One of the most common conversations I have with executives goes something like this:
“I know I should sell some of my company stock. I just can’t make myself do it.”
What’s interesting is that these are usually very smart people. They understand diversification. They understand risk. They know that having a large percentage of their net worth tied to a single stock isn’t ideal. If you asked them whether they would invest half of their portfolio into a single company today, most would quickly say no.
Yet many still don’t sell.
Living in Carmel and working with executives throughout Indianapolis, I see this quite a bit with Eli Lilly employees. Lilly’s success has created tremendous wealth for many families over the past decade. What started as stock grants, options, or RSUs has, in some cases, become one of the largest assets on the family’s balance sheet. I’ve met people with several hundred thousand dollars, $1 million, $2 million, and occasionally much more tied to a single stock position.
That’s a wonderful problem to have.
It’s still a problem.
Lilly is the most obvious example locally because the stock has performed so well, but I see similar situations with executives at Roche and other publicly traded companies. The stock performance may be different, but the conversation is often remarkably similar. A significant percentage of the family’s wealth is tied to a single company, and every available choice feels uncomfortable.
What makes this topic fascinating is that it usually isn’t an investment problem. Most of the people having this conversation already know the investment answer. It’s a behavioral problem. The challenge isn’t understanding diversification. The challenge is taking action when every possible outcome feels painful.
Why Smart People Get Stuck
Behavioral economists have spent decades studying why people fail to take actions they know are probably in their best interest. One of the most powerful concepts is something called status quo bias. Researchers have found that people tend to prefer the current state of affairs, even when they acknowledge that making a change would likely improve the outcome.
That tendency shows up everywhere. People stay in jobs they dislike. They keep subscriptions they no longer use. They postpone estate planning documents they know they should complete. They delay difficult conversations. Doing nothing often feels safer than doing something.
Concentrated stock positions are no different.
When an executive owns a large position in company stock, continuing to hold it rarely feels like a decision. It simply feels like maintaining the status quo. Selling, on the other hand, feels active. It requires paperwork, tax planning, and accepting responsibility for the outcome. One path feels like action. The other feels like inaction.
Psychologically, those two things are not treated equally.
This helps explain why concentrated positions often persist for years after someone recognizes the risk. The executive isn’t necessarily making a conscious decision to maintain a concentrated position. More often, they’re postponing a difficult decision because maintaining the status quo feels less uncomfortable than making a change.
The Fear of Regret
If status quo bias explains why people hesitate, regret aversion helps explain why they stay stuck.
One of the most common thoughts I hear sounds something like this:
“What if I sell and it doubles again?”
That’s not an investment question. It’s an emotional question.
Behavioral researchers have found that people frequently avoid making decisions when they believe a future outcome might cause them to feel regret. The fear is not simply losing money. The fear is being personally responsible for a decision that turns out badly.
For an executive sitting on a large stock position, the possible sources of regret seem endless. If they sell and the stock continues climbing, they’ll wonder why they didn’t wait. If they hold and the stock falls dramatically, they’ll wonder why they didn’t diversify sooner. If they pay a large tax bill and the stock declines shortly afterward, they’ll feel foolish. If they continue holding and eventually need the money, they may wish they had created a plan years earlier.
The result is that many people start searching for certainty before taking action.
Unfortunately, certainty never arrives.
The Problem With Success
One of the ironies of concentrated stock positions is that they usually become risky because they have been successful.
The executives who call me about concentration risk are rarely dealing with a stock that disappointed them. More often, they’re dealing with the opposite problem. The company performed exceptionally well, they continued holding shares, and over time what started as a reasonable position became a dominant part of their balance sheet.
Concentration risk typically develops gradually. A stock grant becomes a larger stock grant. An RSU vests and appreciates. Another grant arrives. The company continues performing well. Years pass. Then one day the executive reviews their balance sheet and realizes that 40%, 50%, or even 60% of their liquid net worth is tied to a single company.
At that point, the conversation changes. The question is no longer whether the company is a good company. The question becomes whether too much of the family’s future depends on one company continuing to perform exceptionally well.
Those are not the same question.
Why Taxes Make Everything Harder
Taxes add another layer of complexity because they create a visible cost associated with taking action.
Many executives have substantial unrealized gains. Selling may trigger a significant tax bill, and nobody enjoys voluntarily writing a six-figure check to the IRS. What starts as a diversification discussion often turns into a tax discussion because the tax consequences are immediate and easy to calculate.
The concentration risk is different. It’s real, but it’s hypothetical. Nobody knows whether the stock will double, remain flat, or decline over the next five years. As a result, many people end up focusing on the cost they can see while paying less attention to the risk they cannot.
I’ve found that executives often frame the decision as a choice between paying taxes and avoiding taxes. In reality, the decision is usually between accepting some tax cost today or continuing to accept concentration risk tomorrow. Both choices have consequences. The challenge is evaluating them together instead of focusing exclusively on one side of the equation.
Why There Is No Perfect Time to Sell
Many executives get trapped because they are trying to answer a question that simply cannot be answered with certainty: Is now the right time to sell?
The difficulty is that the answer only becomes obvious in hindsight. If the stock doubles after you sell, you’ll wish you had held longer. If the stock falls significantly after you continue holding, you’ll wish you had diversified sooner. Because neither outcome can be known in advance, the search for the perfect answer often becomes the reason no decision gets made at all.
This is why I generally believe that concentrated stock positions are better managed with a process than with predictions. The executives who navigate these situations most successfully are rarely the ones who perfectly time their sales. More often, they’re the ones who accept that perfect timing is impossible and focus instead on building a framework they can follow consistently.
What a Good Process Looks Like
The best solutions are usually surprisingly boring.
They don’t depend on predicting what the stock will do next quarter. They don’t require guessing where interest rates are headed or whether the next earnings report will beat expectations. Instead, they rely on creating a rules-based process that reduces the role of emotion.
For some executives, that means automatically selling future RSU vesting events rather than allowing the position to continue growing. Others establish a target concentration level and gradually reduce the position until it falls below that threshold. In some situations, tax-loss harvesting elsewhere in the portfolio can offset part of the gains. Charitable gifting strategies may reduce taxes while supporting causes that are important to the family. I’ve also worked with situations where covered-call strategies on unrestricted shares helped generate additional income while creating a more disciplined framework for reducing exposure over time.
The specific strategy matters less than the principle behind it. The people who make the most progress stop revisiting the same emotional decision every few months. They create rules in advance and allow those rules to guide future actions.
In many ways, that’s what good planning is supposed to do. It doesn’t eliminate uncertainty. It creates a framework for making decisions despite uncertainty.
Final Thoughts
When executives tell me they can’t make themselves sell company stock, I rarely think the issue is a lack of knowledge. Most already understand diversification. Most already understand risk. Most already know that having a large percentage of their net worth tied to a single stock creates vulnerabilities.
What they’re struggling with is something much more human.
They’re trying to balance loyalty to a company they believe in, concern about taxes, fear of future regret, and uncertainty about what comes next. Behavioral research suggests that people naturally default toward maintaining the status quo when faced with difficult decisions, particularly when every available option appears to involve trade-offs. That’s exactly the environment concentrated stock positions create.
The solution is usually not finding the perfect day to sell.
The solution is building a process that doesn’t require you to find one.
Because while a concentrated stock position may have helped create your wealth, protecting that wealth often requires a different set of skills than building it in the first place.
