what is the max % concentration in a single stock?

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what is the max % concentration in a single stock?

Postby staustin » Thu Dec 27, 2012 2:23 pm

My privately held employer merged a month or so ago and is now publicly traded. i was fortunate enough to monetize 10 years of iso's. While i'm excited, i'm now staring at a single stock 30+% concentration of my investable assets.... i plan to sell down to 10 to 15%. What is the forum's thoughts on a maximum single stock concentration in this situation?? Many thanks, in advance.
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Re: what is the max % concentration in a single stock?

Postby Bacchus01 » Thu Dec 27, 2012 2:28 pm

staustin wrote:My privately held employer merged a month or so ago and is now publicly traded. i was fortunate enough to monetize 10 years of iso's. While i'm excited, i'm now staring at a single stock 30+% concentration of my investable assets.... i plan to sell down to 10 to 15%. What is the forum's thoughts on a maximum single stock concentration in this situation?? Many thanks, in advance.


I have a very similar situation. About 24% of my portfolio in one stock, about 15% in another. Both current or former employers.

The advice I got was take any single stock down to no more than 5-10%.
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Re: what is the max % concentration in a single stock?

Postby NYBoglehead » Thu Dec 27, 2012 2:32 pm

I like it at 0%. If things go south you don't want to lose your job and have the value of your stock go down at the same time.
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Re: what is the max % concentration in a single stock?

Postby stan1 » Thu Dec 27, 2012 2:37 pm

If you are 30 with a $100K portfolio its not too big of a deal -- over a short amount of time you'll diversify with new 401K contributions (assuming you max that out).
If you are 60 with a $2M portfolio its a huge deal.

Since your company was bought you really have to ask yourself from a business perspective why you would want to invest in the acquiring company. Sometimes people feel a sense of ownership about a startup or privately owned company. But since its been acquired that's no longer the case. You have no "skin in the game" with the acquirer.
Last edited by stan1 on Thu Dec 27, 2012 2:38 pm, edited 1 time in total.
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Re: what is the max % concentration in a single stock?

Postby krannerd » Thu Dec 27, 2012 2:38 pm

First of all, congrats!

I had always heard about 5% being the maximum threshold for a single security. I think that the Fidelity portfolio analyzer also flags anything above 5%.

My employer matches contributions to my 401k in company stock. I typically sell all of it every 6 months....too many eggs in my company's basket. I assume that if we do really well, there will be other opportunities to benefit from the company's success (promotions, raises, bonuses, etc).
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Re: what is the max % concentration in a single stock?

Postby Wagnerjb » Thu Dec 27, 2012 3:44 pm

stan1 wrote:If you are 30 with a $100K portfolio its not too big of a deal -- over a short amount of time you'll diversify with new 401K contributions (assuming you max that out).
If you are 60 with a $2M portfolio its a huge deal.



Good point from Stan.

I would target 10% as the max, but I would be mindful of tax issues on your journey there. If selling all at once will drive your tax rate - in any one particular year - into a very high bracket, I would consider selling gradually over a few years.

Best wishes.
Andy
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Re: what is the max % concentration in a single stock?

Postby Grt2bOutdoors » Thu Dec 27, 2012 4:19 pm

No more than 5% max - it would not take too much to see a 30% holding become 5% without any prodding on your part, just look to Enron to see what happened there.
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