Is your future resting on one or two stocks?
Diversify without overpaying in taxes. Five questions. Two minutes.
Sell it the old way.
Or save hundreds of thousands.
Work with experts who do this every day.
$1.4M in stock. $1.2M in gains. What's the smartest way out?
Illustrative scenario built from current tax assumptions and representative strategy mechanics. Not a representation of past performance, not a guarantee of outcomes. Actual plan and results depend on inputs not captured here. Talk to an advisor to build your plan.
The real cost of having your net worth in one or two stocks.
A portfolio becomes concentrated once a single stock passes 10% to 15% of your investable net worth. Tech employees often end up in this position because RSUs are a significant portion of their compensation. After an IPO or a few years of vesting, one stock position can account for most of a household’s liquid net worth.
Very often, investors intuitively understand the risk of having a significant portion of their net worth tied to just one or two companies. Research by JPMorgan finds that two thirds of tech companies have had a permanent 70%+ drop from their peaks and never recovered.
Selling, however, can bring its own shock. The combined taxes on a long-term gain for a high-tax state such as California can approach 38%.
Roughly two-thirds of tech companies have had a permanent 70%+ drop from their peak.
They never recovered.
Source: JPMorgan Asset Management, "The Agony & The Ecstasy: The Risks & Rewards of a Concentrated Stock Position," 2024 edition.
The strategies. Most situations call for combining several.
The right answer depends on your stock position, timeline, and goals. There is no one-size-fits-all. Open any strategy for the mechanics, the numbers, and who it fits.
01Section 351 ETF Exchange
Contribute a basket of appreciated stocks into a newly formed ETF. Receive ETF shares in return. No taxable event.
Diversify, defer the gain
Section 351 ETF Exchange
Contribute a basket of appreciated stocks into a newly formed ETF. Receive ETF shares in return. No taxable event.
If you hold several appreciated stocks rather than a single large position, a Section 351 ETF Exchange lets you move that stock into a newly formed ETF and receive diversified ETF shares in return. Because the contribution is not a sale under Section 351, no capital-gains tax comes due that year. Your cost basis carries into the new shares, so the gain is deferred, not erased — you get diversified exposure now and the tax bill later.
To qualify, no single stock you contribute can make up more than 25% of the ETF, and your top five names together cannot exceed 50%. This strategy typically works when you have a basket of at least 10-15 stocks.
02Exchange Funds
Pool appreciated stock with other investors into a private fund. Receive diversified shares after a 7 year lockup.
Tax deferred 7+ years
Exchange Funds
Pool appreciated stock with other investors into a private fund. Receive diversified shares after a 7 year lockup.
An Exchange Fund suits an investor who can give up access to capital for several years in return for diversification today. You contribute appreciated stock to a private fund run by a provider like Eaton Vance, Goldman, or Morgan Stanley, and receive units in a diversified pool. Under Section 721, that contribution is not treated as a sale, so the embedded gain stays deferred.
The cost is liquidity. Traditional exchange funds hold your capital for about seven years and usually require a minimum of $1 million or more.
03Direct Indexing
Own the individual stocks of an index (such as the S&P 500). Harvest losses systematically to offset the gains from selling your stock position.
Harvest losses to offset
Direct Indexing
Own the individual stocks of an index (such as the S&P 500). Harvest losses systematically to offset the gains from selling your stock position.
Direct Indexing rebuilds an index like the S&P 500 by holding the underlying companies directly instead of a single fund. Because individual stocks fall at different times, you can sell the ones trading below cost, realize the losses, and apply them against the gains as you unwind your concentrated position. Wash-sale rules under Section 1091 govern which of those losses count.
The effect is strongest in the early years and fades over time. The benefit builds over five to ten years of banked losses rather than in any single year.
04Charitable Remainder Trust
If you already plan to give significantly, sell appreciated stock inside a tax-exempt trust and draw income for years.
Eliminate tax, draw income
Charitable Remainder Trust
If you already plan to give significantly, sell appreciated stock inside a tax-exempt trust and draw income for years.
A Charitable Remainder Trust fits someone who already intends to make a meaningful charitable gift. You contribute appreciated stock, the trust sells it inside its own tax-exempt structure under Section 664, and you receive an income stream for a set term or for life. Whatever remains at the end goes to the charity you name.
Funding the trust produces a charitable deduction in the contribution year, and the gain compounds inside the trust instead of being forced into a single sale. The income you draw is taxed as it comes out, spread across the term rather than landing all at once.
05Long/Short
Combines a diversified portfolio with a short sale strategy to realize losses you can use against the gains from selling your stock position.
Wash gains tax-neutral
Long/Short
Combines a diversified portfolio with a short sale strategy to realize losses you can use against the gains from selling your stock position.
A Long/Short strategy holds 130% long in a diversified stock index and 30% short in correlated names. The short position is built to realize losses, which you can then apply against gains elsewhere, including the gains from selling down your concentrated position over time. Research comparing the two finds a 130/30 long/short generates well more than double the realized losses of a long-only direct indexing over a decade.
The wash-sale rules are critical. If you are still vesting RSUs in the same employer, the short position must screen those tickers out, and most institutional providers do that automatically for active tech employees.
06Equity collar
Hedge the position with options to set a price floor and ceiling, buying time for slow liquidation.
Downside floor while you plan
Equity collar
Hedge the position with options to set a price floor and ceiling, buying time for slow liquidation.
An equity collar protects a concentrated position without selling it. You buy a put option that sets a floor under the price and sell a call option that caps the upside, and the premium from the call can offset most or all of the cost of the put. The position stays intact, so putting on the collar is not a sale and triggers no tax.
A collar buys time while you plan a staged unwind. On its own it does not diversify the position or defer the embedded gain, so it usually works alongside one of the strategies above. Watch the constructive-sale rules under Section 1259: a collar drawn too tightly can be treated as a sale and trigger the gain you were trying to defer.
The five strategies, side by side.
Each defers, offsets, or eliminates part of the gain in a different way. The right first layer depends on the size of your position, how long you can lock up capital, whether you give to charity, and whether new shares are still vesting.
| Strategy | Best for | Typical minimum | Lockup | Main tradeoff |
|---|---|---|---|---|
| Section 351 ETF Exchange | Converting an appreciated basket of stocks into a diversified ETF. | $250K–$500K+ | A few weeks/months | Must be able to contribute a diversified basket of stocks. |
| Exchange Funds | Stock positions with high unrealized gains. | $1M+ | 7 years | Long lockup period. Private fund, so higher risk. |
| Direct Indexing | Stock positions that have low to moderate unrealized gains. | $5k | None. But selling can trigger massive gains, thus negating the entire strategy. | Takes years for diversification. Concentration risk remains for several years until the position is fully wound down. |
| Long/Short | Stock positions with high unrealized gains. | $500k+ | None. But exiting the strategy is not easy and can trigger massive gains if not done in a planned manner. | Takes years for diversification. Concentration risk remains until the position is fully wound down. Margin and leverage risk. |
| Charitable Remainder Trust | Investors with genuine charitable intent. | $500K+ | Irrevocable — trust term or life | Remaining funds in the trust must be donated to charity. |
The diagnostic is by AI. The plan is human.
Sumeet founded InverseWealth in 2024 after a decade as a tech CPO and VP. The firm helps tech professionals, business owners, and high earners build long-term wealth — specializing in tax mitigation, risk management, and powerful investing strategies.
Inverse AI runs your numbers in seconds because that's what software is good at. An actual plan, however, requires much more. Your stocks don't sit in isolation. Your goals, other investment assets, and life situation all affect the strategy.
Talk to Sumeet to figure out the best strategy for you — your wealth is too important to be left to chance.
Questions people ask before they unwind.
Is this advice?
No. The diagnostic produces educational illustrations based on simplified inputs. It is not personalized investment, tax, or legal advice. The actual planning happens inside a fiduciary engagement with Sumeet, where your specific situation gets analyzed against your full financial picture.
Do I have to give my email or pay anything to use the calculator?
No to both. The calculator runs the numbers without an account. Email is only requested later, in exchange for a written summary of your scenario you can keep. Nothing is paid, nothing is sold to data brokers, and nothing is shared with partners.
How is this different from Wealthfront or Betterment?
Wealthfront and Betterment are excellent for managing a diversified portfolio you already have. They are not built for the specific problem of unwinding a single concentrated position with significant embedded gains. The work most concentrated holders need is combining several mechanisms in the right order, for the right slices of the position. That is what InverseWealth specializes in.
What is a concentrated stock position?
A single stock that exceeds 10–15% of your investable net worth. For tech employees holding RSUs in their employer, concentrated positions of 30–80% are common and create both single-stock and single-employer risk.
Why is a concentrated stock position risky?
Single-stock volatility runs well above a diversified portfolio over multi-year holding periods, and long-horizon studies find a substantial share of individual U.S. equities underperform the broad index over a decade. The tail risk — one bad earnings cycle, one accounting restatement, one regulatory action — does not show up in the average return.
How can I diversify a concentrated stock position without selling?
Five strategies layer onto the same portfolio: Section 351 exchange funds, traditional Section 721 exchange funds, 130/30 long-short extensions, direct indexing with tax-loss harvesting, and charitable remainder trusts. NUA elections apply specifically to employer stock held inside a 401(k). Most plans use three of the five at once.
What is a Section 351 exchange fund?
A pooled investment vehicle where multiple holders contribute concentrated stock for diversified-fund shares without triggering capital gains under IRC Section 351. Newer 2024+ ETF-conversion structures avoid the 7-year lockup and the $1M+ minimums of traditional Section 721 partnership-based exchange funds.
What is the difference between an exchange fund and a CRT?
An exchange fund defers tax via a diversification swap; you keep the principal and a partial liquidity claim against the diversified pool. A Charitable Remainder Trust (Section 664) immediately deducts charitable value, defers gains via tax-exempt sale inside the trust, pays you an annuity, and remainders the residual to charity.
How does direct indexing reduce capital gains tax on a concentrated position?
Direct indexing harvests realized losses across hundreds of individual stocks; those losses offset gains from selling the concentrated position elsewhere. Annual harvested losses of roughly 1.5–2% of portfolio value are typical in year one, declining over time as the portfolio's embedded basis converges to market.
What is a 130/30 long-short strategy for concentrated stock?
Holding 130% long in a diversified index while shorting 30% in correlated names creates harvested losses on the short side that can offset RSU vesting gains and concentrated-position drawdowns. Competent implementations typically generate 3–5% per year of realized losses for five-plus years before the alpha pool exhausts.
What is the minimum position size for an exchange fund?
Traditional Section 721 exchange funds typically require $1M minimum, often $5M, with seven-year partnership lockups. Section 351 ETF-conversion structures are reaching $250K–$500K minimums in 2026, which is why they have unlocked the strategy for the broader $500K–$1.5M concentrated-position cohort.
What is NUA (Net Unrealized Appreciation)?
A 401(k) tax election allowing employer stock distributed in-kind at separation to be taxed at long-term capital gains rates on the appreciation, instead of ordinary income on the full distribution. Best for departing employees with low-basis employer stock held inside the 401(k) plan.
How do I choose between exchange fund, CRT, direct indexing, and 130/30?
Decision criteria: position size, lockup tolerance, charitable intent, holding-period horizon, state of residence, projected income trajectory, and AMT/QSBS carryforwards. The two-minute diagnostic at the top of this page computes the tradeoffs and surfaces which two or three layers are likely to lead the plan.
Do I have to sell my concentrated stock to diversify?
No. The layered stack diversifies via Section 351 conversion, Section 721 contribution, or CRT contribution — none of which is a sale for federal capital-gains purposes. A meaningful chunk of the position is typically diversified before the first taxable sale closes.
What does a fiduciary advisor add over a calculator?
The diagnostic on this page returns one number: federal long-term capital gains plus the 3.8% Net Investment Income Tax plus state. A fiduciary engagement adds the order of operations across multiple tax years, the strategy-stack composition tuned to your AMT/QSBS/charitable picture, and the execution work — fund introductions, 10b5-1 filings, year-over-year harvest accounting.
What percentage of my net worth in one stock is too concentrated?
A single stock above 10–15% of investable net worth is usually concentrated. Between 10% and 30%, tax-aware sequencing starts to matter; above 30%, exchange funds, charitable trusts, or layered tax-loss harvesting may need to come before ordinary sales.
What are the downsides of an exchange fund?
Traditional Section 721 exchange funds usually require large minimums, a seven-year lockup, carryover basis, and provider-specific qualifying-asset rules. Newer Section 351 ETF-conversion structures can have lower minimums and shorter effective lockups, but they still require diversification-test compliance and do not erase the embedded gain.
Should I sell my concentrated stock position all at once or over time?
Most concentrated-stock holders should compare a staged unwind before making a full sale. Selling all at once may simplify the portfolio, but a multi-year sequence can pair exchange funds, direct indexing, 130/30 losses, state-residency timing, and charitable planning against the same gain.
How do I verify InverseWealth and Sumeet Ganju are fiduciary RIAs?
Look up InverseWealth LLC by CRD # 333749 on the Investment Adviser Public Disclosure site, then review the firm's Form ADV Part 2A. The page should show the firm's registration, disclosure history, compensation model, and fiduciary obligations before you rely on any planning recommendation.
Run the numbers before you make the move.
You've read this far. Probably worth 15 minutes to see what selling actually costs you — and what you don't have to pay.
- 26 USC Section 1(h) — Long-term capital gains rate structure (Cornell Legal Information Institute).
- 26 USC Section 1411 — Net Investment Income Tax (3.8%).
- 26 USC Section 351 — Transfer to a corporation controlled by the transferor — the statutory basis for the Section 351 ETF Exchange.
- 26 USC Section 721 — Nonrecognition of gain on a partnership contribution — the statutory basis for traditional Exchange Funds.
- 26 USC Section 664 — Charitable Remainder Trust statutory authority (CRUT/CRAT).
- 26 USC Section 1091 — Wash-sale rule constraints on tax-loss harvesting.
- California FTB Publication 1004 — Stock option and RSU taxation guidelines for California residents and nonresidents.
- Kitces.com (March 2025) — Section 351 vs Section 721 comparison and the 25/50 diversification rule.
- Alpha Architect (Wesley R. Gray, PhD) — Quantitative comparison of Section 351, exchange funds, and 130/30 long-short tax-loss harvesting.
- BlackRock Aperio — Diversifying concentrated stock with long/short institutional strategies.
- AICPA Tax Adviser (September 2025) — Planning with charitable remainder trusts: NIIT interaction, trustee obligations, concentrated-position application.
- Hendrik Bessembinder, “Do Stocks Outperform Treasury Bills?” (Journal of Financial Economics, 2018) — Empirical baseline for the long-tailed distribution of single-stock returns.
Sumeet Ganju, Founder & Investment Adviser, InverseWealth LLC (CA RIA, CRD # 333749). Last reviewed June 6, 2026. This page provides general information rather than personalized investment, tax, or legal advice.