Your company stock has gone up so much that your RSUs are now one of the biggest pieces of your net worth.
Every vest brings back the same question.
Do you hold and let it run, or sell and move the money into an index fund?
Hold, and the stock drops, and you feel like an idiot for not getting out. Sell, and it takes off, and you spend years wondering what could have been.
The standard financial advice says never let one stock grow past 10% of your investments, maybe 15%, and put the rest in an index fund.
It sounds responsible.
But hand that number to someone who watched one company make them wealthy, and it doesn’t feel right. And the number isn’t as solid as it sounds. Ask a few different firms where the line is and you’ll hear 5%, 10%, or 20%.
So if the number isn’t the answer, what is?
Why “cap a stock at 10%” doesn’t land
The cap makes perfect sense on a spreadsheet and almost no sense to the person holding the stock.
The research behind it is real. Since 1980, about 42% of the big U.S. companies in the Russell 3000 lost at least 70% of their value and never got it back. Many were profitable, fairly priced businesses right before they fell.
Meta is a recent example. The stock fell 76.7% in 14 months, from $382.18 to $88.91, before climbing back to a record in January 2024. Anyone holding through that stretch had no way to know the recovery was coming.
So the cap isn’t a bad answer.
It’s an answer to the wrong question.
If one company has become your biggest asset, a study about other companies failing doesn’t feel like it’s about you.
I feel the same way about my own stock. The private business I own and run is a much bigger share of my net worth than 5%, 10% or 15%. I have no plans to sell it down just to hit a target allocation.
Granted, a private company isn’t the same as a public one.
But the feeling is the same.
It’s an asset I believe in. It has rewarded me, and it could still reward me for years. Selling it only because a study said that’s the prudent thing to do doesn’t sit right.
One of our new clients sees it the same way. He holds a large, high-conviction position in one of the biggest public tech companies, and he has no plan to sell it.
We’re fine with that.
A percentage target can’t settle this and neither can a guess, so there has to be a better question.
The question that replaces the percentage
The better question isn’t how much of this stock you own, it’s whether your plan still works if it goes to zero.
Picture the position gone, along with your unvested grants. Then ask three things:
Do the bills still get paid?
Are you still on track for financial independence?
Can you still live the way you want?
If the answers are yes, you have room to hold it. If the answers are no, the stock is carrying more than it should, whatever percentage it is.
A percentage tells you how much you own. It can’t tell you whether you can afford to lose it. A small position can break a thin plan, and a big one can sit inside a strong plan and do no harm.
A percentage only takes a calculator.
But this question takes your real plan.
The way I think about it, your money has three roles:
Pay for the life you need: bills, the mortgage, the kids’ college, and your independence target.
Grow with the market, spread across lots of investments.
Take big swings that could change your life, like a big play on one stock.
The order matters. Fund the first two roles so your plan works without the stock, and only then decide how big the third one gets. The third role is the only one allowed to go to zero.
My stake and my client’s position are fine for the same reason: the plan reaches the targets without them.
A good plan assumes some of it will go wrong.
Have you left enough room for that?
Once you know what the stock is for, the only thing left is what to do with each vest.
Three moves for your next vest
Do these in order, because each one sets up the next.
1. Run the bonus test at each vest
Start with your next vest. Say the company paid it as a cash bonus instead of stock. Would you invest all of the cash bonus on the stock?
There are three honest answers:
No: You don’t believe in the company, so you already know what to do.
Yes: You have high conviction, so you’d buy as much as you could.
In between: You’d buy some of it, but not all.
Most people land in between. If you do, keep the share you’d honestly buy and sell the rest. If the answer is yes, keep it all and let the next move check you. Decide it once, not with your gut on vest day.
The test is fair because of how RSUs are taxed. They count as income when they vest, so keeping the shares is close to taking the cash and buying the stock yourself.
2. Add a zero to your plan
Once you hold shares, whether it’s a moderate amount or a significant one, run your plan with all of it at $0. Include the unvested grants.
No matter how big the position is, your targets should be reachable without any of it.
If they are, you’ve earned the right to hold on purpose. If they aren’t, your plan is leaning on the stock, and that’s the first thing to fix.
3. Give the gains a job
Over time, the shares you kept can grow into a large position with a big gain. That’s when this move applies.
Pick one big expense, like the mortgage, college for the kids, or a vacation home. Sell enough to cover it.
Debt takes away options, and paying off the obligations gives you options back. It also makes the zero test easier to pass, because your plan has fewer bills to carry.
Selling just to diversify doesn’t feel like a win.
But selling to pay off the house does.
And if the stock keeps climbing after you sell, nobody cares, because it already did its job.
— Ryan
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Opulus, LLC (“Opulus”) is a registered investment advisor in Pennsylvania and other jurisdictions where exempted. Registration as an investment advisor does not imply any specific level of skill or training.
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