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Concentrated Stock Position

The situation that exists when a significant chunk of net worth is tied up in a single stock. Experts do not agree on exactly what constitutes a concentrated equity position. Some say it occurs once a stock composes 10% or more of your investments or net worth. Most believe 25% is the trigger level, and still others use a 50% threshold when you also have substantial real-estate holdings.

Wealthy individuals with concentrated single-stock positions often engage financial advisors to develop strategies for hedging, diversification, and liquidity. Strategies include stock sales at regular intervals, protective puts, exchange funds, equity collars, and prepaid forwards, as explained in related glossary terms and a related FAQ. All of the techniques involve complex legal and tax issues and may be prohibited by your company.

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