How to Plan Around Concentrated Stock Positions: ISOs and RSUs

For many employees in technology, biotech, semiconductor, and high-growth companies, equity compensation can quietly become the single largest driver of wealth.

At first, it feels exciting. The company stock has performed well. RSUs continue to vest. Stock options gain value. What started as a meaningful workplace benefit gradually turns into a concentrated investment position worth hundreds of thousands—or even millions—of dollars.

Then comes the difficult question:

How much of this stock should I actually keep?

This is where financial planning becomes essential. Because while concentrated stock positions can create life-changing wealth, they can also expose investors to unnecessary risk if left unmanaged. Employees often find themselves heavily tied to one company—not just through investments, but through their income, benefits, and future career opportunities as well. When your paycheck, bonus, retirement plan, and investments are all connected to the same employer, risk becomes more concentrated than many people realize.

The Hidden Risk of Success

Ironically, concentrated stock positions usually develop because things are going well. The company grows. The stock price rises. Equity grants compound over time. Before long, one position may represent 30%, 50%, or even 70% of total investable assets. This creates a psychological challenge.

Employees often feel emotionally connected to the stock:

• “I know this company better than anyone.”
• “The growth story is just getting started.”
• “I don’t want to miss future upside.”
• “Selling feels disloyal.”

Yet history repeatedly reminds us that even exceptional companies can experience significant declines. Employees at once-dominant firms—from major technology leaders to formerly fast-growing innovators—have seen stock values fall dramatically, often while layoffs and compensation reductions happened at the same time. That combination creates what planners sometimes call double exposure risk: your employment and investment portfolio depend on the same company succeeding.

Understanding the Difference Between RSUs and ISOs

Before building a strategy, it helps to understand what type of equity you actually own.

Restricted Stock Units (RSUs)

Restricted Stock Units (RSUs) are company shares granted to employees that vest over time.

When RSUs vest:

• The shares become yours.
• Their value is generally treated as ordinary taxable income.
• Taxes are typically withheld automatically.
• You now face an investment decision—not a compensation decision.

Here is the mindset shift many employees miss:

Once RSUs vest, they are no longer “special company stock.” They become part of your investment portfolio.

A useful question to ask yourself:

If your employer paid you the same dollar amount in cash today, would you use all of it to buy more company stock?

If the answer is no, that may suggest the position deserves review.

Incentive Stock Options (ISOs)

Incentive Stock Options (ISOs) are more complicated—but potentially more tax efficient.

ISOs provide the right to buy company stock at a fixed strike price.

The planning challenge comes from timing:

• Exercise too early, and you may take unnecessary risk.
• Wait too long, and you may lose favorable tax treatment.
• Exercise too much at once, and you may trigger the Alternative Minimum Tax (AMT).

Unlike RSUs, ISO planning is often about balancing taxes, liquidity, and concentration risk simultaneously. For many employees, this becomes a multi-year strategy rather than a one-time decision.

A Better Framework: Diversification Without Regret

One of the biggest mistakes investors make is viewing concentrated stock planning as an all-or-nothing decision. It usually is not.

You do not have to choose between:

“Sell everything” or “Hold forever.”

Instead, consider building a systematic strategy.

For example:

1. Establish a Concentration Threshold

Determine how much company stock you are comfortable holding.

Some investors use guardrails such as:

• 10–15% of investable assets
• 20–25% for higher conviction positions
• A custom percentage based on financial independence goals

The right number depends on:

• Career stability
• Age and timeline to retirement
• Total net worth
• Other assets available
• Personal risk tolerance

The goal is not perfection. The goal is avoiding excessive dependency on one outcome.

2. Build a Tax-Aware Selling Plan

Taxes matter, but taxes alone should not drive the decision. Many employees delay selling solely to avoid taxes, only to watch gains disappear during a downturn.

A better approach is coordinating sales around:

• Income tax brackets
• AMT exposure for ISOs
• Long-term capital gains treatment
• Retirement timing
• Charitable gifting opportunities
• Years with lower taxable income

Sometimes the best strategy is gradual diversification over several years rather than one large sale.

3. Pair Equity Planning with Goals

Concentrated stock becomes easier to manage when tied to a purpose.

Instead of asking:

“Should I sell?”

Ask:

“What does this money need to accomplish?”

Examples might include:

• Funding retirement
• Paying off a mortgage
• Building a taxable investment portfolio
• Purchasing investment real estate
• College funding
• Creating financial independence

Purpose-driven decisions tend to reduce emotional decision-making.

4. Avoid the “Round Trip” Problem

One of the hardest experiences for employees is watching large unrealized gains disappear.

Many investors have said some version of:

“I was worth $2 million on paper… then it dropped to $700,000.”

A disciplined diversification strategy can help avoid turning significant gains into missed opportunities. No one sells at the exact top and no one knows the future. But having a plan often matters more than predicting the perfect outcome.

The Emotional Side of Equity Compensation

This part often gets overlooked. Company stock is emotional.

It represents:

• Years of hard work
• Promotions
• Team success
• Identity
• Loyalty

Selling shares can feel uncomfortable. But diversification is not a bet against your employer. In many cases, it is simply a way of protecting what you have already earned. You can still believe deeply in your company while reducing unnecessary financial concentration.

Final Thoughts

RSUs and ISOs can be extraordinary wealth-building tools. But they also introduce unique planning challenges around taxes, concentration risk, and long-term financial goals. The most successful strategies are rarely reactive. They are thoughtful, tax-aware, and intentional.

A well-designed plan can help employees participate in future upside while gradually turning concentrated wealth into lasting financial independence. Because the goal is not simply to build wealth. It is to keep it.

About Rigden Capital Strategies

Rigden Capital Strategies was founded on a simple belief: financial advice should be personal, transparent, and centered around your goals—not built on generic models or product-driven sales. With decades of combined industry experience, we’ve developed a process grounded in three core values: value, integrity, and progress.

As a fee-only fiduciary, we provide personalized, goals-based wealth planning services designed to adapt with your life. Our services include investment management, retirement and tax planning, and estate coordination. We use a mix of active and passive strategies to help clients navigate market changes with clarity and confidence.

We believe in building real relationships and delivering clear, actionable strategies—focused on long-term planning and aligned with your objectives.

Your goals, our strategies. Together, let’s make your goals happen.

Disclosure: This article is for informational and educational purposes only and should not be considered individualized tax, legal, or investment advice. Equity compensation planning—including ISOs, RSUs, and concentrated stock strategies—can be complex and should be evaluated based on your unique financial situation. Investing involves risk, including loss of principal. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. Index performance does not reflect the deduction of advisory fees or transaction costs, and investors cannot invest directly in an index. Any references to specific securities or sectors are for illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any security.