25 Ways We Help Clients Build Better Relationships with Their Money
23.) Arrivity financial planners help clients reduce concentrated stock positions to maintain diversified portfolios.
Many prospective clients (and even returning clients) come to us with concentrated individual stock positions that make up high percentages of their investments and retirement capital.
We don’t have anything against you holding most of these individual stocks; we even like many of these companies. But we want to make sure you aren’t overly concentrated in just a handful of individual stocks such that your portfolio is not adequately diversified. The flavor of the last ten years has been tech stocks: MSFT, AMZN, Meta, NVIDIA, INTC, AMD, AAPL and Amgen are a small sampling of popular stocks we see people have concentrated holdings in (often from employees of these companies). From the decade prior, we often see concentrated holdings of Cisco, General Electric, Mastercard, Visa, Ford, Boeing, Warner Bros. etc.
Regardless of whether your concentrated stock position is from an inheritance, your employer’s Restricted Stock Units (RSUs) / Employee Stock Purchase Plan (ESPP), or because you decided to try your hand at individual stock picking – Arrivity financial planners can help you come up with the best plan to tax-efficiently diversify your investment holdings.
Sometimes we view selling a stock that has ‘done well’ and that has significant capital gains as “taking the winnings off of the table.” Sometimes we recommend selling a particular stock or investment because it has a capital loss which we can use to offset some of your capital gains. And regardless of the situation, you can always repurchase the stock or investments if you really like the company in the coming months, as long as you avoid the Wash-Sale Rule.
Another common tactic Arrivity financial planners implement if a client has a particular concentrated stock position they don’t want to sell is to “carve out” or remove those holdings from the client’s diversified retirement capital. We don’t want your $500,000 of Microsoft stock to “crowd-out” the rest of the S&P 500 or other U.S. large cap stocks, which is what would happen if we left that position in a client’s retirement capital and it encompassed the entire 25% allocation we would otherwise have towards U.S. Large Cap index funds. Instead, we’ll “pull out” the concentrated stock positions from the retirement capital and rebalance the client’s remaining retirement capital to their specific risk group – separate and apart from the concentrated stock position. In this way we ensure the client has sufficient diversified retirement capital separate and apart from their concentrated stock position. The concentrated stock position can be kept as long as the financial plan and modeling supports it, or we otherwise develop a short-term or long-term plan to divest from the position in the future.
Please contact us at: Contact Arrivity or 206.217.2583 or info@arrivity.com if we can assist you or someone you know with financial planning.
Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.