The Hidden Danger of Holding Too Much Company Stock in Your Portfolio

Now let’s talk about the second risk: not the tax man, but the market itself—and the danger of having too much of your net worth tied up in your employer’s stock.

Whether you work at Dell, Amazon, or a fast-growing startup in Austin, too many employees fall into the trap of thinking, “I know this company, I believe in it, I’m fine holding it.”

That’s a false sense of security—and it can cost you your future.

Why Company Stock Concentration Is Risky

• You already rely on your company for your paycheck, your benefits, and your RSUs.

• If the company struggles, your income, job security, and portfolio all suffer at once.

• This is called double (or triple) exposure, and it creates outsized risk during market downturns.

Austin Example:

Imagine you’ve worked at a local tech firm for 6 years, and now:

• 70% of your $400K portfolio is company stock.

• You feel like you “know it better” than the market.

But when valuations are stretched or a bear market hits, company-specific stocks often fall 40–60%, especially if growth slows or earnings disappoint.

That’s $100K–$160K wiped out—and your paycheck might be at risk too.

Complacency Is the Real Enemy

• “It’s performed well for years.”

• “I know the company inside-out.”

• “It always bounces back.”

These are comforting lies that prevent rational portfolio management. And in a bear market or overvaluation scenario, they can lead to life-altering drawdowns.

What You Can Do Right Now:

1. Set a Sell-Down Policy Sell a portion of your company stock every year, regardless of the share price. Even 10–20% per year helps diversify and de-risk over time.

2. Diversify with Intent Use proceeds to buy broad-market ETFs, bonds, or sectors not tied to your industry. If you’re in tech, add value or dividend ETFs to your mix.

3. Consider a Collar or Hedge If you’re not ready to sell, explore options strategies like protective puts or collars to limit downside risk.

4. Track Valuation

 If your company is trading at above-average price-to-earnings (P/E) or price-to-sales ratios, know that any slowdown could lead to a long, deep correction.

Final Word:

You’re not just an employee—you’re an investor. And investors manage risk. Don’t fall into the trap of overconfidence or inertia. If you’re building your financial future in Austin, don’t bet it all on one horse—no matter how well you know the stable.

Want help reviewing your stock comp and planning a tax-smart sell strategy? Let’s connect. Helping Austinites make smarter financial moves is what I do.