If a large share of your net worth is tied up in a single company’s stock, you have a concentrated stock position. It’s one of the most common ways investors end up carrying more risk than they realize.
There’s a common rule of thumb for what counts as concentrated: a single stock or investment makes up roughly 10% or more of your total portfolio — every dollar of investable wealth you hold from your investment account to your 401(k) and checking accounts. The number that actually matters, though, is personal. It’s less about the percentage and more about how much of your financial life would be affected if that one holding dropped sharply.
Do you have a concentrated stock position?
The 10% threshold shows up across a lot of financial planning literature, and it’s a reasonable starting point. But it’s a technicality and doesn’t give you a full picture of your risk.
That’s because it’s a single-holding check. You check one holding against that number, but it says nothing about the rest of your portfolio. You could stay under 10% on every individual stock you own and still be poorly diversified overall.
Few people searching for this term are actually sitting right at 10%. Years of RSU vesting, an early equity grant, or a stock that’s simply outgrown the rest of a portfolio routinely push a single holding to 30%, 50%, or more of someone’s total investable portfolio. The real risk lives here, in how much of your financial life depends on one company’s stock price.
Concentration also isn’t limited to a single ticker. Someone with 8% in AAPL and another 60% spread across Silicon Valley tech is still concentrated, because those holdings can rise and fall together. You might clear the 10% threshold but still be at risk.
The same overlap shows up between your job and your portfolio. If you work in an industry and also hold a lot of stock tied to it, a downturn can hit your income and your investments at once.
If it sounds like you have a concentrated portfolio, find out how much you can diversify and defer.
How concentrated positions typically happen
Concentrated positions rarely happen on purpose. They build up gradually, usually through one of a few common paths:
The risks associated with a concentrated stock position
All stocks carry inherent risk, but a concentrated position adds single-company or single-industry risk on top of that. One company or industry underperforming or dropping sharply for reasons that have nothing to do with the broader market can have a significant impact on your finances and net worth.
How to assess your own portfolio
Add up what a single holding is worth (and also what you hold in closely related stocks, like the same sector or industry) and compare that to your total investable portfolio. If that combined exposure represents more than you’d be comfortable losing a large share of, you’re likely carrying a concentrated position, whatever the exact percentage comes out to.
Having a concentrated position isn’t a mistake. You didn’t mess up. It’s usually a sign that things have gone well, whether that’s years of vesting, a successful IPO, or a stock pick that paid off. What you do about it from there is a separate question.
Ready to diversify your concentrated position? Glidepath is an exchange fund that helps you diversify without triggering an immediate capital gains tax bill.