FYI: Most investors understand that having a huge chunk of their wealth bound up with the fate of a single company is risky. But that’s exactly where many wind up—often because a significant amount of their compensation has been in the stock of their company, or they’ve sold a business to a company that has paid in stock.
“Overconcentrations often lead to binary outcomes,” says Reed Smith, a Houston-based managing director in Merrill Lynch’s private wealth management business. “They can be really good, or they can be really bad.”
Smart investors avoid extreme bets, so unless there’s a good reason to hold a disproportionate percentage of your portfolio in one stock—a high-profile executive may need to signal commitment to the firm, for example—you’ll probably need to diversify. But to do so, you must first sell, which can trigger a painful federal capital-gains tax of up to 20%, plus, in most cases, state taxes.
Regards,
Ted
https://www.barrons.com/articles/how-to-diversify-your-stock-portfolio-51553270452
