Diversification basics
Executives often become overexposed to one stock without realizing it. This guide explains diversification in practical terms and gives a simple framework for reducing concentration risk without making emotional decisions.
Educational content only. Not individualized financial, tax, or legal advice.
Diversification is not a slogan. It's a risk management tool.
Executives face a unique problem:
your income already depends on your employer
your benefits may depend on your employer
your portfolio may quietly depend on your employer too
That's why concentration risk matters.
Use this guide if:
- you hold a lot of company stock through RSUs/ESPP/options
- you're not sure what percentage of your assets is tied to one company
- you want a simple approach that doesn't require constant decisions
What concentration risk looks like (simple)
Concentration risk means a single outcome can impact:
Even if you love your company, risk management still matters.
The first step is measuring
You can't diversify what you haven't measured.
Measure:
- company stock as a % of net worth
- company stock as a % of investable assets
- how much new company stock you receive each year (incoming flow)
Most people are surprised by the number.
Set a guardrail (not a prediction)
A guardrail is a boundary you choose intentionally.
Examples (not rules):
- a percentage cap of investable assets
- a dollar cap of company stock value
- a "sell down" rule when you exceed the boundary
The purpose is clarity: decisions become automatic instead of emotional.
Choose your default diversification rule
Rule A: Sell most of each vest/purchase
Simple and often used when risk reduction is the priority.
Rule B: Keep a core, sell the rest
Used when you want exposure but not runaway concentration.
Rule C: Hold within a boundary only
Used for high conviction, but with guardrails.
A good default rule reduces decision fatigue.
Want a simple diversification plan tied to your equity calendar?
We can set a concentration boundary and default sell/hold rule so your plan stays consistent through vesting months.
Book a private callDiversification doesn't mean "sell everything"
It means balancing risk.
You can diversify by:
selling a portion regularly
reinvesting into a broader portfolio
building cash reserves for flexibility
coordinating timing with tax-aware planning
The goal is a plan that holds up through good markets and bad ones.
Tools and worksheets
Use these to measure and set guardrails.
Next in Executive Essentials
FAQ
Want guardrails that match your goals?
If you want help setting a concentration boundary and a simple rule you can follow, book a private call.