>> Matt Nelson: Foreign M M. You've probably heard the advice to hold on to your company stock. After all, you work there, you know the business, you believe in the mission, and it feels almost disloyal to sell, right? But here's what most people don't talk about. Holding too much company stock can be one of the riskiest financial moves you can make. We're not talking about a little risk. We're talking about the kind of concentration that's wiped out employee retirement accounts at companies like Silicon Valley Bank, Enron and WorldCom. I'm Matt Nelson, a AH certified financial planner and founder of Perspective 6 Wealth Advisors. Over 25 years, I've worked with hundreds of high earners, many with significant stock compensation from companies like Medtronic, Boston Scientific and GE Health. And I can tell you this. Knowing when to sell your company stock is just as important as knowing when to hold it. In today's video, I'm going to walk you through three specific times when selling your company stock makes more financial sense than holding it. So let's dive in. Number one, when your concentration risk exceeds 10 to 15% of your portfolio. So let's start with the math. Most professional guidance suggests keeping any single stock, especially your employer's stock, under about 10% of your investable portfolio between 10% and 15%, you're entering a yellow zone where you should actively plan to diversify. Above 20%, you're definitely in the red zone. Why these numbers? Well, because concentration dramatically increases your risk without improving long term returns. Research from T. Rowe Price shows that when a single stock represents more than 5% of your portfolio, advisors consider it worth addressing. Once it hits 10%, it represents a greater risk that's gotta be addressed immediately. Here's the thing most employees miss. You already have massive exposure to your company through your paycheck, your bonus, your benefits and your career trajectory. When you stack a concentrated stock position on top of that, you're essentially betting your financial future on one company. It's like putting all of your eggs in one basket, a very fragile basket, and handing it to your company. Let me give you a real world example. Silicon Valley bank employees had huge concentrations in SVB stock through their ESPPS, their RSUs and their stock options. The stock traded above $700 in late 2021 and then dropped to about 106 by March 9th of 2023. That's an 85% collapse. Two days later, regulators shut down the bank employees with 30%, 40%, 50% of their net worth in SVB stock. They lost most of it overnight. Same job loss, same wealth loss, same company. Or look at Meta. The stock peaked around 382September of 2021, and then it plunged to about $88 in November of 2022. That's a 77% drop. Employees who held concentrated positions through that decline saw their equity compensation cut by more than two thirds in just year. Many had planned early retirements or major purchases based on peak valuations. They had to completely reset their financial timelines. So here's my rule. If your company stock exceeds 10 to 15% of your portfolio, start diversifying now. Sell systematically, whether that's 25% per quarter or 50% at each vesting. The goal isn't to time the market. The goal is to protect yourself from a single company's fate determining your entire financial life. Number two, when you're approaching a major life transition, that could be retirement, buying a home, career change. Let's start with retirement. If you're within five to 10 years of retiring, concentrated company stock becomes especially dangerous. Why? Because you don't have time to recover from a major drop. Think about it like this. If you're 58 years old and planning to retire at 65 and your company stock tanked 60% in year one of that seven year window, you've just lost a decade of compounding. Your retirement date might get pushed back five or 10 years, or you might have to dramatically scale back your lifestyle. So I worked with a client a few years ago who had over 40% of their net worth in a single biotech stock. They were 62. They're planning to retire at age 65. We spent three meetings over two years walking through why they needed to diversify. It wasn't about disloyalty. It was about protecting their retirement. And when they finally understood that selling wasn't about whether the stock would go up, but whether it would outperform the broader market enough to justify that extra risk, they were fully on board. We systematically sold down over 18 months, reinvested into diversified index funds, and they retired on schedule. Now let's talk about buying a home. If you're planning to buy a house in the next one to three years, do not rely on concentrated company stock for your down payment period. The fate of your home purchase should not be tied to short term stock volatility. Here's what I see all the time. Someone sitting on 200,000 in company stock. They're planning to use it for a down payment. The stock drops 40% right before they're ready to buy. And suddenly they're scrambling. Or worse, maybe they take out a margin loan against the stock, stock drops further, they get a margin call, they're forced to sell at the worst possible time. Instead, just sell the stock now. Move it into cash. Short term bonds treat your down payment like a capital preservation bucket, not a speculative bucket. The same logic applies to career changes. If you're thinking about leaving your stable job to join a startup or you're worried about layoffs, you need liquidity and diversification right now, not later. After stock collapses at uh, companies like svb, Meta, Twitter Peloton layoffs often follow. Don't put yourself in a position where a stock drop both wipes out your savings and threatens a job that pays your bills. Number three when you're sitting on massive unrealized gains and missing tax smart opportunities so let's say you've got a company stock with a huge embedded gain. Maybe you bought it at $20 and now it's worth 120. That $100 share gain represents a future tax bill. But here's the opportunity you can use tax loss harvesting donor advised funds, and strategic timing to diversify without getting crushed by taxes. Here's a real example from my practice. A uh client had an unexpected high income one year due to exceeding sales goals and earning massive bonuses and this created a big tax withholding shortage. But he also happened to own ESPP Stock and some RSUs at a loss. So we proposed selling those shares to harvest the loss and offset his high income. He sold the stock at a loss, contributed 60k of the cash proceeds to his brokerage account, and then simultaneously set up a donor advised fund. He contributed low basis stock holdings into the donor advised fund stock he'd held for years and that no longer fit the strategy. And the result was he offset all the added taxes without needing to send in cash. We diversified his portfolio and now he has multiple years of charitable giving already funded. That's the power of tax smart diversification. You can donate appreciated shares to a charity or a donor advised fund, get a charitable deduction for the full market value, and permanently avoid capital gains on the embedded gain. If done strategically in a high income year like when RSU's vest or when you exercise ISOs, you can offset ordinary income while diversifying your risk. Another angle specific tax lot management. So every time your RSU vests or you exercise options, you create a separate tax lot with its own cost basis and holding period. When you sell, you can choose which specific lots to sell, not just default to the first in, first out so this lets you harvest losses strategically or sell higher basis shares first to minimize taxes. And if you have incentive stock options, you can stage your exercises over multiple years to manage your AMT exposure. Start the holding period clock and systematically diversify without triggering one giant tax bill at once. So, bottom line, if you're sitting on big unrealized gains and you haven't explored these strategies, you're likely paying more in taxes and taking more in risk than you need to. As kind of a bonus, I want to look at a behavioral trap and maybe why we hold on too long. Let's talk about why this is so hard. Why do smart, successful people hold on to concentrated stock positions far longer than they should? The answer is behavioral bias. Research shows us that employees systematically overweight their company stock because of loyalty, familiarity, and optimism. You feel like selling is a vote of no confidence. You think, I know this company. I work here. It's safer than some random stock I've never heard of. But that's familiarity bias talking, and it's costing you. There's also the endowment effect. You value what you already own, more than identical things you don't own simply because you own it. An anchoring bias. You fixate on the stock's peak price or your original purchase price, waiting for it to get back there before you sell, even when circumstances have completely changed. So here's the reality. Your human capital, your future salary, bonuses and career is already 100% invested in your company. You can't diversify that. So the one thing you can control, your financial capital should be diversified, not concentrated in the same single company. I always tell clients the mathematically correct answer isn't always the right choice if your emotions and your psychology won't let you follow through. But in this case, the math and the psychology align. Diversifying protects you from catastrophic losses, reduces stress, and still lets you participate in market growth through broad index funds. If you're a high earner with stock compensation, RSUs, ISOs, ESPP plans, and you're not sure whether you're taking on, uh, too much concentration risk, let's talk at Perspective 6 Wealth Advisors. We specialize in helping clients from companies like Medtronic, Boston Scientific, and others. And we create plans to maximize equity value while, uh, minimizing taxes and risk. Schedule a free financial plan consultation at the link in the description and if you found this video helpful, please hit subscribe and like it. It helps more people find this content. Let's bring your finances into perspective. Investment advisory services offered through Savvy Advisors, Inc. Other entities and or marketing names, products or services mentioned here are independent of Savvy Advisors, Inc.