The loop
It runs the same way in almost every case we see. The position is concentrated, the holder knows it, and selling would trigger a consequence. So they hold. Holding means the position grows relative to everything else they own, which raises the stakes, which makes selling feel more consequential. So they hold.
The loop is stable and it resolves in exactly two ways. Either deliberately, on a schedule the holder sets, or involuntarily, through a drawdown they did not choose. There is no third outcome where the problem quietly goes away.
The part that is usually missed
Most people in this position describe themselves as diversified because they also hold index funds and property. The description does not survive examination.
If your employer has a difficult year, three things move together: the share price falls, your unvested grants fall with it, and the security of your employment weakens. Your salary does not offset the concentration in your employer's stock. It is the same exposure expressed twice, and it is correlated at exactly the moment you would need it not to be.
Both of the usual options are bad
The framing people bring to this is binary: hold everything, or sell and take the hit. Both are poor, and the binary itself is the error.
| Approach | What it actually does |
|---|---|
| Hold indefinitely | Defers a tax cost while allowing an uncompensated risk to grow. You are not avoiding the decision, you are financing it with risk. |
| Sell in one transaction | Concentrates the entire consequence into a single year, frequently at the worst possible marginal rate, and forfeits any benefit from spreading recognition. |
| Reduce on a schedule | Spreads recognition across years, allows offsetting positions to be arranged around it, and removes the decision from the moment of maximum emotion. |
What deliberate reduction looks like
The details are specific to each holder, but the shape is consistent.
- 01Set a target. A percentage of net worth you are willing to hold in one employer, decided in a calm quarter rather than after a price move.
- 02Set a schedule to reach it. Tranches across years, sized to your bracket rather than to your conviction about the share price.
- 03Put it inside a plan where trading windows apply, so execution is not dependent on the window being open at the moment you decide to act.
- 04Arrange the offsetting side of the ledger around the years the recognition lands, rather than discovering the consequence afterwards.
- 05Decide in advance what would justify deviating, and write it down. In practice almost nothing does, and having written it down is what stops you finding a reason.
The hardest part is not the mechanics. It is accepting that a tax cost paid deliberately is cheaper than a risk carried indefinitely, which is a trade most people can state clearly and very few act on.
General information only. This article describes law and practice as we understand them at the time of writing. It is not tax, legal, accounting, or investment advice, it does not consider your circumstances, and it does not create an advisor-client or attorney-client relationship. Odyssey Strategic Advisors LLC is not a law firm and is not a CPA firm. Confirm any position with your own tax professional before acting on it. See our disclosures.