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Too much in company stock
#1
Hi all,

About 90% of my portfolio is actually in my company stock.  I've been liquidating about $20k a year of it, but between the stock portion of my bonus and the employee stock purchase plan, it accumulates faster than that.  Having most of my eggs in one basket means I have a lot of risk, although today aside it's done well for me.  Would you recommend I bite the bullet and sell most of my company stock and take the tax hit, then diversify?  Or simply ramp up my annual selling to maybe $50k or even higher until things even out?
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#2
I do think you need to diversify. How you do it is up to you, just be sure to do it.
In reality you have more than 90% in that one company, since it's 90% of your portfolio + probably the majority of your income. If the company gets in trouble then you may lose your job and your portfolio will get wiped out. That's not a good position to be in.

So indeed: Diversify.
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#3
You should absolutely diversify. I am adverse to paying taxes before necessary so I would lean to ramping up the selling of the stock to $50k or so a year instead of doing it all in one year and paying all the taxes. Though if you think that the stock is about to tank, sell and take the tax hit to preserve the portfolio.
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#4
No I think we're doing well, so I'll ramp up to $50k+.
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#5
Definitely diversify at a rapid clip. Too many unhappy endings start like this.
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#6
Can never go wrong with a diversified portfolio but certain companies i'd be fine with a higher then normal percentage--i would put that at around 20 to 25% of total portfolio--i average 8 to 10% range for company stock--i know people who have 100% in company stock and get 50 to 100k a year in dividends thrown at them--not bad if nothing happens--but not good if something does. Most likely our company not going anywhere but there's always a chance, right?

90% is a little much imho
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#7
(02-28-2021, 11:32 AM)rayray Wrote: Can never go wrong with a diversified portfolio but certain companies i'd be fine with a higher then normal percentage--i would put that at around 20 to 25% of total portfolio--i average 8 to 10% range for company stock--i know people who have 100% in company stock and get 50 to 100k a year in dividends thrown at them--not bad if nothing happens--but not good if something does. Most likely our company not going anywhere but there's always a chance, right?

90% is a little much imho

Just to explain the 90%, when I got divorced, it was easiest for me to keep the company stock and give my ex the portfolio I'd built up for us.  So back in early 2018 after we separated the money, I was 95% company stock, 5% what I had in my IRA (not counting the 401k).  I wasn't able to start rebuilding another portfolio in 2018 or 2019, in part because I had to make regular payments to my ex for the value of the house, which I kept.  So it wasn't until 2020 that I could finally start building another portfolio outside my company stock.  So now the split is slightly better at 90% company stock, 5% new account, 5% IRA.  Since the company stock just tumbled from 145 to 130 in the recent downturn, I will probably wait until later in the year to do this year's cash out.
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#8
(03-01-2021, 09:43 AM)ken-do-nim Wrote:
(02-28-2021, 11:32 AM)rayray Wrote: Can never go wrong with a diversified portfolio but certain companies i'd be fine with a higher then normal percentage--i would put that at around 20 to 25% of total portfolio--i average 8 to 10% range for company stock--i know people who have 100% in company stock and get 50 to 100k a year in dividends thrown at them--not bad if nothing happens--but not good if something does. Most likely our company not going anywhere but there's always a chance, right?

90% is a little much imho

Just to explain the 90%, when I got divorced, it was easiest for me to keep the company stock and give my ex the portfolio I'd built up for us.  So back in early 2018 after we separated the money, I was 95% company stock, 5% what I had in my IRA (not counting the 401k).  I wasn't able to start rebuilding another portfolio in 2018 or 2019, in part because I had to make regular payments to my ex for the value of the house, which I kept.  So it wasn't until 2020 that I could finally start building another portfolio outside my company stock.  So now the split is slightly better at 90% company stock, 5% new account, 5% IRA.  Since the company stock just tumbled from 145 to 130 in the recent downturn, I will probably wait until later in the year to do this year's cash out.
Given you current tax situation, and the fact I have no idea what the short-term outlook for your stock/industry, I have rarely regretted averaging out of a stock.  You'll then be forced to average back into your new DGI positions as well, rather than forcing it all in next January which traditionally follows a few above average market months.  YMMV because it always seems too right?  Smile
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#9
I do see your point. I have an open window of one month every quarter to sell, so I will watch it closely.
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#10
So ... had the chance to sell in the $140s around the time I started this thread. Now ... $116/share. Ouch.
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#11
(03-04-2021, 08:56 PM)ken-do-nim Wrote: So ... had the chance to sell in the $140s around the time I started this thread.  Now ... $116/share.  Ouch.
Not good because your intended targets haven't been hit nearly that hard.  Most of them anyway.
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#12
(03-04-2021, 10:52 PM)fenders53 Wrote:
(03-04-2021, 08:56 PM)ken-do-nim Wrote: So ... had the chance to sell in the $140s around the time I started this thread.  Now ... $116/share.  Ouch.
Not good because your intended targets haven't been hit nearly that hard.  Most of them anyway.

Yeah.  I'm not touching it for a while now.  The only move I have to make in 2021 is to exercise a tiny amount of options before they expire.
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