Your Company Stock Just Dropped 25%. Should You Still Diversify Your RSUs?
Last reviewed: September 2026 · Educational, not individual advice
Yes, and the drop is usually what finally gets people moving. RSU concentration risk is rarely solved by finding the optimal strategy; it is solved by moving from knowing to doing. A written, dated sell plan, a ceiling of 10% to 20% of investable assets in company stock, and a process such as direct indexing make it run on schedule.
I will be honest with you. Watching Salesforce (CRM) fall roughly 25% between January 2 and February 6, 2026, from about $254 to about $188, reminded me why I do this work. Not because anyone predicted it. Because of how differently the same news lands on two households that both hold a lot of employer stock: one with a plan already running, and one still waiting for the right time.
To show what I mean I will use a hypothetical composite, Grace. She and her husband Steven are the kind of household we work with in the DC metro; they are not clients, and their numbers are illustrative.
The plan that got a "not yet" (a hypothetical)
Grace holds about $1 million of vested RSUs in the public tech company she has worked at for nine years, with large embedded gains. We sit down, map her net worth, and walk through a structured diversification plan: a tranche schedule, tax-lot selection, and direct indexing to make the transition more tax-efficient. The numbers make sense. The strategy is solid.
She says: "It looks good. But I don't want to."
That is where a lot of these conversations end, and it is not a strategy problem. It is emotional readiness. Sometimes my job is knowing when someone is not ready to hear the answer yet.
The question that changed it
Months later, nothing has moved. So I ask Grace directly: "Is this emotional? Is it because this is your company, part of your identity there?"
She pauses. "Yes."
That one word changes the conversation. Once the feeling has a name, the plan stops being a spreadsheet and becomes a way to keep the career story and the investment strategy in separate places. We write it down together: which lots, what percentage per quarter, what the proceeds buy, and what happens on vest days. A written, dated plan means the decision no longer depends on the next headline, up or down.
Why RSU concentration sneaks up on all of us
If you have held RSUs from your employer, you know the feeling. It is not just stock. It is tied to:
- Your identity. "This company changed my life."
- Your paycheck. Human capital plus stock is double exposure to one employer.
- Inertia. Taxes, paperwork, "maybe next quarter."
When the stock is climbing, concentration feels like winning. When it falls 25% in five weeks, it feels like losing control. Neither feeling is a plan.
How much company stock is too much?
There is no statutory limit, but practitioners and regulators use similar thresholds.
| Share of investable assets | How most planners read it |
|---|---|
| Under 10% | Comfortable for most households |
| 10% to 20% | The ceiling many advisors set, given that your salary already depends on the same company |
| 25% and above | High. A bad year for the stock is a bad year for the household |
| 50% and above | Extreme. Retirement timing and college plans ride on one ticker |
What a 25% drop does at three concentration levels
| Employer stock share | Position size | Loss from a 25% drop | Hit to total investable wealth |
|---|---|---|---|
| 10% | $200,000 | $50,000 | 2.5% |
| 20% | $400,000 | $100,000 | 5% |
| 50% | $1,000,000 | $250,000 | 12.5% |
At 10% the drop is a rough quarter. At 50% it is years of savings. The stock did the same thing in every row; only the concentration changed. That is the whole argument.
What direct indexing does, and what it does not
Direct indexing is not a silver bullet, and I do not bring it up because it is clever. I bring it up because when someone is stuck between "I know I should diversify" and "I can't pull the trigger," it gives us a process:
- Reduce single-stock risk systematically, on a schedule, not all at once.
- Stay invested in the market through a basket of individual stocks that tracks an index and can exclude your employer and underweight its sector.
- Potentially harvest tax losses in the basket along the way, which can offset part of the gain from each tranche you sell.
What it does not do: the losses harvested in a diversified basket are usually far smaller than the gain on a very large single position, so direct indexing is a complement to a sell plan, not a substitute for it. It also adds cost, complexity, and a lot of tax lots. For a modest position, a plain index fund and a sell schedule may be all you need.
A written plan in three steps
- The schedule. Pick a pace you will actually follow: a fixed percentage per quarter, or selling each new vest on the day it lands (the vest-day default is the cash test: would you buy this much of your employer's stock with cash?). Put the dates in the calendar with your trading windows.
- The tax lots. After a drop, some lots may sit at a loss and others at a small gain. Selling those first reduces the tax cost of getting started, and realized losses offset gains elsewhere. Maryland households have an extra reason to pick lots carefully: the state taxes gains as ordinary income and adds a 2% surcharge above $350,000 of federal AGI. The mechanics of tax lots, withholding, and safe harbor are in our tax guide. Watch the wash-sale rule: a loss is disallowed if you acquire substantially identical shares within 30 days before or after the sale, and shares delivered at an RSU vest count as an acquisition.
- The reinvestment. Decide where the proceeds go before you sell: a globally diversified core, tax-advantaged accounts first, and only then the more elaborate tools. If your household also holds ISOs, the exercise decision has its own timing, and the AMT trade-off for ISO holders belongs in the same plan.
When the market is falling around you, what to do when the market gets volatile is the companion read.
What I've learned
RSU diversification is rarely about finding the optimal strategy. It is about helping someone move from knowing what they should do to doing it. Some people are ready; some are not yet. And a 25% drop in a stock everyone thought was safe is a reminder that the best time to diversify is before you need to, not after.
If you are reading this and thinking about your own concentrated position, whether it is CRM, NVDA, MSFT, or a company nobody outside the Beltway has heard of, ask yourself: Am I waiting for the right time, or am I just waiting?
If you want a written plan for your position, book a call. It is a no-pressure conversation about what makes sense for your household. More guides for tech employees are on the hub.
FAQ: concentrated company stock
How much company stock is too much?
Many advisors cap employer stock at 10% to 20% of investable assets, because your salary already depends on the same company. Above 25% a bad year for the stock becomes a bad year for the household; above 50% retirement timing and college plans ride on one ticker. Guideline, not a rule.
Should I sell company stock after it drops 25%?
The drop does not change the answer; it changes your feelings about it. If the position is still above your concentration ceiling, keep selling on the written schedule. Lots now sitting at a loss are the cheapest to sell first, and realized losses can offset gains on other tranches.
Does direct indexing help with a concentrated stock position?
It helps as a process: a scheduled sell-down, a diversified basket that stays invested, and harvested losses that offset part of each sale's gain. It does not eliminate the tax on a very large position, and it adds cost and complexity. Pair it with a sell plan rather than relying on it alone.
Does selling RSUs at a loss trigger the wash sale rule?
It can. A loss is disallowed if you acquire substantially identical shares within 30 days before or after the sale, and shares delivered at an RSU vest count. Sell loss lots outside the 30-day window around a vest, or accept that the disallowed loss is added to the basis of the new shares.
Sources
- Yahoo Finance, Salesforce (CRM) historical prices
- FINRA, Concentrate on concentration risk
- IRS Publication 550, Investment Income and Expenses (wash sales)
- Maryland Comptroller, Technical Bulletin 58, capital gains surcharge
Disclaimer: This article is for educational and informational purposes only and does not constitute investment, tax, legal, or insurance advice. Grace and Steven are a hypothetical composite, not clients. Any strategies discussed may not be suitable for every individual and may involve risks, including the possible loss of principal. Direct indexing and tax-loss harvesting do not assure any particular tax outcome. Please consult your financial advisor, tax professional, and/or attorney regarding your specific situation before making any financial decisions. Past performance is not indicative of future results.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Allset Wealth.
