You made it through the IPO. The lockup expired. Your brokerage account shows a dollar figure that would have seemed impossible a few years ago.
Now comes the question that keeps you up at night: How much, if any, should I sell?
Sell too much and you'll disappoint yourself if the stock doubles. Sell too little and you may be gambling your entire financial future on one company's performance—no matter your belief in it.
This isn't just a financial decision. It's an emotional one. And for most people, it's the hardest decision they'll face in the year following their liquidity event.
In our ISO exercise post, we talked about the pre-IPO decisions that set you up for this moment. The choices you made then—exercise timing, holding periods, AMT exposure—directly affect what you can sell now and how it's taxed. Now we're discussing what comes next: turning concentrated equity into a diversified strategy that protects what you've built.
The Emotional Trap: Why Selling Feels Like Losing
Here's what many clients tell us when they first become liquid:
"This stock has been so good to me. It got me here. I don't want to give up on it now."
"What if I sell at $50 and it goes to $150?"
"If I sell, doesn't that mean I don't believe in the company anymore?"
These feelings are normal. Your equity created this wealth. Selling feels like betrayal.
But here's the reality: holding too much of any single stock— even if successful—can increase risk in ways that may be difficult for many investors. Reframe this: Selling isn't about losing belief. It's about protecting what you already own.
The Math Behind Concentration Risk
Research shows that concentrated stock positions create large downside risk without proportional upside benefit.
According to Morningstar analysis of the decade 2011–2020, only 42% of individual U.S. stocks posted positive returns over that 10-year period. Nearly as many—36%—posted losses. The remaining 22% vanished entirely (delisted or acquired).[1]
This occurred during a decade when the Morningstar U.S. Stock Index gained 13.9% annually.
Translation: even during a prolonged bull market, most individual stocks disappoint. And if your entire net worth is tied to that single stock, one bad quarter—one lawsuit, one product failure, one CEO departure—can destroy years of wealth creation.
You worked too hard to ignore the potential impact of that risk.
Your Stock Doesn't Know You Own It
This is the hardest truth to accept: your company stock doesn't care about your mortgage, your children's college costs, or your retirement timeline.
It will do what the market decides—not necessarily what you need.
Diversification means building a financial plan that is designed to be less dependent on the performance of a single stock.That's not pessimism. That's a movement towards financial security.
Why Building a Diversified Portfolio Matters
Selling company stock isn't just about reducing risk—it's about what you do with the proceeds. The goal is to build a diversified portfolio that protects your wealth while still allowing it to grow.
Here's why that matters:
Even great companies face unpredictable challenges. Intel dominated semiconductors for decades before losing ground. GE was once America's most valuable company. Cisco briefly became the world's most valuable company during the dot-com boom, then lost 86% of its value. These were industry leaders run by competent people—but market shifts happen.
Diversification may help smooth volatility over time. When your entire net worth is in one stock, every earnings report becomes a noticeable event. A diversified portfolio across stocks, bonds, and other assets means you're not at the mercy of one company's quarterly performance.
You break the dependency cycle. If you're still working at the company, you already depend on it for your salary, bonus, and career trajectory. Concentrating your wealth there too means one bad event could impact everything simultaneously. Diversification separates your financial security from your employment.
You gain flexibility. Want to take a sabbatical? Help family? Make a major purchase? When your wealth is diversified, you may have greater flexibility beyond hoping your company stock cooperates with your timeline.
The sooner you begin building a diversified portfolio, the more time it has to compound—and the less dependent you are on any single outcome.
How Much Should You Sell?
There's no universal answer, and the appropriate approach depends on individual outcomes.
How much wealth do you have outside this stock? If you have $5M in company stock and $500K in other assets, you're dangerously concentrated. If you have $2M in company stock and $3M diversified, you're in a better position—but may still want to reduce.
What's your belief in the company's future? Conviction matters, but it shouldn't override risk management. Even if you're bullish, holding 80% of your net worth in one stock is speculation, not strategy.
What do you need this money to do? If you need liquidity for a home purchase, education, or near-term spending, you can't afford to wait and hope the stock cooperates.
How would you feel if the stock dropped 50%? Seriously. If your company stock was cut in half tomorrow, would you be financially okay? Emotionally okay? If not, you may be overexposed.
As we discussed in the Pre-IPO Planning Checklist, understanding your equity and modeling tax implications is foundational. Now you're executing on that plan—and the key is creating a strategy that removes emotion from the equation.
Selling Strategies That Actually Work
Most people approach selling with one of two bad strategies:
- All at once ("I'll just sell everything and be done with it")
- Wait and see ("I'll sell when it hits $X")
Both are reactive. Both are driven by emotion.
Here's what many investors consider: Target-Based Selling
Decide what you need the money for, then sell exactly enough to fund that goal.
Example: Hypothetical example for illustrative purposes only. You want to build a diversified portfolio that provides financial security ($2M), make a down payment on a home ($800K), and fully fund 529 accounts for two kids using the 5-year superfunding strategy ($360K total with both spouses contributing). Work backwards from those goals: you need $3.16M after taxes. Calculate how many shares you need to sell to generate that amount.
This approach ties selling to actual life goals rather than abstract percentages, making the decision emotionally easier and strategically sound.
Time-Based Selling
Set a schedule: sell a fixed percentage every month or quarter, regardless of price. This removes the emotional decision-making and averages your exit price over time.
Price-Based Thresholds
Set rules in advance: "I'll sell a certain percentage if the stock hits $100, another piece at $120, another at $140."
This lets you capture gains on the upside while ensuring you're steadily reducing exposure.
10b5-1 Plans
If you're an insider subject to trading windows, a 10b5-1 plan allows you to set up automatic sales in advance—even during blackout periods.
This is especially valuable if your company has extended lockups or frequent earnings blackouts that limit your flexibility.
Combining Strategies
These strategies aren't mutually exclusive. Many people start with a goal-based approach—determining what financial freedom or specific objectives require, then selling enough to hit that target. From there, they might layer in price-based thresholds to capture additional upside, or adopt time-based selling for the remaining position.
The key is deciding in advance—before emotion and market swings take over.
What About Taxes?
Every share you sell creates a tax consequence. How much depends on what type of equity you're selling and how long you've held it.
As we covered in Should I Exercise ISOs Before an IPO, your pre-IPO decisions directly impact your tax treatment now:
- ISOs held for the full holding period (1 year from exercise, 2 years from grant): Entire gain taxed as long-term capital gains
- Disqualifying disposition of ISOs: Spread at exercise taxed as ordinary income; post-exercise appreciation taxed as capital gains
- RSUs: Already taxed as ordinary income at vesting; only post-vesting appreciation is taxed as capital gains
- NSOs: Spread at exercise taxed as ordinary income; any additional gain taxed as capital gains
You can't avoid taxes entirely. But you can manage them strategically:
Spread sales across multiple tax years to stay below income thresholds where additional surtaxes or phaseouts kick in.
Pair stock sales with charitable donations or tax-loss harvesting to offset gains (we'll cover charitable strategies in our next post).
Model before you sell. Running projections with your CPA before you execute the sale allows you to understand the true after-tax proceeds and make better decisions.
The Tax Cost of Waiting
Many people hesitate to sell because they don't want to "pay the tax bill." But consider this: if you're holding a concentrated position primarily to defer taxes, you're making an investment decision based on tax avoidance rather than sound financial strategy.
The risk of a significant decline in your company stock may, in some cases, exceed the tax cost of diversifying. Paying 30-35% in taxes on a gain is painful—but it's better than watching your concentrated position decline 50% or more while you're trying to avoid that tax bill.
Remember: you only pay capital gains taxes when you have realized gains. That's a good problem to have.
The Biggest Mistakes People Make
Mistake #1: Waiting for "the perfect price" The perfect price is largely unobtainable. The stock will be volatile. Waiting for your ideal number often means you never sell—or you panic-sell during a decline.
Mistake #2: Selling everything at once Going from 100% concentrated to 0% overnight feels decisive, but it eliminates any remaining upside. Many people regret this later, even if it was financially sound.
Mistake #3: Never selling The flip side: people who convince themselves they'll "hold forever" often end up holding through major declines, watching wealth evaporate because they couldn't bring themselves to act.
Mistake #4: Not having a plan Random, reactive sales driven by market moves or panic create the worst outcomes. Structure often beats speculation.
Why You Need a Written Plan
Well defined diversification strategies are often:
- Decided in advance (before you're emotional)
- Written down (so you can hold yourself accountable)
- Reviewed regularly (life changes, plans should too)
We help clients create a documented exit strategy that includes:
- Target percentage to sell
- Timeline for sales
- Rules for when to accelerate or pause
- Tax coordination across years
- What the proceeds will be used for
- Target asset allocation for diversified portfolio
- Rebalancing guidelines
Having this plan written down makes it easier to execute—because you're not making the decision in the moment. You already decided.
How We Help
This is exactly the kind of decision that requires integrated planning. You can't separate the investment decision from the tax decision, and you can't separate either from your actual financial goals.
That's why Brickley Wealth Management combines CPA services and financial advisory under one roof. When you're deciding how much to sell and when:
- We model the income tax impact of different sale scenarios across multiple years
- We stress-test your financial plan to see how much concentration risk you can actually reasonably afford
- We design the diversification strategy that aligns with your risk tolerance and life goals
- We build the actual diversified portfolio tailored to your situation, utilizing tax-efficient strategies including tax-loss harvesting to minimize your tax burden over time
- We coordinate with your existing CPA (or we provide both services) to ensure things fall through the cracks
- We provide ongoing support to help you stay disciplined during market volatility
Whether you're selling post-IPO, during tender offers, or gradually over years, we help you build a strategy designed to manage risk while maintaining exposure to potential future growth.
Ready to discuss your diversification considerations? We can help evaluate your options. Next in this series: Charitable Giving Strategies During a Liquidity Event—because timing your giving before or after sales can make a massive difference in both impact and tax efficiency.
References
[1]: Morningstar Direct, "The Agony & The Ecstasy: The Risks and Rewards of a Concentrated Stock Position" (2021)
[2]: John Rekenthaler, "How Many Stocks Beat the Indexes?" Morningstar, April 26, 2021. https://www.morningstar.com/columns/rekenthaler-report/how-many-stocks-beat-indexes