The short answer: if a meaningful slice of your net worth sits in your employer's stock, you're exposed to that company twice — once through your paycheck, once through your portfolio. That's the part most RSU writing skips, because almost all of it is about taxes. The structural problem isn't the tax bill; it's the correlation. A bad year at your company can shrink your bonus, freeze your raise, thin out your team and mark down your holdings in the same quarter — two risks moving together in exactly the way diversification exists to prevent. And unlike most concentration, this one builds itself: every vest adds more of the same stock, so the position grows unless someone actively decides otherwise. Doing nothing is a decision to concentrate further. A workable frame: size the position against your whole net worth rather than your brokerage account alone, treat under 10% as unremarkable and above 20% as worth a hard look, adjust that line for how you honestly feel about being all-in on your employer — then decide the rhythm in writing, before the next vest, rather than in the moment.
Key takeaways
- Employer stock is a double exposure. FINRA puts it plainly: "in the event your company falters, not only might your investments tumble, but you might also find yourself out of work at the same time" (FINRA, 2023).
- Rough bands: under ~10% of net worth reads as healthy, over ~20% deserves a hard look — and the line moves with your own stance.
- Most people hold. In Schwab's 2025 equity compensation study, 67% of participants had not sold any vested equity (Schwab, Sept 2025).
- US tax basics: RSUs are generally taxed as ordinary income at vest, at fair market value, reported on your W-2 (IRS); anything after that is a capital gain or loss (IRS Topic 409). The fix isn't information, it's timing — write the rhythm down before the next vest.
The exposure you already had before you owned a single share
Start before the equity. Your job is already a position — arguably the largest one you hold. It pays monthly, it has a growth rate, and it carries company-specific risk nobody is hedging for you. That's the argument in your career is your biggest asset, and it sharpens everything here: once you accept it, employer stock stops looking like one holding among many and starts looking like doubling down on a bet you're already fully committed to.
The technical word is correlation. Diversification works because your holdings don't all fall at once, and employer stock breaks that quietly — the scenario that hurts the stock (lost contract, missed guidance, sector downturn, restructuring) is usually the same scenario that freezes your raise or shortens your tenure. The base rate for any single name is humbling too: Hendrik Bessembinder's study of every US common stock on the NYSE, American exchange and Nasdaq since 1926 found essentially all of the market's net wealth creation traces to the roughly 1,000 top performers — just 86 companies accounted for half of it.
Why this concentration is uniquely easy to miss
Three things make employer stock slip past the part of your brain that notices risk.
It arrives as compensation, not as a purchase. You never sat down, compared options and decided to buy — it showed up in an offer letter, and nobody audits a gift the way they audit a trade.
It feels like a reward, and rewards resist scrutiny. Checking a bonus for risk feels ungrateful, so the shares get filed under "good news" rather than under "holdings."
It grows on autopilot. A four-year grant with annual refreshers means new shares land every quarter, forever, without anyone deciding anything — and if the stock rises too, the position compounds from both ends. You can go from 8% of net worth to 30% without a single active choice, which is why "I haven't changed anything" isn't the reassurance it sounds like.
There's a measurement gap too. Company stock inside 401(k) plans has genuinely collapsed as a problem: in Vanguard's 25th How America Saves, covering 2025 data from nearly five million workers, just 2% of participants had more than 20% allocated to company stock, against 18% in 2005. Real progress — but RSUs don't live in the 401(k). They sit in a separate equity account no plan-level statistic can see, so the reassuring number and the actual exposure are measuring different things.
What the bands actually look like
The useful denominator is total net worth, not your brokerage balance: 40% of a small brokerage account matters much less than 25% of everything you own. FINRA notes some experts cap any single stock at 10% of investment assets, "and that could be too high, depending on your goals and circumstances" — the right shape for a threshold, a band rather than a rule.
| Employer stock as % of net worth |
What it means |
What moves the line |
| Under 10% |
Unremarkable. Even a severe drawdown here is a bad year, not a changed life. |
Almost nothing — this band is forgiving. |
| 10–20% |
The drift zone. Usually fine, but this is where vesting quietly carries you if there's no plan. |
How much more is scheduled to vest in the next 12 months. |
| Over 20% |
Worth a hard look. Company-specific news now moves your net worth and your income together. |
Your stance: comfortable being all-in on your employer widens the line; wanting to diversify tightens it. |
| Over 40% |
Your financial plan and your employer's results are effectively one variable. |
Cash buffer, how portable your skills are, and whether the shares are actually sellable. |
The last column is what generic rules of thumb miss. Someone who genuinely wants to be all-in and understands the trade-off gets a wider band than someone whose stated goal is diversification — the threshold is meant to match the person, not overrule them. Income portability works the same way: a transferable skill set softens the double exposure, a niche role in a one-employer town hardens it. The general mechanics are covered in portfolio concentration risk; employer stock is that problem with your salary stapled to it.
The real reason people hold: it feels like disloyalty
Here's the honest part. When people don't act on employer concentration, it's rarely because they've never heard of diversification. It's because selling your own company's stock feels like a bet against your own team. You sat in the all-hands. You know what the roadmap looks like. Selling feels like saying out loud that you don't believe — and if you manage people, it can feel like something your reports would notice.
The data fits that reluctance. In Schwab's 2025 study of 420 US equity compensation participants, fielded in May 2025, 67% had not sold any of their vested equity. Of those, nearly half were waiting for more favourable market conditions, 40% were waiting to become fully vested, and around 29% were worried about the tax consequences. Notice what those reasons share: every one is a reason to decide later. And "later" is how a 10% position becomes a 30% one.
Naming the feeling matters because it points to the fix. If the obstacle were ignorance, information would solve it. Since the obstacle is that every individual moment feels like the wrong moment, the fix is to stop deciding in the moment.
Decide the rhythm in advance, not at the vest
The version that works is a rule written down before the next vest: what share of each vest is kept, what happens to the rest, and what percentage of net worth you're steering towards. Written in advance, it's maintenance. Written on the morning of a vest, after a bad week of headlines, it's a reaction — and reactions are where loyalty, fear and price anchoring do their worst work. A pre-set rhythm also answers the two moments that break improvised plans: the stock falls and acting feels like crystallising a loss, or the stock rips and acting feels like leaving money behind.
The tax mechanics matter for pacing, and they're simpler than most people assume. In the US, RSUs are generally taxed as ordinary income at vest — as the IRS puts it, "the value of the stock transferred is includable in the income of the employee upon vesting of the RSU and it is taxed as ordinary income," reported at fair market value on your W-2. That bill arrives whether you keep the shares or not; holding doesn't defer it. The shares then carry a cost basis at that vest-date value, and any move from there is a capital gain or loss — short-term at one year or less, long-term above that, taxed at 0%, 15% or 20% depending on your taxable income. Which means keeping vested shares is economically identical to taking the cash and buying your employer's stock with all of it, a purchase most people would size differently if it were framed that way.
This isn't tax advice, and the right pace depends on your bracket, your state, your role's trading restrictions and whether the shares are liquid at all — a conversation for a qualified tax professional, not a blog post.
What a read-only look shows you
The hard part is usually just seeing the number: equity sits in one account, retirement in another, cash somewhere else, and nothing adds them up. That's the gap Ed is built for. Ed is a money person — read-only software that reads your holdings and equity data for analysis only. It executes nothing, and it isn't a registered investment adviser. Its portfolio health read puts employer exposure next to fees and idle cash, sizes it against your whole net worth rather than one account, and shows the trajectory: where the position lands after four more quarters of vesting if nothing changes. What you do with that is yours. If you've never seen the single number, the free Financial Reality Check is where it shows up.
The bottom line
Employer stock is the one holding where the risk to your portfolio and the risk to your paycheck are the same risk, and it's easy to miss because it arrives as a reward and grows without anyone deciding anything. So find the percentage, judge it against your whole net worth and your own honest stance, and write the rhythm down while nothing is happening. The feeling that acting is disloyal is real — a rule written in a calm month is what keeps that feeling from making the decision for you.
Money at peace. Wealth in motion.
See where your exposure actually sits → · Ed is on the App Store and Google Play.
Ed: Wealth is a research and self-reflection tool, not a registered investment advisor. Nothing here is financial, investment, or tax advice. The decision is always yours.
Sources
- FINRA, Love Your Company Stock? Here's What to Know (11 August 2023) — https://www.finra.org/investors/insights/love-your-company-stock-what-to-know
- IRS, U.S. taxation of stock-based compensation received by nonresident aliens — video text script (last reviewed 18 October 2025) — https://www.irs.gov/newsroom/us-taxation-of-stock-based-compensation-received-by-nonresident-aliens-youtube-video-text-script
- IRS, Topic no. 409, Capital gains and losses (last updated 25 February 2026) — https://www.irs.gov/taxtopics/tc409
- Charles Schwab, 2025 Annual Equity Compensation Study (released 23 September 2025; 420 US participants surveyed by Logica Research, 30 April–17 May 2025) — https://pressroom.aboutschwab.com/press-releases/press-release/2025/Schwab-Study-Equity-Compensation-Plays-Major-Role-in-Workers-Retirement-Plans-and-Financial-Wellbeing/default.aspx
- Vanguard, How America Saves 25th edition (2025 plan-year data, published 16 June 2026), company-stock figures via NAPA-Net — https://www.napa-net.org/news/2026/6/plan-design-drives-record-retirement-participation-better-outcomes-vanguard/
- Bessembinder, H., Do Stocks Outperform Treasury Bills? — ASU W. P. Carey School of Business research summary — https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills
