Concentrated Stock Positions: Risks, Strategies, and What to Know

You may have heard or experienced this: a single stock has grown to dominate your investment portfolio—maybe it was a company you believed in, long tenure at a job, or an inheritance. What starts small can get unwieldy. A concentrated stock position can offer big upside, but it comes with its own set of risks and decisions.

Here’s what you need to know—why this matters more than ever, what’s changing, and strategies to manage without losing sleep.

Why It’s Risky

• Volatility & downside exposure: When one stock makes up a large portion of your portfolio, any negative event—regulatory, competitive, leadership changes—can hit you hard.
• Market leadership shifts: What's hot now often doesn’t stay hot forever. History shows that overconcentrated positions tend to underperform when leadership in markets rotates.
• Emotional attachment: It's common to hold a winning stock for too long because you don’t want to “miss out.” But that emotional hang-up can prevent you from making rational decisions.
• Tax consequences: Selling a large, appreciated position often means a big capital gains tax. Timing and approach matter.

What’s New / What to Watch

• Sharper market scrutiny on big names & concentration risk: Right now, many analysts are pointing out that the biggest-cap stocks (especially in tech) are taking up large chunks of market value—which amplifies systemic risk if sentiment turns.
• Changes to capital gains rates & tax law proposals: Depending on your income level and where you live, potential tax law changes could affect how costly it is to sell large positions. (Always keep an eye on legislation and IRS rules.)
• More tools and vehicles becoming available: Exchange funds, donor-advised funds, direct indexing, hedging strategies—there are more refined ways to reduce exposure without incurring massive taxes or losing upside.

What You Can Do: Practical Steps

1. Assess how concentrated you are: Check what percentage this one position makes up of your total portfolio and whether that makes sense given your risk tolerance and time horizon.
2. Build around the position: If selling right away feels wrong (taxes, rules, emotion), then diversify the rest of your portfolio—different sectors, geographies, fixed income—to mitigate some risk from that concentrated piece. 
3. Sell gradually with tax strategy: Staggering sales across years or income levels can help spread out tax impact. Use losses where possible to offset gains. 
4. Use non-sale strategies:
   • Hedging via options or collars
   • Exchange funds (for those eligible) which allow you to get diversified exposure without a full immediate tax event 
   • Charitable giving of appreciated stock (if that fits your values and estate plan)
5.  Consider a Charitable Remainder Trust (CRT): A Charitable Remainder Trust (CRT) allows an individual with a concentrated, highly appreciated stock position to donate it to an irrevocable trust, which can then sell the stock without immediately triggering capital gains taxes. The trust provides the donor (or other designated beneficiaries) an income stream for life or a set term, and at the end of the term, the remaining assets are distributed to a designated charity, offering a partial tax deduction and potentially reducing estate taxes.

          6. Make a plan - we are here to help: Because rules, tax laws, valuations, and market environment change, it’s smart to revisit a strategy for handling your concentrated holdings regularly. What made sense last year might not make sense now.

Why Now Is Especially Important

• The market has been buoyant, driving up valuations in certain big-cap stocks. When values are high, the potential downside from a correction or policy shift also increases.
• Tax law discussions remain active in many jurisdictions. Proposals affecting capital gains, cost basis rules, etc., could change the “cost” of diversifying concentrated stock.
• Inflation, rising interest rates, regulatory risk, and global supply chain or geopolitical risks can hit individual companies harder than broader diversified portfolios.

Bottom Line

Holding a large position in a single stock isn’t “wrong”—sometimes it’s unavoidable or was a smart move to get there. But staying passive and doing nothing can leave you exposed. The right approach balances your emotional ties, tax implications, and financial goals. With thoughtful planning and periodic review, you can reduce risk without losing your shot at upside.