Concentrated Stock Positions: Planning Strategies to Help Manage Risk

By Shurdonna Joseph

June 29, 2026

KEY TAKEAWAYS

• Holding a large portion of your investable assets in one stock can increase volatility and reduce diversification.
• Strategies such as staged selling, hedging, tax-loss harvesting, exchange funds, lending, and charitable giving may help address different risks and planning goals.
• Because these strategies can involve tax, legal, liquidity, and investment considerations, they should be evaluated as part of your complete financial picture.

Concentrated stock positions can be acquired through years of disciplined investing, executive compensation programs, business ownership, stock options, restricted stock awards, or inheritance. While these holdings can represent significant wealth accumulation, they may also expose you to increased portfolio volatility, tax complexity, liquidity challenges, and reduced diversification.

Investment professionals may view holding more than 10% to15% of your investable assets in a single security as concentrated. When too much of your portfolio depends on one company, your financial plan may become more vulnerable to market volatility, company-specific risk, and reduced diversification.

The risk may be amplified when the position is tied to your employer, as a decline in the company's value could affect both your investment portfolio and your primary source of income.

Why You May Be Reluctant to Sell

• A strong emotional connection to the stock
• Confidence in future share appreciation
• Potential capital gains taxes
• Dependence on dividend income
• Concern about market perception, particularly for insiders

There are a variety of strategies that may help address certain risks of a concentrated portfolio, while supporting your broader goals.

Before implementing any diversification strategy, you should first evaluate three key considerations:

• Risk: How much exposure do you have to a single company?
• Taxes: What are the potential tax implications of reducing the position?
• Liquidity: Do you anticipate near-term cash flow or spending needs?

1. Sell Shares Over Time

Selling can free up funds, which may then be deployed to diversify your portfolio. However, if you have a low-cost basis, you may realize capital gains taxes. In this case, you might opt to sell shares over time—a strategy that may help you manage the timing and amount of realized gains. You may also consider setting up a systematic selling plan that sells a specific number of shares on predetermined dates or at set intervals. This approach can help create discipline and reduce the risk of making decisions based solely on market timing. You may also use price-based selling plans, which are designed to sell shares when the stock reaches certain target prices. While this may help improve the sale price, the stock may never reach those targets, leaving the position concentrated for longer than intended.

If you are a corporate insider, officer, director, or large shareholder, a 10b5-1 plan¹ may be considered. These plans establish a predetermined schedule for selling shares and may help document a pre-established trading plan.

2. Hedge Your Position

If you opt to hold on to your concentrated stock position, hedging strategies may help you reduce the impact of a significant price decline, sometimes referred to as downside protection. Here are a couple of strategies to consider:

• Put Option Contract: This lets you sell the stock at a specified price (the option’s ‘strike’ price), creating a potential floor if the stock declines².
• Zero-Premium Collar: This strategy combines the purchase of a put option with the sale of a call option. The premium received from selling the call helps offset the cost of the put. This strategy may provide some downside protection, but it can also limit upside if the stock appreciates above the call price.
• While these strategies can be useful if you have restricted stock, low-basis shares, or practical limitations on selling, they can be complex and should be reviewed with your advisor and tax professional.

3. Generate Additional Yield or Income

If you plan to continue holding the stock, you may be able to generate additional income from the position. One approach is writing covered calls, which involves selling call options on shares you already own. You receive premium income, but your shares may be sold if the stock rises above the call price.

Another option is to participate in a fully paid securities lending program³. Through this type of program, you lend eligible securities to financial institutions and receive a fee while the shares are on loan. The rate depends on demand for the security. This approach may be appropriate for long-term holders, but it does not provide downside protection and may involve additional risks.

4. Address Liquidity Needs

A concentrated stock position may also be used to help meet liquidity needs, such as funding a large purchase, paying taxes, or completing a home renovation.

A securities-based loan⁴ may allow you to borrow against eligible securities without immediately selling shares. This can provide access to cash while potentially deferring capital gains taxes, depending on your circumstances. However, borrowing against securities involves risk. If the value of the collateral declines, you may be required to deposit additional assets or sell securities, which could create tax consequences.

A variable prepaid forward contract may provide cash for a portion of the stock’s current value, typically in exchange for delivering a variable number of shares at a future date. This type of strategy may defer capital gains recognition until settlement, but it can limit future upside and involves complex tax and legal considerations.

5. Use Tax-Loss Harvesting and Direct Indexing

Tax-loss harvesting may help offset realized gains from a concentrated stock or security position over time. It involves selling an investment to realize a loss, which can be used to offset gains from highly appreciated stocks.

A separately managed account may support a staged diversification plan by harvesting losses over time. Those losses may help offset some taxable gains from selling concentrated shares.

Direct indexing can further customize this approach. Instead of owning an index fund, you own individual securities that make up an index, such as the S&P 500. This structure may allow for tax-loss harvesting, exclusions of specific securities, and customization by sector, industry, or values-based preferences.

6. Diversify While Managing Taxes

If you are not ready or able to sell a concentrated position, alternative diversification strategies may provide an opportunity to broaden portfolio exposure while supporting longer-term planning objectives.

An exchange fund may help diversify a concentrated stock position without triggering immediate capital gains taxes, subject to applicable tax rules. In this strategy, you contribute shares to a fund in exchange for exposure to a diversified portfolio, often tied to a broad market index such as the S&P 500 or Russell 3000.

Exchange funds may offer tax deferral and support estate planning objectives , but they also have limitations. At least 20% of the fund must generally be invested in illiquid assets, often real estate. The fund may not accept every stock, and if your original stock significantly outperforms the diversified portfolio, you may give up some potential return.

Another option is margin lending, which can generate additional capital without an immediate sale of securities. However, margin loans involve interest costs and the risk of a margin call if account values fall. If securities must be sold to meet a margin call, capital gains taxes may apply.

7. Donate Your Shares

If you are charitably inclined, you might want to consider donating some or all of your concentrated stock.

A donor-advised fund (DAF)⁵ allows you to contribute appreciated stock, may allow you to receive a charitable deduction, and recommend grants to charities over time. Once contributed, the stock can typically be sold by the fund and reinvested in a diversified portfolio. A charitable remainder trust (CRT) may be appropriate if you want to donate stock while creating an income stream. The trust typically sells the stock, reinvests the proceeds, and pays income to you or another beneficiary. When the trust ends, the remaining assets go to charity.

Conversely, with a Charitable Lead Trust (CLT)⁶, the charity receives the trust income stream for a specified time after which the principal reverts to your beneficiaries.

Keep in mind that trust strategies can incur costs associated with creation and maintenance, so they should be evaluated with your tax and legal advisors.

A Strategy Customized for You

Managing a concentrated stock position is rarely about a single decision. Often, an effective approach involves balancing multiple priorities, including diversification, tax efficiency, liquidity needs, charitable objectives, income considerations, and legacy planning.

An appropriate strategy may combine several solutions based on your goals, tax situation, time horizon, and broader financial circumstances. Because concentrated stock positions often involve investment, tax, legal, and estate planning considerations, a coordinated approach can help support decisions being evaluated within the context of your overall wealth plan.

Your Financial Advisor can help you assess available options, coordinate with specialists, and develop a strategy tailored to your individual circumstances. You should also consult your accountant and legal advisor to understand the potential tax, legal, and estate planning implications of any strategy.

Working With Janney

Depending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.

If you engage in a brokerage relationship, you will buy and sell securities on a transaction basis and pay a commission for these services. Our recommendations for the purchase and sale of securities will be based on what is in your best interest and reflect reasonably available alternatives at that time.

If you engage in an advisory relationship, you will pay an asset-based fee, which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory relationships.

For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

By establishing a relationship with us, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences.

Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.

1. 10b5-1 Plans: For more information about 10b5-1 plans, please visit: https://www.sec.gov/rules/final/33-7881.htm
2. Options: For more information on options, please visit: https://www.janney.com/wealth-management/disclosures-agreements/disclosures-agreements-service/equities/options For additional information on the characteristics and risks of options please refer to the OCC website: https://www.theocc.com/Company-Information/ Documents-and-Archives/Options-Disclosure-Document
3. Fully Paid Securities Lending: Fully Paid Securities Lending may not be appropriate for all investors. Reclassification of dividend income from loaned securities may have implications on tax responsibilities, and voting proxy rights are forfeited. Clients should consider the potential counterparty risk, reinvestment risk, market risk, liquidity risk, and operational risk, among other considerations. The examples provided are hypothetical and do not take into account any specific situations. This information was prepared from sources believed to be reliable but is not guaranteed as to accuracy and is not a complete summary or statement of all available data. There are no guarantees that any investment or investment strategy will meet its objectives or that an investment can avoid losses. Investment products offered are not insured by the FDIC or any other government agency. They are not deposits or obligations of, or guaranteed by the financial institutions where offered. They also involve investment risk, including the possible loss of principal. Past performance is not an indication of future results. For more information on fully paid securities lending, please visit: https://www.janney.com/wealth-management/disclosures-agreements/disclosuresagreements-service/margin-lending/fully-paid-securities-lending---client
4. Securities-Based Lending and Margin Lending: Margin lending is not available for retirement accounts, annuities, UGMA/UTMA accounts, money market funds, CDs, many international securities, certain managed accounts, and certain other securities. There are significant risks to margin borrowing which should be understood before embarking on a margin strategy. Your Janney Financial Advisor can provide you with further information to inform your investment decisions. For more information on margin lending, please visit:  https://www.janney.com/wealth-management/disclosures-agreements/disclosures-agreements-service/margin-lending/margin-disclosure
5. Donor-Advised Funds: For more information about donor-advised funds, please visit: https://www.janney.com/wealth-management/education/detail/ education/2022/05/13/donor-advised-funds
6. Charitable Lead Trusts: For more information about charitable lead trusts, please visit: https://www.janney.com/wealth-management/education/detail/ education/2022/05/13/charitable-lead-trust
7. Charitable Remainder Trusts: For more information about charitable remainder trusts, please visit: https://www.janney.com/wealth-management/ education/detail/education/2022/05/13/charitable-remainder-trusts

Diversification does not assure a profit or protect against loss. Options, margin lending, securities-based lending, exchange funds, and trust strategies involve risks and may not be appropriate for all investors. Janney Montgomery Scott LLC, its affiliates, and its Financial Advisors do not provide tax, legal, or accounting advice. Clients should consult their tax and legal advisors before implementing any strategy.

This information was prepared from sources believed to be reliable but is not guaranteed as to accuracy and is not a complete summary or statement of all available data. There are no guarantees that any investment or investment strategy will meet its objectives or that an investment can avoid losses. Investment products offered are not insured by the FDIC or any other government agency.

They are not deposits or obligations of, or guaranteed by the financial institutions where offered. They also involve investment risk, including the possible loss of principal. Past performance is not an indication of future results.

This material provides a general overview of planning strategies that may be considered when addressing a concentrated stock position. The availability, eligibility requirements, costs, risks, and tax treatment of each strategy vary, and not every strategy is appropriate for every investor or available through Janney. Investors should consult their financial, tax, and legal professionals before implementing any strategy.

Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

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