Most investors don’t intentionally build a concentrated stock position where a single company or one sector makes up a significant portion of their portfolio. Yet it happens more frequently than many realize—and usually without any single “bad” decision along the way.
One common cause is successful return on investment. Stocks and sectors can become overweighted simply through prolonged, outsized growth. Technology, for example, didn’t begin as roughly one-third of the S&P 500, dominated by names like Nvidia, Microsoft, and Apple. Even investors who own diversified index funds may find that technology now represents 50% or more of their overall portfolio exposure.
Concentration can also develop through employment-related stock ownership. In cities like Atlanta, home to numerous Fortune 500 and Fortune 1000 companies, this is particularly common. Companies such as Home Depot, United Parcel Service, Delta Air Lines, and The Coca-Cola Company rank among the largest U.S. corporations, with others like Southern Company and Genuine Parts Company close behind. Employees often accumulate large positions through stock purchase plans, stock options, restricted stock units, or performance-based awards. In other cases, investors inherit sizable stock holdings from parents or grandparents.
Over time, these legacy positions may experience decades of compounding growth, eventually dominating a portfolio. That concentration is often reinforced by emotional attachment or a sense of loyalty—particularly when the stock represents a family legacy passed down over generations.
It’s important to remember that these are businesses, not personal relationships. Selling shares doesn’t hurt the company or damage its prospects. Public stocks trade on the secondary market. When you sell, someone else buys. Under normal market conditions, the company itself is unaffected when a single investor sells their shares. For investors who value the sentimental aspect, one creative solution is to preserve the memory through a vintage stock certificate or keepsake, while still making prudent financial decisions.
Taxes are another significant reason investors hesitate to reduce concentrated positions. Until a stock is sold, gains remain hypothetical—the market hasn’t paid you yet. While a sizeable, embedded gain can lead to a meaningful tax bill, long-term capital gains are far less than 100%, and the presence of a tax bill is evidence that the investment was successful. Meanwhile, paper gains can disappear quickly. A 3% or 5% pullback may erase an amount equal to the taxes you were trying to avoid—yet the concentration risk remains, and taxes still owed when you eventually do sell.
Completely exiting a position all at once is rarely the recommended solution. Instead, strategies often include trimming the position over time, dollar-cost averaging out, and reallocating proceeds to improve diversification. In some cases, options strategies may help generate income or provide downside protection while gradually reducing exposure. Coordinating with a tax adviser can also help ensure gains are realized during years when they can be absorbed without materially disrupting your broader tax situation.
Reducing a concentrated stock position may involve costs, but those costs can be worthwhile when weighed against the risk of owning too much of any single company. A more diversified portfolio can help reduce volatility, limit downside risk, and avoid idiosyncratic risk—the kind of company-specific surprise that can derail even the strongest long-term plan.
And finally, remember: It’s not that your adviser dislikes the stock you own. They just don’t want it to make up 30% of your portfolio.
If you have questions on how you can reduce a concentrated stock position, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the January 31, 2026 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.