What counts as a concentrated stock position?

When one company's stock makes up a large share of your net worth, you're holding what's called a concentrated stock position, a common way investors end up more exposed than they think.

A widely cited threshold: once a single stock or investment reaches roughly 10% of your total portfolio (every dollar of investable wealth, from brokerage accounts to your 401(k) to checking), it counts as concentrated. That said, the percentage itself isn't the real issue. What matters is how much of your financial life would be shaken if that one holding took a sharp hit.

Do you actually have a concentrated position?

Financial planning literature leans heavily on that 10% figure, and as a starting point, it's not unreasonable. But it's a technicality, one that misses the fuller risk picture.

The reason: it only evaluates a single holding at a time. Every stock in your portfolio could individually sit under 10%, and you could still end up badly diversified overall.

Hardly anyone searching this term is landing right at 10%. Multiple years of RSU vesting, early-stage equity, or a stock that's simply run ahead of the rest of a portfolio frequently pushes a single holding past 30% or 50% of someone's total investable assets. That's where the real exposure sits, in how much of your financial life is riding on a single company's share price.

Concentration doesn't require a single ticker, either. An investor holding 8% in one company plus another 60% scattered across Silicon Valley tech names is still concentrated, because those positions tend to move in tandem. Technically clearing 10% on any one line item doesn't mean the underlying risk has gone away.

The same overlap can appear between your career and your portfolio. Working in an industry while also holding a large stake in stock tied to that industry means a downturn could hit your paycheck and your investments together.

Worrying about concentration risk? Diversify without selling outright.

How concentrated positions usually build up

These positions almost never happen deliberately. They accumulate slowly, typically through one of a handful of familiar routes:

1. Equity compensation over time. Multiple years of RSU or option grants from one employer, particularly when vested shares are kept rather than sold.
2. Founder or early-employee equity. A stake built before or around an IPO, from back when the shares weren't yet publicly valued.
3. Inherited stock. Shares handed down from family, frequently with a low cost basis and years of built-up gains.
4. A long-held conviction stock. One position bought years back that's simply grown to outsize the rest of a portfolio.

The risk that comes with a concentrated position

Every stock carries some baseline risk, but concentration piles single-company or single-industry risk on top of that baseline. If one company or sector underperforms or drops sharply for reasons unrelated to the wider market, the effect on your finances and net worth can be significant.

How to check your own portfolio

Tally what one holding is worth, along with anything held in closely related names (same sector, same industry), and weigh that combined total against your entire investable portfolio. If losing a large share of that combined exposure would be more than you're comfortable with, you're probably carrying a concentrated position, no matter the exact percentage.

None of this means a mistake was made. A concentrated position is usually the byproduct of something going right, whether that's years of vesting, a successful IPO, or a stock pick that paid off. What to do next is a separate question.

Ready to diversify out of a concentrated position? Glidepath is an exchange fund built to help you diversify without triggering an immediate capital gains tax bill. Get started to see if you qualify.