Diversify with Confidence – Tailored Solutions for Managing Concentrated Positions

Although there is no universal threshold for what constitutes a concentrated stock position, there are two ways to test whether you have one: (1) it constitutes a material portion of your overall portfolio (e.g., 20%, 50%), or (2) you have enough exposure to one position that you feel anxiety when the stock declines. Finding yourself in this situation can create unwanted risks.

Concentrated stock positions can be quite complex. Your age, income level, any restrictions or conditions for selling the position, tax considerations, your affinity for the company/stock, your position as a corporate insider, and other factors should all be considered holistically to create a tailored plan to mitigate the risk. At Mercer Advisors, we help you work through these considerations to help you navigate the nuances of having a concentrated position and ensure the stability and growth necessary to achieve desired financial outcomes.

66% of Individual Stocks Underperformed the Russell 3000 Between 1987 and 2023

The conventional wisdom is that the rising tide lifts all ships. However, 36 years of data does not support that claim. Almost 40% of individual stocks in the Russell 3000 underperformed the index and lost money.

Source: Aperio, MSCI. Graph generated on 3/21/2023. Russell 3000® Index range is 1/1/1987 to 2/28/2023.

Concentrated stock positions, even among veteran investors, are more common than people think. The reasons people end up in this situation are varied. However, it doesn’t matter how you got there, what matters is that concentrated positions pose risks that require your careful consideration.

1 This is a hypothetical example for illustration purposes only, actual investor results will vary.

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