How Tech Employees Can Manage Concentrated Company Stock Positions

Stock compensation
can create significant wealth building

opportunities for employees
of publicly traded companies.

And we see this especially
for those working in the tech industry.

Although it can create a significant
opportunity, there’s also some

potential risks that make proper planning
even more critical.

If you work at a publicly traded company
and you found yourself

with an overconcentration of your company
stock in your portfolio.

Let’s chat.

My name is Gina DiGirolamo.

I’m here today with Daniel Dusina.

Daniel is our chief investment officer,

and he actually typically leads
our Blue Chip NOW! podcast.

So we’re excited to have him on the chat
today.

Thank you for joining me.

Thanks so much for having me. Excited
to chat.

Absolutely. Awesome.

Well, as I mentioned,
we’re just going to kick things off.

And if you could share a little bit
on employee compensation

when it comes to their company stock,
what does that look like

and who might it apply to? Yeah.

So you might find traditionally
at public companies

there could be an opportunity
for employee ownership of stock.

This could come through an employee stock
purchasing plan.

Just a general piece of their bonus
or year end compensation, restricted stock

units, whatever it may be,
whatever the format, it comes in

and it’s aimed at historically
and generally speaking,

trying to align the interests
of an individual

or a high performing employee
with the interests of a company.

And how does that create risk.

What what could happen over a long over
the long term.

I think the, the biggest risk
that you see with company

stock plans is always in my eyes
going to be concentration risk.

So when I talk about concentration
risk it’s essentially the risk

of putting all of your eggs in one basket
without having any diversification.

You can be hitching your wagon

to just one horse where essentially it

it doesn’t always end up being an issue,
but the potential for risk is much,

much greater
if you build up a position over time

that ends up dominating
not just your portfolio,

but ultimately your financial future
and your current financial success.

That can pose some serious risks.

And this is an interesting combination

between the financial planning
and portfolio management.

And I and I think part of that is this
behavioral finance topic that we talk

about of someone feeling a certain bias
or they really like the company.

They know that it’s done well.

So they want to hold on to that stock.

What does that look like
from an investment management perspective.

And what should they look out for. Yeah.

Well, you know,
I think that there is some level

of familiarity that comes into play.

So if you are a high performing employee
or a corporate executive

and you’re being granted or gifted

shares of stock over years
and years at a time.

Number one, you live and breathe

the results of that company
that you’re allocated to every single day.

You understand
the direction of the business.

You understand the vision.

You understand
the challenges that it faces,

and you probably do feel
some semblance of control

or a level of influence
on the direction of the company,

and thus success of the shares
that you are owning.

So I think that the familiarity
bias is a huge piece of why

you end up seeing some corporate
executives or general employees

that are gifted stock
or granted stock be over concentrated.

There are other elements
that come into play too.

Again,
this is a bit of a different angle to it,

but it’s like if you’re getting continuous

allocation to security of any kind,

you might not be paying attention to what

that looks like
as a portion of your broader portfolio,

but also as a portion of your broader
livelihood.

So Daniel, specifically
looking at the potential for risk when,

when someone’s receiving company stock,
not only are they going

to receive the stock, as you mentioned,
in the form of reviews or bonuses

or some type of their compensation,
but they’re also their livelihood.

Their other income is also tied
to that single company.

What is the risk management
look like from that perspective?

Yeah.

Well, I’m glad you brought it up
because really, you should look at the

some of the risks of stock
based compensation from two lenses.

So number one, on the portfolio
side of things,

you could very easily see an individual
who is continuously

being granted shares of a public company
have that allocation grow to 20, 30, 40,

even 50% of that
individual’s investable assets,

which again, there’s no one size
fits all number, which is right.

And we’ll probably touch on that later.

But the idea being that this company
and its success

are dominating your future investable
portfolios outcome.

Right.

The other lens through
which to look at this, and the other

piece of concentration is
not only is your portfolio potentially

extremely tied
to the success of this company,

but so is your day to day, week
to week, month to month earnings, right?

If this same company,
which you are extremely heavily allocated

to, is going to be somewhat

dictating your livelihood,
salary bonus, future opportunities,

all of the sudden it’s
not just a portfolio concentration risk.

It’s just a holistic financial well-being
risk that I think most people

don’t pay attention to until it ends up
being a little bit too late.

That’s a great point. Absolutely.

In your role, what does it look like
from a portfolio management standpoint?

How are you?

How would you advise
someone to go about this?

I think again, there’s
no one size fits all approach,

but I do think understanding
an individual’s time

horizon, general level of tolerance
for risk, and I would say

just financial standing, that’s
where you can start to develop a plan.

And so realistically it’s it’s
not about one size fits all plans.

It’s more about having an actual detailed

plan of attack
and sticking to that plan of attack.

I mean, for one individual
that could be taking some

chips off the table
every month, for others,

it could be a defined allocation
being sold every year.

And even select scenarios,
it might make sense to strike some options

around this individual security.

Again, it’s it’s more around having a plan
that’s the most important thing

and staying disciplined to it
and getting out in front of of any risks

at the onset before it ends up
being too late and potentially too costly.

I want to dive a

little bit deeper
into our specific strategy

when it comes to an individual stock
portfolio.

So oftentimes we’ll see individuals
that work at publicly traded companies.

They have all of this employer stock.

They will also own mutual funds

or other ETFs or other types of products
that might also have an allocation

to the same company that they work for,

creating more of that overconcentration
risk.

How does the blue chip partners

investment strategy play into someone

who may want to diversify the allocation
that they have?

Yeah, it’s a good point
because let’s say mutual fund A,

you know, the manager of that fund
is not specifically taking

into account Gina Geronimo’s position.

And Amazon, for example, when he’s
deciding to buy or sell that position.

And unless you’re astutely
aware of each of the holdings

of any of your mutual fund
or exchange traded fund positions,

this is a risk that can go
unnoticed and unchecked.

Now, one of the benefits
of using individual companies

for an equity allocation
is that there isn’t really any gray area.

I mean, you see what you own on
statements.

It’s very easy to map out the allocation
as it pertains to your holistic

balance sheet and overall
financial situation.

The other thing it does
is it can allow for some opportunities

with regards to selling individual
positions of of shares of your employer

without, blowing yourself up
from a tax perspective.

You mentioned using the individual stock
positions

in a in an equity portfolio or allocation.

How does that plan to tax
planning in this situation.

Well I think so.

In addition to the familiarity
and I guess level of control

that an employee might feel
with regards to their company stock.

You also might have individuals

that are hesitant to sell
just because of of the tax burden.

So if you are a shareholder of a stock

through your company
that has appreciated rapidly or massively,

again, if left unchecked over years
and years of compounding.

All of a sudden
you could be looking at a pretty

big tax bill in order
for you to take some risk off the table.

So one reason that I think
using individual companies

to constitute
an equity allocation is beneficial

is because it can give you
some more flexibility on taxes.

At Bluechip, our standard equity models

are generally between 25 to 40 companies.

And as much as I’d like to believe
otherwise, in any given year,

not all 25 to 40 of
those are going to go straight upwards.

So with that, it’s it’s around
being active and recognizing losses,

even if you still believe
in the fundamentals of the company.

If there is short
term dislocation in the market like we saw

in March of this year, we saw it in March
and in April of 2025 as well.

Take advantage of those dislocations.

Recognize some taxable losses
that can free up an individual

to recognize some taxable gains
from a potentially appreciated position

and ultimately start to de-risk
and concentrate their their portfolio.

Absolutely.

So we talked about the behavioral
familiarity bias that comes with this.

We talked about the tax planning
that kind of pertains to it.

I want to circle back to the idea
of someone

being a high performer at their company.

Knowing the company. Knowing the industry.

How would you say,
if you were to give one piece of advice to

to someone to balance out
that confidence in the company

with needing to diversify
the rest of their portfolio?

What would be the key takeaway there?

Yeah, it’s always difficult
because, like you said,

that familiarity extends
a lot of the time.

Well past the company itself.

If the
if this company that the employee works at

and has a large stock
allocation to is in tech.

Generally speaking, an individual
might be well versed and more up

to date on things
going on in the tech sector.

I would, I would always challenge
the notion

that just because an individual’s
comfortable with an allocation

or knows a lot about it,
that they should be overly exposed to it.

I mean, in the case of a public

publicly traded company like Microsoft,
if you have an employee

that’s being granted rsas continuously
and they’ve built up a big position,

keep in mind Microsoft is going to be,
generally speaking,

very correlated with the other magnificent
seven names Apple, Amazon, alphabet.

I would

if it were were my recommendations,
I would intentionally limit exposure

to those types of names and other names
that Microsoft is correlated

with, which might not be an just tech
and they might not be in

communication services.

Excuse me, there are some companies
in industrials over the last two, two

and a half years that shares of Microsoft
are highly correlated with.

So I would be very astutely aware of what

this company that you work for in public
markets is correlated with,

and be very intentional around
diversification.

Now, the, the other side of things,
I think that there’s this notion

that if you’re an employee
of a publicly traded company

and you’re being granted shares
because they believe in you and

they want you to believe in the company,

there is some level of of respect,

I guess, that comes with an employee
not wanting to sell.

They want to show that
they believe in the company.

But at the same time,
I think you can still do that.

No one’s saying that.

You have to completely table your exposure
and completely step out of

of your exposure to the publicly traded
shares of this company.

It’s more around thinking forward.

Partnering with somebody
who can help you map out an astute

financial plan
that’s in your best interest.

And I don’t think any executive of any
company would would fault any individual

for thinking that way. Right.

And I like what you had said about

really having a keen eye on what you own

within the company
stock and outside of that,

because there’s there’s
a lot of different ways

that I think someone is working
at this company for ten, 15, 20 years.

It builds up and you might not notice
what this risk is in your overall plan.

Yeah. So it’s a great explanation. Yeah.

And that’s why I say it’s important
to get out in front of this.

Because if you don’t number one, it

probably is happening behind the scenes
without you even recognizing it.

And if you fast forward five, ten,
even 15 years,

again, it’s not going to be a problem
that’s unsolvable.

It just becomes a lot more challenging
and potentially a lot more costly.

And just like Daniel said,
if this is a situation

that might apply to you, reach
out to our team of blue chip partners.

We’d be happy to help.

And thank you so much for chatting with me
today, Daniel.

It’s a great conversation.
Of course. Happy to do it.

Thanks for having me, Gina. Absolutely.
And thank you for watching.

Can’t wait to chat again soon.