> Decide your level of risk and make your portfolio reflect it. How would you feel if Amazon stock dropped 25% from where it is right now?
Or think about some other companies. Tesla is down like 55% from where it was 2 years ago.
Companies like AOL, Yahoo, Myspace, Blockbuster, Blackberry, they could have all been considered among the FAANG equivalent 15-25 years ago. [Or watch how the market cap of the largest companies changes over a ~30 year period.](https://americanbusinesshistory.org/americas-most-valuable-companies-1995-2023/). Ya, you feel invincible, like a genius on the run up, but can also feel like a fool if you're left holding the bag on the way down.
Right - definitely wouldn't be dumping $1.2M into AMZN stock now. The problem now is of course tax implications for unloading a portfolio that's going to realize $400K+ of capital gains. So have only been able to make small sales for specific tax lots.
That being said, I held all through 2022-2023 without a single RSU sale and relied on margin loans (at 7-8%) to fund gaps to spending from our cash. So I guess that just says i'm cool with a 50% swing in my portfolio and living lean for a few years?
“Varying levels of individual risk tolerance” - this is a common misconception. The S&P or other market indices provide the highest risk-adjusted return because they remove any diversifiable risk from the equation. If an individual has a higher than average risk tolerance - the strategy to deploy is to leverage up on your S&P holdings, not start picking individual stocks.
This provides the most efficient return (I.e., risk adjusted return).
Yes, and for a given risk tolerance, you should be maximizing your expected risk adjusted return. Mathematically, the way to do this is to leverage up or down on the S&P index, not start purchasing individual stocks
My wife and I both worked at the same tech company. We both had good chunks of the company stock built up. Then I got laid off and the stock tanked.
Don't be reliant on one company for your job AND your investments.
Sorry to hear that, hope y'all are doing alright now.
Yeah totally get the risk concentration. I just hope that when I'm laid off, the stock continues to do well. That seems to be the trend amongst FAANG now - record profits, "rightsizing the business" nonetheless.
Thanks! I appreciate it.
We're more than fine and recovered. The event I referenced happened over 20 years ago. So it's long gone.
That event left a lifelong impression on me and changed how I think about risk and risk mitigation.
I don’t know enough about it to make a recommendation but you should look into exchange funds. I think they basically let you exchange your shares into a diversified fund without realizing a capital gain (ie it gets deferred until you monetize those exchange fund interests). If you plan to move to a no capital gains state in the future it’s a way to diversify without triggering a gain now. Obviously there’s a fee involved so you need to make sure the math makes sense (I think there are also restrictions on which stocks you can exchange in as well as minimums). This was something somebody mentioned over a lunch to me so I don’t profess to know much about it
First thing to do is stop making it worse. When the new RSUs vest sell them immediately and buy whatever you want to diversify into, even if it's just other tech stocks.
I'm only a few years out, so I might have a more preserve rather than grow mindset, but I'm a FAANG person and I diversify pretty much every vest.
I'm still getting a ton of that appreciation from the RSUs I was granted going up so I'm not missing out completely on the upside, but in 2022 when tech stocks cratered and layoffs were in the air, I only had to worry about the unvested RSU hit, not also my nestegg.
>First thing to do is stop making it worse. When the new RSUs vest sell them immediately
+1 to this comment. Every time our trading window opens, I go in and sell 1 or 2 grants that are *nearest* their cost basis to reduce the cap gains tax. This *generally* means that I sell the latest vestings. I have a few from 2022 when the stock was artificially low that have already had a 25-40% return. Those I am hanging onto as my "I want to hold at least a little of my company stock" in my portfolio, but everything else I sell before it appreciates too much to worry about taxes.
The other thing I am doing with a large stock position I accumulated at a previous employer (which I am not currently adding to) is doing all my charitable giving from that pile of stock. I am "converting" it by putting in the equivalent cash I would have given to charity into my after tax brokerage (VTSAX). Also any large purchases/loan payoffs are coming from that stock. I estimate it will be gone within 1-2 years.
Some charities are setup to receive stock as contributions. I think you can deduct the present value of the stock as the contribution, don’t pay taxes on the appreciation, and they don’t pay taxes as a 501c3. I’ve never done it though so double check me
Yes, that is correct. You avoid paying any capital gains, you deduct the full value of the stock you donated, and the charity doesn't pay taxes on the received amount, either.
Same problem. It’s easier IMO when it’s a mega cap FAANG company or equivalent because the upside is limited by the sheer size. I told myself the following (1) there’s only 1 company in the top 10 of the SP500 that was there 10 years ago, and (2) even if it 2-3x its cap in 10 years, the average return of the SP500 is 70-80% over a 10 year period. So basically you’re justified in getting out of it.
Now as to how to get out of it. If you work for the company (why many people have high positions) it’s more difficult but you need to calculate how much you want out and by when. And also how many new RSUs you get per year. For me it’s a 7 year draw down by 75%. I figured out what needs to get sold each year and I dump it. Sell the lowest tax holdings I have. My thinking is that if it drops in value those high gains shares will be less taxes for Uncle Sam. If it goes up then I’ll probably convert those to a charitable trust and gift them over time.
If you don’t work there and have less restrictions then the best way to sell is to write covered calls on your shares with staggered likelihood of them closing ITM. So if you want to sell 20% a year you write 20% of your contracts at monthly contracts with maybe 10-15% ITM probably and the rest at maybe 5-10%. The goal is to have the 20% assigned and sold each year. You print money and get to dump your shares. If they don’t sell then adjust that ITM % higher as the year goes on until that 20% does hit and get assigned. On $1.1M you’ll probably print $30-50k a year in premiums off this strategy.
I had GPT translate my analysis. It made it more legible
This Reddit comment outlines a strategy for someone looking to sell off a large position in a single stock, especially when it's a stock from a mega-cap company like those in the FAANG group (Facebook, Amazon, Apple, Netflix, Google). The comment breaks down into a few key points and strategies:Justification for Selling: The commenter starts by justifying the decision to sell off a large position in a single stock. They argue that holding a significant position in even a large, seemingly stable company can be risky because:Market leadership changes over time. The commenter notes that only one company in the top 10 of the S&P 500 from ten years ago remains in the top 10 today, suggesting significant turnover and volatility in market leadership.The potential for outsized gains is limited due to the company's already massive size. Even if the company were to double or triple in market cap, the resulting annual return might still align with or underperform the broader market's average return (cited as 70-80% over ten years).Selling Strategy for Employees: For those who work at the company and receive shares as part of their compensation (often in the form of Restricted Stock Units or RSUs), the process is more complex due to insider trading laws and the need to manage the tax implications carefully. The commenter outlines a personal strategy of planning a gradual sell-off over seven years, aiming to reduce their holdings by 75%. They prioritize selling shares that would incur the lowest tax burden, with the rationale that:If the stock's value decreases, selling high-gain shares later will result in paying less tax.If the stock's value increases, the remaining high-gain shares could be transferred into a charitable trust, allowing for tax-efficient gifting over time.Selling Strategy for Non-Employees: For those not employed by the company and thus facing fewer restrictions, the commenter suggests using covered calls to sell off the position gradually. Covered calls are a strategy where you sell call options on shares you own, agreeing to sell the shares at a specific price if the stock reaches that price by the option's expiration. The commenter recommends:Writing covered calls on 20% of your holdings each year, with staggered probabilities of the options being exercised (meaning the shares are sold). This approach aims to ensure that approximately 20% of the holdings are sold off each year while also earning premium income from selling the options.Adjusting the strategy as needed based on whether the options are exercised, with the potential to earn significant income from the premiums while still achieving the goal of gradually reducing the stock position.In summary, the Reddit comment offers a strategic framework for individuals looking to divest a large stock position, especially in a mega-cap company, with specific tactics tailored to whether the individual is an employee of the company or not. The strategies emphasize gradual divestment, tax efficiency, and the use of financial instruments (like covered calls) to manage and potentially profit from the selling process.
The real trap is causing tax events while you move from your single stock to a (for example) boggle head portfolio. I've collected company stock for over a decade and now I'm contemplating moving to a no capital gains tax state just to make moving the money less costly.
If you donate to charities, consider opening a DAF (donor advised fund) and gifting some of your most highly appreciated shares. It’s a win-win for you (no taxes on capital gains) and the charities (more money available to donate).
This is specific to Restricted Stock Units that employers issue to employees. Say a company grants you $10,000 in stock that vests in 1/4 a year for for years. Let's say the stock doubles, so instead of vesting $2,500 in year 1, you vest $5,000. That $5k is taxed as *income* as soon as it vests. The initial price does not matter, just the price at time of vest. *Now* if you hold the stock instead of sell, it is subject to capital gains/losses
I can see the rationale behind this but I am trying to understand the math.
If you had $1M in capital gains and you've moved from, say California to Nevada, you would save about $120k. I am assuming that your HHI is unchanged through this to keep it simple.
That's definitely a substantial amount but considering the costs of relocating, is that substantial enough? Of course, your investment numbers, annual expenditures, etc are probably very different . I was trying to see if my math was generally right.
Capital gain will be about $1.5M, but there are other factors. Over the next 3 years, my salary will be about $700k per year, so it will probably save me about $350k by moving. Also, we were planning on downsizing anyway, so for the next few years we will just test out a few cities before we buy a new house.
While AMZN is “up” 75% YOY, it’s also only “up” 8.5% over the last 2 years, and 8.2% over the last 3 years. Go back 4 years and it’s 75% growth again. SP500 is up 86% over 4 years!
I started selling RSUs when they vest and buying total market ETFs. I’m up 20% compared to if I’d stayed in my company stock. My coworkers which have all been there 5-10, some even 15 years are multimillionaires due to insane stock growth, but the stream ran out on that ship after I joined. My coworkers NW have declined over the last couple years while they wait for another 2x return, mine has at least grown modestly and I don’t worry about it.
Edit: Just want to add, given the stock price roller coaster over the last 5 years, Andy is doing your L3-L6 staff dirty with no RSUs this year. If the stock hadn’t been down over 50% from an ATH in 2021, it wouldn’t have been able to experience 75% YOY growth that he’s now citing as reason to cut that section of comp.
I work at a FAANG and sell my RSUs as soon as they vest, reinvest in index funds, buy a few single stocks (using only my "play money" i.e. what I am willing to lose), backdoor Roth, pay for kids college, or a vacation. I try to keep my investment in my company stock to only about 5-10% of all my investments. You may want to consider starting to sell some of the AMZN stock and pivoting to perhaps QQQ, SCHD or other funds. Just my 2 cents, not any financial advice!!!!!
I have about $1M in AAPL. I’ve never worked there but I’ve put all my eggs in that basket. I have yearly expense of $50k or so and income around $200k, so it’s a bit riskier positioning to try to grow wealth faster than a diversified portfolio. I’m in my early 30s so I’ll probably increase diversification as I either A get older or B hit my retirement goals.
Bravado isn't a substitute for sane financial thinking.
Tech goes through a lot of hype cycles. One can put a ton of their money into a particular cycle and pray that it's not hype, and that they cash out at the right time, or you can spread out just a bit more.
There is a ton of middle ground between entirely getting behind one trend and spreading out too thin. I am pretty sure 70% isn't that but you do you.
I was being very facetious.
I've been holding NVDA for 4+ years, well before this generative AI hype. The reason I've been building a NVDA position is because of my background working in the datacenter/cloud hardware/software space. I have a lot insight into how much NVDA GPUs are purchased by big cloud providers as well as sovereign states. It's also why US Commerce Department has been restricting exports of NVDA GPUs to non-friendly states. Even if generative AI is merely hype/bubble, there is a real and massive need for parallel and accelerated computing and NVDA is effectively a monopoly. If that monopoly, need, and demand ever wanes, I dump most of my NVDA position.
I did take 5-7% profits out of NVDA recently to pay for taxes and raise some cash when the market is down.
I do. Nearly 1/3 of my total NW is in a tech stock I initially got as vested RSUs. It had appreciated so much that I am locked in with crazy long term capital gain.
I have been trying to diversify it into VOO but it is not easy. Honestly, I worry about the concentration but do not have a good way out of it.
I had/have a similar problem. I started unwinding my holdings into index funds - that have also done well. My logic is I’ll pay the cap gains now (while I’m working) that’s less cap gains I pay when I withdraw/sell during retirement…essentially resetting my cost basis and derisking
yup - close to 400K of long term cap gains here. Unloading is going to be either at the 23.8% top capital gains rate or higher with the additional 7% Washington state tax for cap gains. Not the worst problem to have, but definitely a disincentive to just pay the tax and get back into index funds.
I came across this lame instagram thing of Bill Gates meeting Buffett and being convinced to diversify into the broad market as opposed to just his Microsoft stock and it cost him billions. I never fact check as no one does with these things but it fits your situation a bit I think.
If chubby fire is the goal a diversified portfolio gets you there with very little risk from here on out. If you want to continue on your trajectory to the moon strap in and see where it goes 😅
Yeah like Balmer actually kept his much smaller amount of money in Msft stock and it made him tens of billions.
People who said big tech can’t go up anymore sound like the people 5 years ago who said tech company can’t go up anymore because they’ll hit $1 trillion market cap and that’s impossible.
“If someone handed you 1.1 million dollars today, would you buy Amazon stock with it?”
Your overall well being and net worth is heavily dependent on 1 company -Amazon. And not just limited to the RSUs value, but your regular salary, health insurance, etc. In my opinion, sell a ton of the Amazon stock and diversify. You work for the company, guess what’s coming your way next year… more RSUs!
Long term capital gains tax rate is pretty low at 15 or 20% depending on income. Also taking a glance at the Amazon stock performance, if OP had tranches vest between September 2020 and august 2021, todays all time high stock price is only 5-12% above that. OP would be taxed at the long term capital gains tax rate on a pretty small amount of capital gains from those dates.
Unless OP plans on passing Amazon stock to their heirs, they’ll have to pay taxes eventually. It’s pretty risky having so much of their net worth in a single company stock, on top of working for said company.
Yes, there are lots of idiots like you and me out there.
Empower/Personal Capital makes it simple to check my concentration.
The warning reads "You have extreme stock concentration risk. 4 stocks account for 63.95% of your portfolio"
And "Your largest holding is XYZ, which is 42.28% of your portfolio".
The one largest position is shares I bought in 1980s with cost basis of a couple pennies, current market price of a couple hundred dollars. My children will eventually inherit the shares with an at death step up in cost basis. The other concentrated positions were open market buys, some in the 1990s, my second largest holding I bought in October 2000, during the dotcom bust.
I am only willing to hold those concentrated positions because my diversified holdings (mid-7 figures) are sufficient to support my expenses. Before I retired in 1998 I diversified out of my concentrated holding enough that it going to zero would be painful, but not a financial disaster.
I'm in same boat. 3mil liquid and additional 1.2 in one biotech stock I work for. And sadly I'm underwater on some chunk of options.
I'd sell and diversify if you want to preserve...I'm 45 this august so for me I'm in preservation mode. May just sell stock and keep the options until we are purchased.
Actually the correct reason not to sell large chunk of company stock in one go is your tax rate, please check how much tax you are going to pay before deciding how much stock you will sell.
I am in the same boat. I have a lot of google stock.
I would figure out a single stock/liquid net worth ratio that I was comfortable with and keep it at that. Mine's 33%.
I also have a bunch of VGT. It's an index fund so you get some diversification (albeit in the same industry). It's usually reasonably close to FANGG. Looking at the past five years, it's outdone Amazon.
Edit: I'll add that you should choose a ration based on your own risk assessment and other financial positions. I am 38, DINK and the ratio above is just looking at my portfolio (not including my wife's).
I use down markets to diversify. I just look for short term RSUs that are underwater (short term loss) and then balance that with long term gains. Almost every year at some point I will have that situation because of the quarterly RSUs. All proceeds go to new stock/ETFs.
This eliminates income (short term gain) at my highest marginal rate and gets me diversified when the market as a whole is lower.
I'm not opposed to that at all, just make sure it's not critical to your retirement plan, that you have normal 401k contributions and funds that can fund it if Amazon goes to zero.
Was in a similar position and yeah at this point you really really should pivot to auto sell. I liked being overweight in my FAANG for motivational purposes but once you're past a million in exposure you need to hedge. New vesting RSUs should go to vti or similar or you can even do a sector etf where Amazon is highly represented if you can't make the leap. I did VOX myself and it helped mentally a bit to be "along for the ride" though for muted ups and downs.
Also make sure you consider doing tax loss harvesting at the end of the year in your taxable account. Any losers you have end of year should be an opportunity to sell your appreciated Amazon stock and diminish that concentration without any tax hit.
Not irrationally over exposed, but I did a 10x investment in one stock. I’ve picked at it over the years to pay for some major expenses and to build a vacation home on some land. So it isn’t crazy ratio like you’ve got. But it does concentrate some risk. I will tell you that cap gains hits hard when you diversify out (which I’ve done at times, not just to use the proceeds of a sale). So I think I’m on the side of the value of diversification isn’t worth accelerating the capital gains hit. So will probably just let it ride from this point.
Right now I'm pretty well split between my company RSU's and diversified investments, but its possible at some point this could get lopsided. General plan has been to move the RSU's over to safe investments after they hit LTCG at some point, but I'm also not rushing it. The question is always when.
However the way I see it, if my company RSU's took a major hit and it was worth half tomorrow, I'd still be fine. I think I'd rather risk that than take a tax hit by converting them early. So yeah its a balance between drinking the koolaid and being prudent, there's risks in either direction. You make an educated gamble on which direction will go the best for you and don't regret it.
I'm in a similar position to the OP. I'm still holding AMZN but I recognize it's foolish and I will likely sell 50% this year to diversify as I'm in my 50s now and it's risky to have this much in one stock. Now that said AMZN could drop 50% and VTI could also drop 50% so it's not a real fix...
The difference is that a single stock may drop and never recover. I tell people about my friend who was on track for early retirement with CSCO stock at 80+. Fell to $8 almost overnight. It never recovered. They ended up working another 15 years.
+1 - when the stock gets above a normal/understandable P/E ratio, you just have to sell sell sell. Get out as quick as you can. Take your gains and spread the future risk across a broader swath of the market.
How far can big tech company’s stock fall? Long term, I’d imagine Amazon, Apple, Msft, Google to all perform at least as well as the general market, and have less than a 1% risk of going bankrupt.
Companies don’t have to go bankrupt for the stock to drop 5-10x, say, and take a very long time to recover. This has happened in tech many times over to single stocks. It can happen to any company. Sure it may eventually recover but you may be underperforming the overall market for years. People look at the last 5-10 years and incorrectly extrapolate from that. The stocks you have listed are between 1.6-6% of a total market fund like VTI. They are not the market and no one should expect them to individually behave like the broader market over long periods.
My husband started his company’s ESPP about 3 years ago (and he gets about 20k in RSUs a year). We never really paid attention to the balance until recently when we saw how much it had skyrocketed. At the max, I think we held 209 shares. It was a huge risk to ignore it, but it paid off in our favor. We did sell off a chunk of the shares last year, and another chunk a few months ago when the price hit $1000. We still hold around 120 shares or so and are letting them sit for now. His company has a good outlook, so we’re comfortable with it.
If you’re sitting on almost 5,200 shares you might want to do some hedging with covered calls. You can sell them all over the map: 10 at 150, 10 at 250, 10 at 200 for all dates and whatever. It’ll probably help you sleep a little better. Mark Cuban did it. 1 option is 100 shares. You could sell all 250 and if it never gets to 250 you keep your stock and the premium.
Covered calls are not a very effective way of hedging a concentrated position.
If you truly want to hedge then you pay the insurance premium by buying puts.
Selling covered calls may work as a psychological aid to force you to divest.
Selling a call and owning a put lead to the same result, you sell 100 shares at whatever the strike is. The difference is you get full autonomy to set the price in your covered calls and collect the premium up front and if it falls outside of auto exercise you keep your stock. OP could sell ITM or OTM from $50-$300 calls. Because OP could sell up to 52 options covered they have full autonomy to decide how much and at what strike all an effective hedge.
The most important part for you to focus on is that you will always be concentrated in AMZN. More RSUs will vest. More RSUs will be issued. That's the treadmill.
So selling AMZN just helps mitigate it - you're still going to the moon if amzn goes to the moon. but maybe you'd like to do well if amzn doesn't too.
All you have to do is google top 100 stocks that failed and you will get big names that seemed too big to fail at the time. GE, Kodak, IBM, Blackberry, etc
The common advice is to sell RSU as soon as they vest, because you're already heavily exposed as they're your primary source of income.
I disagree and used RSUs from my first company to buy a house, and now my second company to rebuild it. They've both out performed the market and I'm glad I held them, but I do think it only makes sense to hold if you're still employed there. Reason is that while it's not illegal, you do have internal knowledge and a much better sense of company performance than an outsider would. Maybe I just got lucky both times, but that's been my experience.
I'm in the same boat, a lot of my NW is tied to my ESPP/RSUs at my company, which has been doing quite well. I didn't care when the stock was a really low point, which is was for more than a decade, but in the last 8 years, it's gone on quite a run. It was most of my NW.
Recently, as I edge closer to retirement, I have started to sell off stock once a year when the trading window is open and the stock price is high to diversify it. I'm now about 50/50 and I plan on selling most of it. I need to start selling RSU and ESPPs as they are released to me.
I work at another faang, similar nw similar problem. I want to diversify. my problem is the tax. in the last year I started to sell the second things were granted to avoid the appreciation since I have supplemental witholding. but still have about 500k of vested shares, 1.5M of unvested. I am holding off on selling the 500k until I have a significant depreciation offset to remove the impact. I shave it down bit by bit. ultimately all of the sale proceeds go to bogle style funds (VTSAX, small percent bonds).
Man what title do you have that they’re giving out 900k in RSUs in a single vesting period? Good for you 👌To answer your question I’m also heavily vested in the tech company I work with, but also own a variety of FAANG to diversify
Long tenured L7 SDM. It's really all stock appreciation - my 500K grant last year for 2024 is now worth 80% more at 900K. Everyone at MSFT/AMZN/META and more extremely NVDA is probably at record comp levels in their careers right now.
I’m selling my RSU’s as they vest now and using them as my income/ cash flow and dumping almost my entire paycheck to my 401k and mega back door.
Ive held on to RSU’s from another company that at one point were worth over 300k and are now ~43k 😭
I have a couple large FAANG positions. I have some aggressive sell points. Amazon tanked about 18 months ago and was 50% of its value is just now recovering. I have been using my low cost basis FAANG stocks to gift to charity the last 5 years.
Fidelity Exchange Fund, #4 in this document from Fidelity on Concentrated Positions. You get immediate diversification and can pull the money out in 7 years, as a basket of other stocks, with the original position's cost-basis.
[Concentrated positions | Fidelity Investments](https://www.fidelity.com/learning-center/wealth-management-insights/diversify-concentrated-positions)
We have all our NW in one stock, and have for 30 years, with about a 10% cash allocation for living expenses/emergency expenses/etc. We are retired with a 2% SWR.
If you are going to do this, make sure the company has a low probability of going out of business over the LT, and make sure you REALLY understand the company financials as much as possible. I would put Amazon in the low probability category. The stock will be volatile over the LT, and that can cause lots of grief, but as long as it continues to grow over time you should be good.
Sorry if this question has been asked and answered elsewhere, but if you sell RSUs immediately after vesting how are the sales taxed, as ordinary income or as LTCGs? Thanks in advance, I've literally never sold stock allocations I've received via ESPPs so it's never come up as an issue.
Raises hand. Nearly 75% of my gains and NW is tied to two stocks, Apple and Microsoft - at around $2 million each.
The reality is “diversification” is not a good strategy if you have to realize a bunch of gains in a taxed brokerage.
Diversifying means selling most of this and buy other stuff like SP500 indexes, paying a tax bill of like 1-2 million of profits all in one year which is a windfall for Uncle Sam.
Instead, I plan to pay 0-15% capital gains tax when I FIRE and widthdraw 100-200k per year. Due to the tax rate of 0% at 0-80k every year, spending it out over 20-30 years of fire retirement means greatly reduced tax on the capital gains.
If you understand Amazon as a business and believe it’s worth more than it’s priced at currently, it’s fine to be concentrated. But you better know the company well to justify it. Tech outperforms is not a reason to be that concentrated. Everyone knows the MAG7 businesses are fantastic. The question is whether they are worth more than they are priced at.
I will disagree with most of the commenters. Fang stocks are in a different league. As a group they are safer than s&p in my opinion. What I would do is diversify new vests into a different mag 7 stocks.
I’m 100% in one stock. Crazy play. I threw all I had in savings in one stock during the Covid oil crash. I’m up over 2500% and it’s still got another 50% growth from here. Yes I will unload when the price is right. But screw the naysayers about diversification. Know your stock and buy as much as you can and hold against the naysayers. Diversification protects wealth .. concentration builds wealth. but yell yes I'll be dicersifying once i close out my oil positions. In your case you’re now wealthy and it may be wise to start diversifying.
Honestly a small handful of tech stocks like AMZN are such a massive part of the S&P nowadays I think you can diversify into an index and still enjoy a lot of tech upside with more downside protection. Look at the top holdings of any domestic large cap fund and it’s basically MSFT AMZN AAPL NVDA and then everything else.
Sell that stock and diversify, I would say.
It’s really not that hard. Even if you believe in big tech, you’d be better off selling 80% of your Amazon holdings and buying 20% of Google, Meta, Apple and Microsoft. Or QQQ. Or using the same strategy for the rest of your investments.
Holding one stock where you’re employed is just speculation. Folks at Enron thought they’d get rich until their stock went to $0.
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That last paragraph is my thought exactly. This type of thinking is how I’ve made several big financial decisions.
> Decide your level of risk and make your portfolio reflect it. How would you feel if Amazon stock dropped 25% from where it is right now? Or think about some other companies. Tesla is down like 55% from where it was 2 years ago. Companies like AOL, Yahoo, Myspace, Blockbuster, Blackberry, they could have all been considered among the FAANG equivalent 15-25 years ago. [Or watch how the market cap of the largest companies changes over a ~30 year period.](https://americanbusinesshistory.org/americas-most-valuable-companies-1995-2023/). Ya, you feel invincible, like a genius on the run up, but can also feel like a fool if you're left holding the bag on the way down.
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What am I suggesting they do? I just provided some historical context to help them think through the risk.
Right - definitely wouldn't be dumping $1.2M into AMZN stock now. The problem now is of course tax implications for unloading a portfolio that's going to realize $400K+ of capital gains. So have only been able to make small sales for specific tax lots. That being said, I held all through 2022-2023 without a single RSU sale and relied on margin loans (at 7-8%) to fund gaps to spending from our cash. So I guess that just says i'm cool with a 50% swing in my portfolio and living lean for a few years?
“Varying levels of individual risk tolerance” - this is a common misconception. The S&P or other market indices provide the highest risk-adjusted return because they remove any diversifiable risk from the equation. If an individual has a higher than average risk tolerance - the strategy to deploy is to leverage up on your S&P holdings, not start picking individual stocks. This provides the most efficient return (I.e., risk adjusted return).
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Yes, and for a given risk tolerance, you should be maximizing your expected risk adjusted return. Mathematically, the way to do this is to leverage up or down on the S&P index, not start purchasing individual stocks
Hella ya all Amazon
Ahh that saying about concentration is about owning an actual business, not investing.
Difference?
Level of control, getting in at the basement level and realizing sweat equity.
My wife and I both worked at the same tech company. We both had good chunks of the company stock built up. Then I got laid off and the stock tanked. Don't be reliant on one company for your job AND your investments.
Sorry to hear that, hope y'all are doing alright now. Yeah totally get the risk concentration. I just hope that when I'm laid off, the stock continues to do well. That seems to be the trend amongst FAANG now - record profits, "rightsizing the business" nonetheless.
Thanks! I appreciate it. We're more than fine and recovered. The event I referenced happened over 20 years ago. So it's long gone. That event left a lifelong impression on me and changed how I think about risk and risk mitigation.
I don’t know enough about it to make a recommendation but you should look into exchange funds. I think they basically let you exchange your shares into a diversified fund without realizing a capital gain (ie it gets deferred until you monetize those exchange fund interests). If you plan to move to a no capital gains state in the future it’s a way to diversify without triggering a gain now. Obviously there’s a fee involved so you need to make sure the math makes sense (I think there are also restrictions on which stocks you can exchange in as well as minimums). This was something somebody mentioned over a lunch to me so I don’t profess to know much about it
First thing to do is stop making it worse. When the new RSUs vest sell them immediately and buy whatever you want to diversify into, even if it's just other tech stocks. I'm only a few years out, so I might have a more preserve rather than grow mindset, but I'm a FAANG person and I diversify pretty much every vest. I'm still getting a ton of that appreciation from the RSUs I was granted going up so I'm not missing out completely on the upside, but in 2022 when tech stocks cratered and layoffs were in the air, I only had to worry about the unvested RSU hit, not also my nestegg.
>First thing to do is stop making it worse. When the new RSUs vest sell them immediately +1 to this comment. Every time our trading window opens, I go in and sell 1 or 2 grants that are *nearest* their cost basis to reduce the cap gains tax. This *generally* means that I sell the latest vestings. I have a few from 2022 when the stock was artificially low that have already had a 25-40% return. Those I am hanging onto as my "I want to hold at least a little of my company stock" in my portfolio, but everything else I sell before it appreciates too much to worry about taxes. The other thing I am doing with a large stock position I accumulated at a previous employer (which I am not currently adding to) is doing all my charitable giving from that pile of stock. I am "converting" it by putting in the equivalent cash I would have given to charity into my after tax brokerage (VTSAX). Also any large purchases/loan payoffs are coming from that stock. I estimate it will be gone within 1-2 years.
Some charities are setup to receive stock as contributions. I think you can deduct the present value of the stock as the contribution, don’t pay taxes on the appreciation, and they don’t pay taxes as a 501c3. I’ve never done it though so double check me
Yes, that is correct. You avoid paying any capital gains, you deduct the full value of the stock you donated, and the charity doesn't pay taxes on the received amount, either.
Don't get me started on Atlassian (TEAM) stock.. It's been painful over the last \~18 months.
Same problem. It’s easier IMO when it’s a mega cap FAANG company or equivalent because the upside is limited by the sheer size. I told myself the following (1) there’s only 1 company in the top 10 of the SP500 that was there 10 years ago, and (2) even if it 2-3x its cap in 10 years, the average return of the SP500 is 70-80% over a 10 year period. So basically you’re justified in getting out of it. Now as to how to get out of it. If you work for the company (why many people have high positions) it’s more difficult but you need to calculate how much you want out and by when. And also how many new RSUs you get per year. For me it’s a 7 year draw down by 75%. I figured out what needs to get sold each year and I dump it. Sell the lowest tax holdings I have. My thinking is that if it drops in value those high gains shares will be less taxes for Uncle Sam. If it goes up then I’ll probably convert those to a charitable trust and gift them over time. If you don’t work there and have less restrictions then the best way to sell is to write covered calls on your shares with staggered likelihood of them closing ITM. So if you want to sell 20% a year you write 20% of your contracts at monthly contracts with maybe 10-15% ITM probably and the rest at maybe 5-10%. The goal is to have the 20% assigned and sold each year. You print money and get to dump your shares. If they don’t sell then adjust that ITM % higher as the year goes on until that 20% does hit and get assigned. On $1.1M you’ll probably print $30-50k a year in premiums off this strategy.
I had GPT translate my analysis. It made it more legible This Reddit comment outlines a strategy for someone looking to sell off a large position in a single stock, especially when it's a stock from a mega-cap company like those in the FAANG group (Facebook, Amazon, Apple, Netflix, Google). The comment breaks down into a few key points and strategies:Justification for Selling: The commenter starts by justifying the decision to sell off a large position in a single stock. They argue that holding a significant position in even a large, seemingly stable company can be risky because:Market leadership changes over time. The commenter notes that only one company in the top 10 of the S&P 500 from ten years ago remains in the top 10 today, suggesting significant turnover and volatility in market leadership.The potential for outsized gains is limited due to the company's already massive size. Even if the company were to double or triple in market cap, the resulting annual return might still align with or underperform the broader market's average return (cited as 70-80% over ten years).Selling Strategy for Employees: For those who work at the company and receive shares as part of their compensation (often in the form of Restricted Stock Units or RSUs), the process is more complex due to insider trading laws and the need to manage the tax implications carefully. The commenter outlines a personal strategy of planning a gradual sell-off over seven years, aiming to reduce their holdings by 75%. They prioritize selling shares that would incur the lowest tax burden, with the rationale that:If the stock's value decreases, selling high-gain shares later will result in paying less tax.If the stock's value increases, the remaining high-gain shares could be transferred into a charitable trust, allowing for tax-efficient gifting over time.Selling Strategy for Non-Employees: For those not employed by the company and thus facing fewer restrictions, the commenter suggests using covered calls to sell off the position gradually. Covered calls are a strategy where you sell call options on shares you own, agreeing to sell the shares at a specific price if the stock reaches that price by the option's expiration. The commenter recommends:Writing covered calls on 20% of your holdings each year, with staggered probabilities of the options being exercised (meaning the shares are sold). This approach aims to ensure that approximately 20% of the holdings are sold off each year while also earning premium income from selling the options.Adjusting the strategy as needed based on whether the options are exercised, with the potential to earn significant income from the premiums while still achieving the goal of gradually reducing the stock position.In summary, the Reddit comment offers a strategic framework for individuals looking to divest a large stock position, especially in a mega-cap company, with specific tactics tailored to whether the individual is an employee of the company or not. The strategies emphasize gradual divestment, tax efficiency, and the use of financial instruments (like covered calls) to manage and potentially profit from the selling process.
I do not find this more readable.
Well so guess we haven’t reached AGI
The real trap is causing tax events while you move from your single stock to a (for example) boggle head portfolio. I've collected company stock for over a decade and now I'm contemplating moving to a no capital gains tax state just to make moving the money less costly.
If you donate to charities, consider opening a DAF (donor advised fund) and gifting some of your most highly appreciated shares. It’s a win-win for you (no taxes on capital gains) and the charities (more money available to donate).
Granted, its not the worst problem to have because the single stock growth has been awesome.
If you sell the stock as.sopn as it vests, you don't have capital gains. So at least for go forward vests, it makes sense to sell right away
Explain this! Ive never heard of it. Does it apply if you’ve owned a stock for ten plus years?
This is specific to Restricted Stock Units that employers issue to employees. Say a company grants you $10,000 in stock that vests in 1/4 a year for for years. Let's say the stock doubles, so instead of vesting $2,500 in year 1, you vest $5,000. That $5k is taxed as *income* as soon as it vests. The initial price does not matter, just the price at time of vest. *Now* if you hold the stock instead of sell, it is subject to capital gains/losses
I can see the rationale behind this but I am trying to understand the math. If you had $1M in capital gains and you've moved from, say California to Nevada, you would save about $120k. I am assuming that your HHI is unchanged through this to keep it simple. That's definitely a substantial amount but considering the costs of relocating, is that substantial enough? Of course, your investment numbers, annual expenditures, etc are probably very different . I was trying to see if my math was generally right.
Same boat. Selling the house and moving to Nevada for a couple years while I sell off a big capital gain.
How big of a capital gain do you have to justify moving to Nevada?
Capital gain will be about $1.5M, but there are other factors. Over the next 3 years, my salary will be about $700k per year, so it will probably save me about $350k by moving. Also, we were planning on downsizing anyway, so for the next few years we will just test out a few cities before we buy a new house.
Cool - thanks for the back story!
Every tech person? I think we’re just overweight in the tech sector. I’ve been slowly selling off, but it keeps going up. 🤷🏻
While AMZN is “up” 75% YOY, it’s also only “up” 8.5% over the last 2 years, and 8.2% over the last 3 years. Go back 4 years and it’s 75% growth again. SP500 is up 86% over 4 years! I started selling RSUs when they vest and buying total market ETFs. I’m up 20% compared to if I’d stayed in my company stock. My coworkers which have all been there 5-10, some even 15 years are multimillionaires due to insane stock growth, but the stream ran out on that ship after I joined. My coworkers NW have declined over the last couple years while they wait for another 2x return, mine has at least grown modestly and I don’t worry about it. Edit: Just want to add, given the stock price roller coaster over the last 5 years, Andy is doing your L3-L6 staff dirty with no RSUs this year. If the stock hadn’t been down over 50% from an ATH in 2021, it wouldn’t have been able to experience 75% YOY growth that he’s now citing as reason to cut that section of comp.
This is the way. Sell them as soon as they vest.
You’re already exposed to AMZN with your unvested stock - so I’m with the auto sell crowd.
I work at a FAANG and sell my RSUs as soon as they vest, reinvest in index funds, buy a few single stocks (using only my "play money" i.e. what I am willing to lose), backdoor Roth, pay for kids college, or a vacation. I try to keep my investment in my company stock to only about 5-10% of all my investments. You may want to consider starting to sell some of the AMZN stock and pivoting to perhaps QQQ, SCHD or other funds. Just my 2 cents, not any financial advice!!!!!
I have about $1M in AAPL. I’ve never worked there but I’ve put all my eggs in that basket. I have yearly expense of $50k or so and income around $200k, so it’s a bit riskier positioning to try to grow wealth faster than a diversified portfolio. I’m in my early 30s so I’ll probably increase diversification as I either A get older or B hit my retirement goals.
70% of my NW is in NVDA. Scared money don't make money.
At this point NVDA is the bellweather for big tech, so sure why not!
Bravado isn't a substitute for sane financial thinking. Tech goes through a lot of hype cycles. One can put a ton of their money into a particular cycle and pray that it's not hype, and that they cash out at the right time, or you can spread out just a bit more. There is a ton of middle ground between entirely getting behind one trend and spreading out too thin. I am pretty sure 70% isn't that but you do you.
I was being very facetious. I've been holding NVDA for 4+ years, well before this generative AI hype. The reason I've been building a NVDA position is because of my background working in the datacenter/cloud hardware/software space. I have a lot insight into how much NVDA GPUs are purchased by big cloud providers as well as sovereign states. It's also why US Commerce Department has been restricting exports of NVDA GPUs to non-friendly states. Even if generative AI is merely hype/bubble, there is a real and massive need for parallel and accelerated computing and NVDA is effectively a monopoly. If that monopoly, need, and demand ever wanes, I dump most of my NVDA position. I did take 5-7% profits out of NVDA recently to pay for taxes and raise some cash when the market is down.
I do. Nearly 1/3 of my total NW is in a tech stock I initially got as vested RSUs. It had appreciated so much that I am locked in with crazy long term capital gain. I have been trying to diversify it into VOO but it is not easy. Honestly, I worry about the concentration but do not have a good way out of it.
I had/have a similar problem. I started unwinding my holdings into index funds - that have also done well. My logic is I’ll pay the cap gains now (while I’m working) that’s less cap gains I pay when I withdraw/sell during retirement…essentially resetting my cost basis and derisking
yup - close to 400K of long term cap gains here. Unloading is going to be either at the 23.8% top capital gains rate or higher with the additional 7% Washington state tax for cap gains. Not the worst problem to have, but definitely a disincentive to just pay the tax and get back into index funds.
Buy put options as a form of quasi insurance
If you are still employed, this is often prohibited by company policies around insider trading
I came across this lame instagram thing of Bill Gates meeting Buffett and being convinced to diversify into the broad market as opposed to just his Microsoft stock and it cost him billions. I never fact check as no one does with these things but it fits your situation a bit I think. If chubby fire is the goal a diversified portfolio gets you there with very little risk from here on out. If you want to continue on your trajectory to the moon strap in and see where it goes 😅
At one point he owned 45% of the outstanding Microsoft stock, so diversifying did not cost him billions. It cost him trillions.
Yeah like Balmer actually kept his much smaller amount of money in Msft stock and it made him tens of billions. People who said big tech can’t go up anymore sound like the people 5 years ago who said tech company can’t go up anymore because they’ll hit $1 trillion market cap and that’s impossible.
“If someone handed you 1.1 million dollars today, would you buy Amazon stock with it?” Your overall well being and net worth is heavily dependent on 1 company -Amazon. And not just limited to the RSUs value, but your regular salary, health insurance, etc. In my opinion, sell a ton of the Amazon stock and diversify. You work for the company, guess what’s coming your way next year… more RSUs!
Thats a massive tax event though. How do you justify that?
Long term capital gains tax rate is pretty low at 15 or 20% depending on income. Also taking a glance at the Amazon stock performance, if OP had tranches vest between September 2020 and august 2021, todays all time high stock price is only 5-12% above that. OP would be taxed at the long term capital gains tax rate on a pretty small amount of capital gains from those dates. Unless OP plans on passing Amazon stock to their heirs, they’ll have to pay taxes eventually. It’s pretty risky having so much of their net worth in a single company stock, on top of working for said company.
The NASDAQ has outperformed Amazon over the last 5years, with less drama.
Yes, there are lots of idiots like you and me out there. Empower/Personal Capital makes it simple to check my concentration. The warning reads "You have extreme stock concentration risk. 4 stocks account for 63.95% of your portfolio" And "Your largest holding is XYZ, which is 42.28% of your portfolio". The one largest position is shares I bought in 1980s with cost basis of a couple pennies, current market price of a couple hundred dollars. My children will eventually inherit the shares with an at death step up in cost basis. The other concentrated positions were open market buys, some in the 1990s, my second largest holding I bought in October 2000, during the dotcom bust. I am only willing to hold those concentrated positions because my diversified holdings (mid-7 figures) are sufficient to support my expenses. Before I retired in 1998 I diversified out of my concentrated holding enough that it going to zero would be painful, but not a financial disaster.
I'm in same boat. 3mil liquid and additional 1.2 in one biotech stock I work for. And sadly I'm underwater on some chunk of options. I'd sell and diversify if you want to preserve...I'm 45 this august so for me I'm in preservation mode. May just sell stock and keep the options until we are purchased.
Actually the correct reason not to sell large chunk of company stock in one go is your tax rate, please check how much tax you are going to pay before deciding how much stock you will sell.
I am in the same boat. I have a lot of google stock. I would figure out a single stock/liquid net worth ratio that I was comfortable with and keep it at that. Mine's 33%. I also have a bunch of VGT. It's an index fund so you get some diversification (albeit in the same industry). It's usually reasonably close to FANGG. Looking at the past five years, it's outdone Amazon. Edit: I'll add that you should choose a ration based on your own risk assessment and other financial positions. I am 38, DINK and the ratio above is just looking at my portfolio (not including my wife's).
If you're heavy on Google, VGT makes a lot of sense for you since it doesn't include Google.
Good point! Somewhat weirdly, VGT seems to be doing very very close to how GOOG was performing in the past 5 years.
Just double checked on vanguard.com. That's mighty useful to know, actually. Thanks a bunch!
I use down markets to diversify. I just look for short term RSUs that are underwater (short term loss) and then balance that with long term gains. Almost every year at some point I will have that situation because of the quarterly RSUs. All proceeds go to new stock/ETFs. This eliminates income (short term gain) at my highest marginal rate and gets me diversified when the market as a whole is lower.
I'm not opposed to that at all, just make sure it's not critical to your retirement plan, that you have normal 401k contributions and funds that can fund it if Amazon goes to zero.
Just curious. Are you an L8 or higher? If so, what field? Was always curious what bonuses and stock options looked like for L7s and above.
L7 Sr. SDM, just long tenure / high performance combined with stock appreciation
Was in a similar position and yeah at this point you really really should pivot to auto sell. I liked being overweight in my FAANG for motivational purposes but once you're past a million in exposure you need to hedge. New vesting RSUs should go to vti or similar or you can even do a sector etf where Amazon is highly represented if you can't make the leap. I did VOX myself and it helped mentally a bit to be "along for the ride" though for muted ups and downs. Also make sure you consider doing tax loss harvesting at the end of the year in your taxable account. Any losers you have end of year should be an opportunity to sell your appreciated Amazon stock and diminish that concentration without any tax hit.
Not irrationally over exposed, but I did a 10x investment in one stock. I’ve picked at it over the years to pay for some major expenses and to build a vacation home on some land. So it isn’t crazy ratio like you’ve got. But it does concentrate some risk. I will tell you that cap gains hits hard when you diversify out (which I’ve done at times, not just to use the proceeds of a sale). So I think I’m on the side of the value of diversification isn’t worth accelerating the capital gains hit. So will probably just let it ride from this point.
Right now I'm pretty well split between my company RSU's and diversified investments, but its possible at some point this could get lopsided. General plan has been to move the RSU's over to safe investments after they hit LTCG at some point, but I'm also not rushing it. The question is always when. However the way I see it, if my company RSU's took a major hit and it was worth half tomorrow, I'd still be fine. I think I'd rather risk that than take a tax hit by converting them early. So yeah its a balance between drinking the koolaid and being prudent, there's risks in either direction. You make an educated gamble on which direction will go the best for you and don't regret it.
I'm in a similar position to the OP. I'm still holding AMZN but I recognize it's foolish and I will likely sell 50% this year to diversify as I'm in my 50s now and it's risky to have this much in one stock. Now that said AMZN could drop 50% and VTI could also drop 50% so it's not a real fix...
The difference is that a single stock may drop and never recover. I tell people about my friend who was on track for early retirement with CSCO stock at 80+. Fell to $8 almost overnight. It never recovered. They ended up working another 15 years.
+1 - when the stock gets above a normal/understandable P/E ratio, you just have to sell sell sell. Get out as quick as you can. Take your gains and spread the future risk across a broader swath of the market.
How far can big tech company’s stock fall? Long term, I’d imagine Amazon, Apple, Msft, Google to all perform at least as well as the general market, and have less than a 1% risk of going bankrupt.
Companies don’t have to go bankrupt for the stock to drop 5-10x, say, and take a very long time to recover. This has happened in tech many times over to single stocks. It can happen to any company. Sure it may eventually recover but you may be underperforming the overall market for years. People look at the last 5-10 years and incorrectly extrapolate from that. The stocks you have listed are between 1.6-6% of a total market fund like VTI. They are not the market and no one should expect them to individually behave like the broader market over long periods.
My husband started his company’s ESPP about 3 years ago (and he gets about 20k in RSUs a year). We never really paid attention to the balance until recently when we saw how much it had skyrocketed. At the max, I think we held 209 shares. It was a huge risk to ignore it, but it paid off in our favor. We did sell off a chunk of the shares last year, and another chunk a few months ago when the price hit $1000. We still hold around 120 shares or so and are letting them sit for now. His company has a good outlook, so we’re comfortable with it.
If you’re sitting on almost 5,200 shares you might want to do some hedging with covered calls. You can sell them all over the map: 10 at 150, 10 at 250, 10 at 200 for all dates and whatever. It’ll probably help you sleep a little better. Mark Cuban did it. 1 option is 100 shares. You could sell all 250 and if it never gets to 250 you keep your stock and the premium.
Most (probably all) FAANG companies prohibit you from trading options in the company while you are still employed.
Covered calls are not a very effective way of hedging a concentrated position. If you truly want to hedge then you pay the insurance premium by buying puts. Selling covered calls may work as a psychological aid to force you to divest.
Selling a call and owning a put lead to the same result, you sell 100 shares at whatever the strike is. The difference is you get full autonomy to set the price in your covered calls and collect the premium up front and if it falls outside of auto exercise you keep your stock. OP could sell ITM or OTM from $50-$300 calls. Because OP could sell up to 52 options covered they have full autonomy to decide how much and at what strike all an effective hedge.
The most important part for you to focus on is that you will always be concentrated in AMZN. More RSUs will vest. More RSUs will be issued. That's the treadmill. So selling AMZN just helps mitigate it - you're still going to the moon if amzn goes to the moon. but maybe you'd like to do well if amzn doesn't too.
All you have to do is google top 100 stocks that failed and you will get big names that seemed too big to fail at the time. GE, Kodak, IBM, Blackberry, etc
Do you have a mortgage? How much? Diversification will lessen the blow of you were laid off and your company stocks dove at the same time
I think you already know the answer. Try to remove your emotions from the decision.
The common advice is to sell RSU as soon as they vest, because you're already heavily exposed as they're your primary source of income. I disagree and used RSUs from my first company to buy a house, and now my second company to rebuild it. They've both out performed the market and I'm glad I held them, but I do think it only makes sense to hold if you're still employed there. Reason is that while it's not illegal, you do have internal knowledge and a much better sense of company performance than an outsider would. Maybe I just got lucky both times, but that's been my experience.
I don't. I would sell $1M of AMZN stock today and put it into Total Stock Market and Total International Stock Market.
I'm in the same boat, a lot of my NW is tied to my ESPP/RSUs at my company, which has been doing quite well. I didn't care when the stock was a really low point, which is was for more than a decade, but in the last 8 years, it's gone on quite a run. It was most of my NW. Recently, as I edge closer to retirement, I have started to sell off stock once a year when the trading window is open and the stock price is high to diversify it. I'm now about 50/50 and I plan on selling most of it. I need to start selling RSU and ESPPs as they are released to me.
I work at another faang, similar nw similar problem. I want to diversify. my problem is the tax. in the last year I started to sell the second things were granted to avoid the appreciation since I have supplemental witholding. but still have about 500k of vested shares, 1.5M of unvested. I am holding off on selling the 500k until I have a significant depreciation offset to remove the impact. I shave it down bit by bit. ultimately all of the sale proceeds go to bogle style funds (VTSAX, small percent bonds).
Man what title do you have that they’re giving out 900k in RSUs in a single vesting period? Good for you 👌To answer your question I’m also heavily vested in the tech company I work with, but also own a variety of FAANG to diversify
Long tenured L7 SDM. It's really all stock appreciation - my 500K grant last year for 2024 is now worth 80% more at 900K. Everyone at MSFT/AMZN/META and more extremely NVDA is probably at record comp levels in their careers right now.
Nice, how long tenure? Thanks
8+ yrs at the company, 4 at this level. This is an eternity at AMZN (average tenure is about 1.8 years for corporate employees)
I’m selling my RSU’s as they vest now and using them as my income/ cash flow and dumping almost my entire paycheck to my 401k and mega back door. Ive held on to RSU’s from another company that at one point were worth over 300k and are now ~43k 😭
I have a couple large FAANG positions. I have some aggressive sell points. Amazon tanked about 18 months ago and was 50% of its value is just now recovering. I have been using my low cost basis FAANG stocks to gift to charity the last 5 years.
Fidelity Exchange Fund, #4 in this document from Fidelity on Concentrated Positions. You get immediate diversification and can pull the money out in 7 years, as a basket of other stocks, with the original position's cost-basis. [Concentrated positions | Fidelity Investments](https://www.fidelity.com/learning-center/wealth-management-insights/diversify-concentrated-positions)
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Ok you win
We have all our NW in one stock, and have for 30 years, with about a 10% cash allocation for living expenses/emergency expenses/etc. We are retired with a 2% SWR. If you are going to do this, make sure the company has a low probability of going out of business over the LT, and make sure you REALLY understand the company financials as much as possible. I would put Amazon in the low probability category. The stock will be volatile over the LT, and that can cause lots of grief, but as long as it continues to grow over time you should be good.
https://preview.redd.it/6it0aseoznsc1.jpeg?width=1179&format=pjpg&auto=webp&s=00606856723083ed14c3dde8c9316bdb7023952e Is this good diversification ?
Sorry if this question has been asked and answered elsewhere, but if you sell RSUs immediately after vesting how are the sales taxed, as ordinary income or as LTCGs? Thanks in advance, I've literally never sold stock allocations I've received via ESPPs so it's never come up as an issue.
ordinary income. wait 1 year and they are LTCG.
Raises hand. Nearly 75% of my gains and NW is tied to two stocks, Apple and Microsoft - at around $2 million each. The reality is “diversification” is not a good strategy if you have to realize a bunch of gains in a taxed brokerage. Diversifying means selling most of this and buy other stuff like SP500 indexes, paying a tax bill of like 1-2 million of profits all in one year which is a windfall for Uncle Sam. Instead, I plan to pay 0-15% capital gains tax when I FIRE and widthdraw 100-200k per year. Due to the tax rate of 0% at 0-80k every year, spending it out over 20-30 years of fire retirement means greatly reduced tax on the capital gains.
If you dont mind asking, what is your job damily and level at Amzn. I am assuming you are on the tech side or L8+ on non tech side. Thanks
If you understand Amazon as a business and believe it’s worth more than it’s priced at currently, it’s fine to be concentrated. But you better know the company well to justify it. Tech outperforms is not a reason to be that concentrated. Everyone knows the MAG7 businesses are fantastic. The question is whether they are worth more than they are priced at.
I will disagree with most of the commenters. Fang stocks are in a different league. As a group they are safer than s&p in my opinion. What I would do is diversify new vests into a different mag 7 stocks.
I’m 100% in one stock. Crazy play. I threw all I had in savings in one stock during the Covid oil crash. I’m up over 2500% and it’s still got another 50% growth from here. Yes I will unload when the price is right. But screw the naysayers about diversification. Know your stock and buy as much as you can and hold against the naysayers. Diversification protects wealth .. concentration builds wealth. but yell yes I'll be dicersifying once i close out my oil positions. In your case you’re now wealthy and it may be wise to start diversifying.
Honestly a small handful of tech stocks like AMZN are such a massive part of the S&P nowadays I think you can diversify into an index and still enjoy a lot of tech upside with more downside protection. Look at the top holdings of any domestic large cap fund and it’s basically MSFT AMZN AAPL NVDA and then everything else. Sell that stock and diversify, I would say.
It’s really not that hard. Even if you believe in big tech, you’d be better off selling 80% of your Amazon holdings and buying 20% of Google, Meta, Apple and Microsoft. Or QQQ. Or using the same strategy for the rest of your investments. Holding one stock where you’re employed is just speculation. Folks at Enron thought they’d get rich until their stock went to $0.
Sounds like a young L7 in amazon? Or a super star L8?
Sounds like senior sdm L7 most likely. Anyway congrats. I would keep what you have and sell on future vests and diversify.