Every time a batch of RSUs vests, you face the same question: should I sell my RSUs immediately, or hold on to the shares? You already owe ordinary income tax on the full value at vest, whether you sell or not. What happens after that is a separate call, and it’s one you make again at every vesting date.
There’s no single right answer here. Selling your RSUs immediately converts the shares to cash without adding further tax exposure beyond what you already owed at vest. But wait even a little while, and any gain since then becomes a separate taxable event when you sell. Holding keeps your upside if the stock does well, but it stacks concentration risk on top of the income tax you’ve already paid.
For people who’ve built up a large RSU position over several vesting cycles, options like an exchange fund offer a third path: diversifying without an immediate sale.
The case for selling your RSUs
Selling at vest is the default most financial advisors reach for, and it holds up well for ordinary-sized vests. You’ve already paid income tax on the full value of the shares, so a same-day sale doesn’t add a second tax bill of any real size. You walk away with cash you can move into a diversified portfolio, pay down debt, or spend, and you’re not carrying any more single-stock risk than you already have elsewhere.
The tradeoff is what you give up. Once you sell, you’re out of the position for good. If the stock keeps climbing after that, you don’t participate in any of it.
The case for holding RSUs
Holding keeps you exposed to further upside. If your company’s stock keeps climbing, an RSU grant you hang on to could be worth more in a year or two than the value you were taxed on at vest.
That upside comes with a cost. You could end up carrying concentrated single-stock risk for longer than you’re comfortable with. And let’s be clear: holding doesn’t help you avoid the capital gains tax bill, it just delays it. Whenever you do eventually sell, any appreciation since vest becomes a taxable gain.
The third option: The case for exchange funds
With an exchange fund you get diversification, defer capital gains (if any is owed), and keep your capital in the market. The trade off is that you need to lock up your capital for (typically) 7 years.
Exchange funds work by pooling appreciated stock from many investors into a single diversified fund, in exchange for a stake in the pool rather than cash. Because you’re exchanging shares rather than selling them, the transaction doesn’t trigger a taxable sale.
Your capital gains tax is deferred, not eliminated, generally until you redeem after a required holding period. Most exchange funds require seven years, and the shares you eventually receive back carry over your original cost basis.
An exchange fund isn’t a way to avoid the tax bill forever, and it isn’t automatically the better option, either. It’s a specific tool for a specific situation: a large, appreciated, concentrated position where you want to diversify without triggering a big sale right now, and where you’re comfortable committing the position for several years.
Glidepath is one example of an exchange fund. It requires accredited investor status and a $100,000 minimum contribution, and it charges no management fee to members.
If your RSU position has grown enough to make you worry about concentration risk, see if you qualify for the Glidepath fund.
When RSUs pile up: comparing your options
For a single vest, the sell-or-hold decision is usually manageable either way. It gets harder once several years of vesting have turned into a position worth a meaningful share of your net worth. At that point, selling everything at once can trigger a capital gains tax bill large enough to influence your decision.
Here’s roughly how the three main paths compare once a position has reached that size:
| Sell now | Hold | Contribute to an exchange fund | |
|---|---|---|---|
| Concentration risk | Removed immediately | Stays, and grows if the stock keeps climbing | Removed immediately (you exchange the stock for a diversified pool) |
| Tax treatment | Capital gains tax due on appreciation since vest | No tax due until you sell | Capital gains tax deferred, generally for a minimum of 7 years. |
| Liquidity | Full access to cash right away | Full access, though selling later still triggers tax | Limited. Funds are generally locked in for the deferral period |
You have three ways to deal with your RSUs
Whether to sell your RSUs immediately, hold them, or consider an exchange fund depends on the size of the position, your tax situation, how soon you need the cash, and how much single-stock risk you’re comfortable carrying.
Interested in learning whether an exchange fund fits your situation?