If you've been paid in company stock for a few years, it can really pile up on your balance sheet. RSU grants keep vesting. ESPP purchases keep landing. And one day you look up and a big share of your net worth rides on one company.
Not to mention, your paycheck and your unvested grants already depend on that same company. That's a risk management problem.
The obvious fix is to sell some. But after years of growth, selling can mean a large tax bill on gains you've never touched. That's where it's easy to freeze, and keep holding by default.
There's more than one way out. Here are 4 tax-smart ways to unwind a concentrated position.
Strategy number 1 is prioritizing your lots.
Every time you vest, you get a new batch of shares, called a lot, and each lot has its own cost basis. For RSUs, that basis is the stock's value on the day it vested, and that amount is taxed day 1 as income.
So your shares aren't all the same. For example, let’s say you hold 3 lots, each worth $50,000 today.
Lot A vested near a high, so its basis is $60,000. Selling it is a $10,000 loss. Lot B vested last quarter and the stock hasn't moved much, so its basis is about $50,000. Selling means no gain or loss. Lot C vested years ago, and its basis is $10,000. Selling it is a $40,000 taxable gain.
All three lots are the same stock, but a very different tax bill.
That's also why selling at vest can be one of the cheapest moves you have. If the stock hasn't moved since the shares vested, there's generally little gain or loss to tax.
There is one important consideration - if you don't pick specific lots, some brokerage firms may sell your oldest shares first. This default setting varies from broker to broker, so be sure to check with yours. The oldest shares you own might be the highest gain and thus the most expensive tax-wise.
Strategy number 2 is donating the high gain shares to charity.
If you already donate, you can give highly appreciated stock instead of cash. A gift of stock you've held more than one year to a public charity generally avoids the capital gain, and if you itemize, you might be able to deduct its full market value, within limits.
For shares held one year or less, the deduction is limited to your cost basis or fair market value - whichever is less. So in some cases the old, low-basis shares might be the better ones to donate.
A donor-advised fund, or DAF, makes this easier during a big income tax year. With a DAF you can contribute a large block of low-basis shares in a high-income year, like a big vest year, take the deduction that year, and spread out your distributions to charities over time.
There are some strings attached here. First is that there are deduction limits, based on your Adjusted Gross Income. So if you donate too much, you might not get to deduct the full amount. We recommend you speak with your tax advisor before making a large donation. Second, the donation is irrevocable, once those shares are donated you can’t get them back.
Strategy number 3 is tax-loss harvesting.
If you’ve sold stock at a large gain, selling other investments at a loss in a taxable account during the same year can help offset that gain.
But you need losses available to use. With an index fund, you can sell your shares in the fund, but you can’t separately sell the individual stocks it owns. Direct indexing is a strategy that gives you that flexibility because you own the stocks directly.
Even when the index is up, some of those stocks may be worth less than you paid for them. Because you own the stock directly, you can sell those positions to realize losses and buy other investments to maintain similar market exposure.
You do have to watch the wash-sale rule. Buying the same or a substantially identical security within 30 days before or after the sale can prevent you from claiming the loss on your current tax return. That includes purchases in other accounts.
Direct indexing can also help you avoid adding to your employer stock concentration. A customizable direct-indexing portfolio can exclude your employer, so that part of your portfolio doesn’t add to the exposure you’re trying to reduce.
There are trade-offs. Managed direct indexing typically costs more than a low-cost index fund, and your returns can differ from the index - called tracking error. The tax benefit depends on the losses available and your tax situation. Harvesting losses can also defer taxes rather than eliminate them, because replacement investments may generate taxable gains when you sell them later.
Which brings us to strategy number 4, the one I promised at the start, the Exchange Fund.
An exchange fund is where you contribute your shares to a partnership with other investors contributing their own concentrated stock, and you each get a slice of the new pool. Because it's a contribution, rather than a sale, it doesn't trigger a capital gain on the way in. So the primary benefit is you now own a slice of this larger diversified pile of stocks, rather than your previously concentrated position - and in most cases it hasn’t triggered a capital gain yet.
The fine print is real. You often have to stay in the fund for 7 years, and your money is hard to get out. These funds are generally limited to investors with high asset levels, and there are fees.
In addition, the investor’s original low basis carries over to the new holdings so the gain is just deferred, not eliminated.
Before you go down this road, check your employer’s insider trading policy. Many companies restrict hedging company stock, and some treat exchange funds as a form of hedging.
That's the 4. The combination that fits depends on your income, whether or not you’re charitably inclined, your company's trading rules and how much of the stock you want to own.
If your position has grown past comfortable, click the link in the description and tell us a little about your situation. We'll set up a time to talk.
A conversation now can cost a lot less than selling the wrong shares.
Now, this video is educational and general in nature. It is not tax, legal, or investment advice, and it is not a recommendation to buy, sell, or hold any security. The figures used here are hypothetical, for illustration only, and reflect federal rules as of 2026, which can change. State taxes and your individual circumstances can meaningfully change the outcome.