Concentrated Employer Stock and Our 10% Rule

If years of vesting have left a large slice of your net worth sitting in one company's stock — usually the same company that pays your salary — this article covers how much of that concentration Queen City Wealth Planning considers reasonable, and how we bring a position down without stepping outside your employer's trading rules. It matters most once you are already past that ceiling: the question stops being whether to trim the position and becomes how, and how fast, given the specific windows you are actually allowed to trade in.

How much of my net worth should sit in company stock?

Our policy is that a single company's stock should not exceed 10% of your investable net worth — the value of your investment and retirement accounts taken together, not your total net worth, which would also count things like home equity or a business you own outright. We measure against investable net worth specifically because that is the pool a move in one stock can actually damage; a paid-off house does not fall in value because your employer's share price does. The 10% line is not a target to graze up against — it is the point above which we treat the position as a problem to solve rather than a portfolio choice to leave alone. For most clients who work at the company whose stock they hold, the position grows past 10% gradually, one vest at a time, without any single decision that felt like "buying too much." That is exactly why we check it against a fixed ceiling rather than trusting a gut sense of how much feels like a lot — the vesting schedule does the buying for you, so the review has to happen on a schedule too, not only when the position starts to feel uncomfortable. Once you are above the line, the rest of this article is about how we bring you back under it, not whether we do.

What is the risk I am actually taking?

Holding a large position in one stock is a different kind of risk than holding a diversified portfolio, and the difference is not just more ups and downs. A single company can fall by a large amount and simply never return to its old price — it can lose a product cycle, a key customer, or a competitive edge in a way the broader market, spread across thousands of companies, does not experience the same way. A diversified index recovers from a downturn because the economy as a whole tends to grow again; one company recovers only if that specific company does, and plenty of once-dominant companies never have. The part of this risk that is easy to overlook is how it stacks with your career: your salary, your bonus, and often your sense of job security all depend on the same company whose stock you are holding. If that company has a bad year, you can face a falling stock price and a frozen raise, a smaller bonus, or a layoff at the same time — the two risks move together instead of offsetting each other. That correlation, not just the size of the position, is why we treat concentrated employer stock as a materially different problem from an ordinary large holding in a diversified fund, and why the ceiling in the previous section exists at all.

How do we unwind a concentrated position?

Once a position is above the 10% line, we build a written schedule of sales rather than making one large trade or waiting for a "better" price that may never arrive — timing a sale to a price target turns a risk-management decision into a market bet, which is exactly what we are trying to get you out of. The schedule sells the position down in planned tranches, spaced across your open trading windows, with a stated end date rather than an open-ended intention to sell some eventually. Within that schedule, the easiest shares to sell first are usually the newest ones: selling shares at or near the vest date costs very little in additional tax, because your basis in them is already close to the price you would sell at — the compensation income was already taxed through withholding at vest, as covered in our article on what happens to your RSUs at vest. Older, more appreciated shares carry a larger embedded gain and a longer holding period, so we weigh basis and holding period lot by lot before choosing which shares to sell in a given window, rather than selling whichever shares happen to be easiest. We check progress against the schedule at your regular reviews — the spring meeting, which already covers your equity calendar for the year, is where we track how the unwind is going and adjust the pace if your situation has changed. Absent a specific reason to move faster, our default is to bring a position under 10% within 12 to 24 months of first crossing the line.

What about my trading window and blackout periods?

Your company's open trading windows and blackout periods are set by internal policy, not by tax law or securities law directly — most public companies restrict trading to a period after each earnings release and close it again as the next quarter's results approach, precisely to keep employees from trading around information the market does not yet have. Those windows can be narrow, and they rarely line up neatly with when we would otherwise want to execute a planned sale. A Rule 10b5-1 trading plan is the standard way around that mismatch: you adopt a written plan, while you are not in possession of material non-public information, that pre-authorizes a broker to execute specific trades on a schedule or by formula, without your further input once it is running. Adopting the plan does not let trading start immediately — a cooling-off period has to pass first, set by the SEC's own rule rather than by company policy, and it runs longer for a company's directors and officers than for other employees before their first trade under the plan can happen. To keep the plan's legal protection, it also has to be adopted in good faith while you hold no material non-public information, and you cannot keep influencing how or when trades happen once it is in place — those conditions, not just having a plan on paper, are what make it a valid affirmative defense if a trade under it later looks well-timed.

Can I hedge instead of selling?

Collars, prepaid variable forwards, and pledging shares as loan collateral are all things that exist in the market as ways to reduce exposure to a concentrated position without an outright sale — you may hear about them from a banker, a colleague, or an article like this one. We do not implement or advise on any of them. Each carries its own contract terms, costs, and risks that go beyond a plain sale, and getting them wrong can leave you more exposed than the position you started with, not less. Our approach to a concentrated position is a sale schedule, not a derivative or a loan against the shares, and we would rather tell you plainly that hedging strategies are outside what we do than walk you partway into a topic we are not going to implement for you. If you want to understand hedging and the other things we intentionally do not offer, that boundary — and the reasons for it — is covered in a separate article on what we don't do.

Key numbers (2026)

• Concentration ceiling — a single company's stock should not exceed 10% of your investable net worth (our concentration policy).
• Default unwind horizon — once above the ceiling, our default is to bring the position back under 10% within 12–24 months (our concentration policy).
• Review cadence — progress against the unwind schedule is checked at your spring review, which covers your equity calendar for the year (our meeting cadence).
• Rule 10b5-1 cooling-off period — 90 days after adoption, or, if later, two business days after the issuer discloses financial results for the quarter in which the plan was adopted (capped at 120 days), for directors and officers; 30 days for other insiders (17 CFR 240.10b5-1(c)(1)(ii)(B)).
• Long-term capital gains holding period — a sale qualifies for long-term treatment once you have held the shares for more than one year (IRS Topic No. 409).

Current as of 2026-09

Sources

• 17 CFR 240.10b5-1, Trading "on the basis of" material nonpublic information in insider trading cases — https://www.law.cornell.edu/cfr/text/17/240.10b5-1
• SEC Release No. 33-11138, Insider Trading Arrangements and Related Disclosures (87 FR 80362) — https://www.govinfo.gov/content/pkg/FR-2022-12-29/pdf/2022-27675.pdf
• IRS Topic No. 409, Capital Gains and Losses — https://www.irs.gov/taxtopics/tc409

Sample content for demonstration purposes — not financial advice.