Feeling Stuck With a Concentrated Stock Position? Here's How to Take Control

Concentrated stock positions are rarely accidental. They tend to be the result of something that went right.

You held shares in a company you believed in, and it grew. You received equity compensation over years of work and watched it compound. You helped build something and were rewarded for it.

The challenge comes later. When that single position has grown to represent 30, 40, or even 60 percent of your net worth, the situation changes. What began as an asset becomes a source of risk. Your financial plan starts to feel dependent on the performance of one company, one sector, one quarterly earnings call.

This is the tension I see most often with clients who come to us in this situation. They know the concentration is a problem. They're not sure how to address it without triggering a significant tax bill or making a decision they'll regret.

Here's what I tell them: panic selling is not the only option. There are disciplined, strategic approaches to reducing concentration on your own timeline, with your tax situation and long-term goals guiding every step.

1. Systematic Trimming

The simplest starting point is systematic trimming. Rather than selling the position all at once, you sell a defined percentage each year, typically somewhere between 10 and 20 percent, depending on your situation.

This does two things. It spreads the tax impact across multiple years, which can meaningfully reduce the overall bill. And it removes the pressure of making one large, high-stakes decision. You're building a process, not executing a single transaction.

For clients who feel emotionally attached to a position, systematic trimming is often the right entry point. It creates momentum without forcing an all-or-nothing choice.

2. Options Strategies: Collars and Covered Calls

For clients who want downside protection while they work through a larger diversification plan, options can play a useful role.

A collar strategy involves purchasing a protective put, which limits how much you can lose if the stock drops, and simultaneously selling a covered call, which caps how much you gain if the stock rises. The result is a defined range of outcomes. You give up some upside in exchange for real protection on the downside.

For clients who are comfortable holding the position but want to generate income from it, selling covered calls alone is an option. You collect premiums from the options you sell, but accept that if the stock rises above the strike price, your gains will be capped. It is a tradeoff worth understanding clearly before executing.

3. Tax Loss Harvesting

Selling a concentrated position typically means recognizing a capital gain. Tax loss harvesting is a way to offset some of that impact.

The strategy involves selling other investments in your portfolio that have declined in value. Those realized losses can be used to offset the gains from your concentrated stock sale, reducing the net tax liability.

This works best as part of an ongoing portfolio management practice rather than a one-time fix. When we manage portfolios at Altman Advisors, we look for harvesting opportunities throughout the year, not just at tax time.

For larger positions, long-short strategies can accelerate this process by generating losses on both sides of a trade. These are more complex approaches, but they can be effective when the concentrated position is substantial and the tax impact of a direct sale would otherwise be prohibitive.

4. Donor-Advised Funds

If philanthropy is already part of how you think about your wealth, contributing appreciated shares directly to a Donor-Advised Fund is one of the most tax-efficient moves available.

When you contribute shares to a DAF rather than selling them first, you avoid capital gains tax entirely on the contributed amount. You receive an immediate charitable deduction. And the assets in the fund can continue to grow before you distribute grants to the causes you care about.

For clients with large, highly appreciated positions, this strategy can accomplish a lot at once: reduce concentration, eliminate capital gains on a portion of the position, support meaningful causes, and create a giving vehicle the whole family can participate in.

5. Exchange Funds

Exchange funds are less commonly known but particularly relevant for founders, executives, and long-term holders with very large single-stock positions.

The structure works like this: you contribute your shares to a pooled investment fund alongside other investors who are also holding concentrated positions. In return, you receive a proportional interest in a diversified basket of assets. The contribution is not treated as a sale for tax purposes, so you do not trigger capital gains at the time of the exchange.

There are requirements. Exchange funds typically require a multi-year lockup period, often seven years, and participation is generally limited to accredited investors. They are not the right tool for every situation. But for the right client, they offer a meaningful way to diversify a large position without an immediate tax event.

6. Putting It Together

None of these strategies works in isolation, and the right approach depends entirely on your specific situation. Your cost basis. Your income in a given year. Your philanthropic goals. Your timeline. Your appetite for complexity.

What I find in practice is that most clients with concentrated positions benefit from a combination of approaches, layered thoughtfully over time. Systematic trimming creates the baseline habit. Tax loss harvesting manages the annual impact. A DAF contribution handles a portion of the philanthropic intent. An exchange fund addresses the largest slice when the timing is right.

The goal is not to eliminate the position overnight. It is to build a plan that reduces your exposure steadily, on your terms, without forcing decisions that create new problems.

At Altman Advisors, this is work we do with clients across a range of situations, from early-stage company equity to decades-long public market holdings. If you are sitting with a position that has grown larger than you are comfortable with, the most important step is starting the conversation.

We are happy to take a look at your situation and help you think through what a structured approach might look like.

Contact Altman Advisors to schedule a confidential conversation. www.altmanadvisors.com

Disclosure: The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Altman Advisors is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Altman Advisors and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Altman Advisors unless a client service agreement is in place.