Unintentional Stock Concentrators

Do you unintentionally concentrate your portfolio on one stock?  Most people don’t realize its’ even happening.   I view a concentration issue as having more than 20% of your portfolio in 1 stock.

My office is located in a heavy technology company area.  These tech companies have all sorts of retirement and stock plans, including:  ESPP, RSU, Stock Options, Profit Sharing, and 401k’s.  What do these plans have in common?  The same Company stock.

When times are good (such as the late 90s)-this was an absolute home run.  I have seen as high as 95% of one’s net worth in one stock.  I have seen this work in a positive manner where the stock went crazy.  But….when times are bad (aka ENRON) it is an absolute strike-out.  The company doesn’t have to go out of business for it to be detrimental.  I have seen a $440k 401k drop to $40k.  It is heartbreaking.  It can be avoided……if you have a plan.

Sometimes you have to wait…such as in a profit sharing plan that credits in company stock that won’t allow you to transfer to another option.  Sometimes in can be sold immediately, such as an ESPP.  Bottom Line is to create a systematic plan to diversify the company stock each year to not have more exposure than you feel comfortable with.

I always ask what my client’s favorite investment has been.  The option I hear most often…an individual stock.  It is also the same answer when I ask them what their least favorite investment has been.  How does this stock fit into your plan, to achieve your goals?  At the end of the day isn’t that what this is all about?


Stock investing involves risk including loss of principal. No strategy assures success or protects against loss. Material is for general information only and not intended to provide specific advice or recommendations for any individual.


Michael McGinley, CFP ®
Comprehensive Wealth Manager | Tax Advisor
Chandler, AZ 85226