easy to feel confident in a company you work for every day, this level of concentration is a risk. You are essentially doubling down: your salary and job are tied to the company's success, and a vast portion of your financial capital is too. A company-specific downturn—be it a bad product launch, a regulatory issue, or a leadership crisis—could simultaneously threaten your job and significantly erode your net worth.

Think of it like a casino. If you were playing blackjack and saw your initial investment triple, wouldn’t you want to take some chips off the table? Pocketing some of those gains can be one approach to lock in gains. Selling a portion of your vested RSUs doesn't mean you're abandoning the ship. You can still participate in potential growth through the shares you choose to keep, as well as all future vesting shares.

Human behavior around stock price is peculiar. When the stock price is low, people panic and sell. But when the stock price is high—a time some investors consider realizing gains—they often hold on, convinced the stock is the second coming of NVIDIA. This behavior is driven by optimism and the fear of missing out, yet it can increase concentration risk.

Everyone’s financial situation and risk tolerance are unique, but for some, a highly concentrated stock position can create risks that may not align with some investors’ goals, time horizons, or liquidity needs. It may make sense to establish a systematic plan to sell a portion of your vested RSUs. This capital can then be used to fund your immediate financial goals (like a down payment or home renovation) or to further diversify your portfolio. Diversification reduces risk without necessarily sacrificing returns. Don't let inertia or optimism create unnecessary concentration risk in your financial life. Review your company stock exposure and consider pocketing some of those hard-earned winnings.

Memories

Things I Bought