I Have 90% of My Net Worth in One Stock. How Do I Diversify Without a Massive Tax Bill?

Clients increasingly arrive seeking tax-aware diversification rather than being persuaded to pursue it. Two common situations involve employees with concentrated holdings from stock options or RSUs and investors with large gains in a single winner such as NVIDIA or Alphabet. Concentrated positions can produce significant embedded gains taxed at federal long-term capital gains rates plus state taxes and the 3.8% net investment income surtax. Concentrated winners can also experience sharp drawdowns, increasing the risk of large losses. Lower fees and the growth of direct and custom indexing make tax-loss harvesting more accessible. Custom-indexed sleeves can harvest losses at the constituent level while the concentrated position is gradually reduced, often alongside exchange funds, charitable remainder trusts, or 10b5-1 plans.

"“one of the biggest trends that I've seen in the wealth management space in the last 5 years”: clients walking in the door already asking for tax-aware diversification, rather than advisors having to sell it to them."

"“I have stock options in Google because I work there. It's 90% of my net worth. I know I need to diversify, but I also don't want to just rip the Band-Aid off and sell.”"

"“I put money in NVIDIA 7 years ago and it's worth way more than it was, but help me diversify so I don't lose it all, but also make the tax bill easier to withstand.”"

"Carlson credits lower fees and the rise of direct and custom indexing for making tax-loss harvesting accessible to regular investors. A custom-indexed S&P 500 sleeve can harvest losses on individual constituents while the holder gradually unwinds the concentrated stake, often paired with exchange funds, charitable remainder trusts, or 10b5-1 plans for employees."

Read at 24/7 Wall St.