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Annotated diagram of Schedule DTax errors can be costly! Don't draw unwanted attention from the IRS. Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more.

Financial Planning: Diversification

What are the risks of owning my company's stock?

When you hold shares acquired through stock compensation or an ESPP, you take on the potential risks and rewards of being a shareholder. By owning stock, you are subject to both market risk (e.g. a general economic crisis or downturn) and company-specific risk (e.g. a steep drop in your company's stock price after poor corporate results).

If you believe your company's stock has a better outlook than other investment choices, you may be tempted to hold your shares. However, it is wise to consider the risks of having your net worth concentrated in just one stock. For that reason, diversification is often an important financial-planning goal. When the amount of money at issue is large, you should consult a financial advisor.

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