Holding Too Much Company Stock? Read This

How to Avoid Too Much Risk in Employer Stock

Receiving stock from your employer can seem like an advantage. And in many cases, it is.

In the United States, millions of workers accumulate company stock through:

• 401(k) plans with employer stock matching
• RSUs (Restricted Stock Units)
• ESPPs (Employee Stock Purchase Plans)

The problem begins when this turns into concentration. And today, that’s more common than it seems.

The risk many people ignore

There’s a central concept here: concentration risk.

It happens when a large portion of your wealth is tied to a single asset—or worse, a single company.

With employer stock, the risk is even greater because you don’t rely on the company only for investing, but also for:

• your salary
• your benefits
• your job stability

In other words, your income and your investments are in the same place. This has a name: double exposure.

The current landscape in the U.S. (2026)

Some data helps illustrate the scale of the issue:

According to MarketWatch, about 23% of employees buy their employer’s stock when given the option.

The general recommendation is to keep between 5% and 15% in a single company.

In 2026, the U.S. market is more concentrated than ever, with the top 10 companies representing around 40% of the S&P 500.

This means concentration risk isn’t just in your portfolio—it’s in the system as a whole.

The biggest danger: losing everything at once

The worst-case scenario isn’t theoretical—it happens.

Real-world example (adapted)

Imagine an employee at a tech company:

• 70% of their wealth is in company stock
• 100% of their income depends on the company

Now something happens: a 40% drop in stock price and layoffs.

The result isn’t just loss of income—it’s also a significant loss in wealth.

When concentration becomes dangerous

Use this practical reference:

% of wealth in employer stock	Risk level
0% – 10%	Healthy
10% – 20%	Caution
20% – 40%	High risk
40%+	Very risky

Above 20%, it’s already worth reassessing.

Why it’s so hard to sell

Even when the risk is clear, many people don’t reduce their position.

This happens due to behavioral factors:

1. Familiarity
   You know the company. You trust it.
2. Optimism bias
   “It has always grown… it will keep growing.”
3. Emotional attachment
   You work there. There’s pride involved.
4. Tax concerns
   Selling may trigger taxes—and that delays decisions.

Real-world scenarios

Case 1: The “loyal” employee

• 15 years at the company
• Accumulated RSUs
• 60% of wealth concentrated

Decision: doesn’t sell due to trust

Result: sector downturn directly impacts wealth and financial security

Case 2: The young professional

• Early career
• Receives stock as bonuses
• Doesn’t diversify

Result: strong initial growth followed by unexpected volatility
Gains disappear quickly

Case 3: The executive with stock options

• High net worth
• Large portion in company stock

Risk:

• Extreme exposure
• Full dependence on company performance

Very common in startups and big tech.

How to evaluate your exposure today

Try this simple exercise:

1. Add up your total wealth
2. Calculate how much is in company stock
3. Find the percentage

If it’s above 15%: it deserves attention.

If it’s above 30%: it requires action.

Practical strategies to reduce risk

You don’t need to sell everything at once. But you do need a plan.

1. Gradual selling

• Sell portions over time
• Reduces emotional and tax impact

2. Smart diversification

• Reinvest into ETFs or broad funds
• Reduce dependence on a single asset

3. Use liquidity events

• RSU vesting
• Stock bonuses

Convert into cash and diversify.

4. Periodic rebalancing

• Adjust your portfolio every 6 or 12 months

5. Tax planning

• Understand capital gains impact
• Consider strategies like NUA (Net Unrealized Appreciation)

An important point: it’s not about “not believing in the company”

Many people confuse diversification with lack of confidence.

That’s not the case. It’s about risk management.

Even strong companies can:

• decline
• face crises
• change quickly

The market has shown this many times.

The 2026 context: more risk than it seems

Today, additional factors increase risk:

• growing market concentration
• higher structural volatility
• elevated valuations in some companies

This increases the impact of downturns—and makes diversification even more important.

A final takeaway

Owning stock in the company you work for isn’t a problem. The problem is owning too much.

You don’t need to sell everything.

But you do need to ask a simple question:

If this company runs into trouble tomorrow, will I be okay?

If the answer is no, then it’s not just an investment. It’s too much risk concentrated in one place.

Written by

Gabriel Gonçalves