How Much of Your Net Worth Should Be in Employer Stock?
Understanding the Wealth Decision
Employer stock creates double concentration: salary and wealth depend on the same company. There is no universal safe percentage, but risk rises sharply when a single-company decline can derail a home, education, retirement or entrepreneurship goal.
Reading Tax, Liquidity and Concentration Together
Measure vested, exercised and expected near-term vesting separately.
Include unlisted ESOPs at a conservative value.
Set goal-specific capital aside from the concentrated position.
Where Personal Balance-Sheet Risk Builds
Company knowledge can create false confidence.
Tax can discourage sensible diversification.
A senior role may make both job and share value sensitive to the same event.
Making the Allocation Decision
Before acting, answer five questions in writing: calculate employer-stock percentage of investable net worth; stress a 50–70% decline; separate near-term goals; create a staged-sale policy; and review after each vesting or liquidity event.
The right concentration is one whose failure changes returns, not the family’s life plan.
Key takeaways
- Measure vested, exercised and expected near-term vesting separately.
- Company knowledge can create false confidence.
- The right concentration is one whose failure changes returns, not the family’s life plan.
Related questions
What should an investor verify first?
Measure vested, exercised and expected near-term vesting separately.
How does the structure affect the investor’s outcome?
Include unlisted ESOPs at a conservative value.
What is the main downside to test?
Company knowledge can create false confidence.
How should the final decision be made?
The right concentration is one whose failure changes returns, not the family’s life plan.
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