How much of your net worth is one company?
When you are paid in company stock, your salary and your savings both depend on the same company. A downturn at one employer can reduce both at once, which is a different kind of exposure from holding the same position in a company you do not work for. Measuring it takes one number: the market value of company stock as a share of your investable assets. What to do about that number is a decision, and this page does not make it. Educational only.
Your job and your savings depend on one company
An outside investor holding a single stock carries market risk on that position. An employee paid in that stock carries the same market risk plus the fact that the events which move the share price also move hiring, bonuses, future grants and the value of the vests not yet delivered.
These are not independent. A company under pressure tends to produce a falling share price and reduced compensation in the same quarters, which is exactly when a household would otherwise draw on savings.
Measuring it
It is one calculation, using figures you already have.
- Market value of company shares you hold outright.
- Plus company stock inside retirement accounts, which is easy to overlook.
- Divided by total investable assets, including retirement accounts and cash.
Vested and unvested are worth separating. Vested shares are an asset you hold and could act on. Unvested units are future compensation contingent on staying, which behaves more like a claim on future salary than like a holding.
What often surprises people is how fast the percentage grows. A concentration that was modest can double over two vest cycles without a single decision being made, because vesting adds to the position automatically while nothing removes from it.
What the tax treatment does and does not say
One tax point is often taken as a reason to sell.
The vest already created ordinary income, taxed at 25.4% federally on the sample used across this site. Your basis is the vest-day value. Selling shortly after vesting therefore produces very little capital gain, because the sale price and the basis are nearly the same number.
That is only the math. It says selling near a vest is not expensive in capital gains terms. It does not say selling is the right decision, and the opposite point, that holding for long-term treatment is worth the wait, also looks at only one effect. Both are inputs to a decision that also involves what you think of the company, what the rest of your savings look like, and what the money is for.
Deciding in advance
The difficulty with this decision is that it arrives on a vest day, when the price is known, the news is fresh, and the shares are already there. It is a hard time to think the decision through calmly.
A written policy set in a quiet month is one common answer. It states what happens on each vest and leaves the vest day with nothing to decide. Policies vary: a share of each vest, a ceiling on concentration, a schedule independent of price, or no change at all as a deliberate position.
What these have in common is that they are decided ahead of time. Employees subject to trading windows or preclearance have a further reason to decide early, because the window may be closed when you want to act.
Questions people ask
What percentage of net worth in one stock is too much?
There is no threshold that fits every household. A single figure offered for everyone is really a recommendation. What the number does is make the exposure visible so it can be weighed against the rest of your situation.
Does selling right after a vest trigger a big tax bill?
The vest itself is the taxable event and it happens whether or not you sell. A sale shortly afterwards is measured against the vest-day basis, so the additional capital gain is usually small.
Should I count unvested RSUs in the calculation?
They are worth tracking separately. Unvested units are contingent on continued employment, so they behave more like future compensation than like an asset you hold, while still being exposed to the same share price.
What about company stock in my 401(k)?
It counts toward the same exposure and is frequently forgotten because it appears on a different statement. Some plans also carry specific tax treatment for appreciated employer securities, which is worth asking your preparer about before any distribution.
Try it with your own numbers
The modeler shows company stock as a share of what you have entered, alongside the vest calendar that keeps adding to it.
Free to use, and your figures stay in your browser.
The percentage is simple math. What it means for you depends on the rest of your finances.