Many professionals are stellar in their fields but make the mistake of linking the bulk of their investments to the companies for which they work.
This might be a winning strategy when organizations are successful, but no company is immune to management missteps, government regulations, cost pressures, competitive shifts or disruptive technologies.
For example, the health care and pharmaceutical industries, including retail drugstores, had long been viewed as stable, yet their vulnerability has recently been exposed.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- UnitedHealthcare, once a beacon of reliability, was in a freefall.
- CVS Health, a diversified giant, has seen its stock plummet by half with no recovery.
- Rite Aid? Bankrupt twice, first due to a CEO fraud scandal.
- Walgreens went private after its stock cratered by about 90%.
- Novo Nordisk, a European pharmaceutical powerhouse, dropped more than 30% in a week after an outlook cut and CEO transition.
That's just in health care — other industries might face similar risks.
As an investment adviser and fiduciary, I've seen a troubling trend among professionals — entrepreneurs, executives and medical professionals alike — who tie too much of their wealth to an employer's stock.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
No matter your title or industry expertise, you can't predict everything. Even if you accurately gauge your company's trajectory, macroeconomic forces, industry disruptions or unreliable economic indicators — such as revised jobs data — can derail company valuations.
Many employees with company stock plans hold excessive amounts in their employer's stock, increasing their risk. This concentration is a financial disaster waiting to happen.
A single company downturn could cost you your job and a significant portion of your wealth, compounding the impact of an already stressful situation.
Understanding concentration risk
Concentration risk occurs when too much of your portfolio is tied to one asset — in this case, your employer's stock. This is particularly dangerous because your income and investments are linked to the same entity.
If your company falters, you could face a double blow: job loss and a plummeting portfolio. The health care sector's recent turmoil illustrates this vividly.
Management errors, such as the CEO-led fraud scandal that triggered Rite Aid's first bankruptcy, or external pressures, such as those impacting UnitedHealthcare's once-high valuations, can erode stock value unpredictably.
Even global leaders such as Novo Nordisk, which dropped more than 30% in a week in July 2025, aren't immune.
Entrepreneurs with startup equity, executives with restricted stock units (RSUs), and health care professionals with employee stock purchase plans (ESPPs) are especially vulnerable. Loyalty to your company or confidence in its future can cloud judgment, leading to over-investment.
As Walgreens' privatization and Rite Aid's bankruptcies demonstrate, even well-established firms can falter.
Six steps to protect your wealth
To safeguard your financial future, diversification is key. Here are six practical steps to mitigate concentration risk and build a resilient portfolio:
Limit company stock exposure. Keep your employer's stock to 5% to 10% of your portfolio. Beyond this, you're gambling on a single company's fortunes. Diversify into broad market index funds, exchange-traded funds (ETFs) or other sectors to spread risk.
Sell strategically. Cash out ESPPs and RSUs as soon as they vest, assuming no immediate penalties. Reinvest the proceeds into diversified assets to reduce reliance on your company's performance.
Be tax-savvy. Selling stock can trigger capital gains taxes, so consult a tax adviser to optimize timing and minimize liabilities. However, don't let tax concerns lock you into a risky position — preserving wealth trumps tax savings.
Prepare for volatility. Company stock is not a substitute for a retirement plan. A single bad quarter, policy shift or market correction can tank its value.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
Stay objective. Emotional attachment to your employer can skew financial decisions. Treat company stock as one part of your portfolio, not a badge of loyalty.
Rebalance regularly. Review your portfolio at least annually to ensure it aligns with your financial goals and risk tolerance. Market shifts or personal circumstances might require adjustments to maintain diversification.
A cautionary tale and a path forward
I've witnessed too many professionals learn this lesson the hard way.
A physician client held 40% of their portfolio in a single health care stock, confident in the company's dominance. When unexpected regulatory changes hit, their portfolio lost nearly a third of its value, derailing their retirement plans.
Diversification could have prevented this.
This serves as a wake-up call for professionals across all industries, especially as regulatory and market changes accelerate.
Your expertise drives your career, but your financial security demands a broader strategy.
By capping company stock, selling strategically and rebalancing regularly, you can protect your wealth from the unpredictable forces that nobody can fully anticipate.
Related Content
- Why Company Stock May Be Riskier Than Employees Realize
- Employee Stock Options: Understanding the Benefits and Risks
- How Does an Employee Stock Ownership Plan, or ESOP, Work?
- Taxes in Retirement: What ESOP Participants Need to Know
- Q2 2025 Post-Mortem: Rebound, Risks and Generational Shifts
-
How Prepaid Verizon Phone Service Works and When It's a Smart ChoiceExplore the differences between Verizon Prepaid and Verizon Postpaid plans—costs, perks, flexibility, and when going prepaid makes sense.
-
Try This One-Minute Test to Uncover Hidden Health RisksFinding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Try This One-Minute Test to Uncover Hidden Health Risks
Finding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Child-Free Cruises Perfect For Your Retirement CelebrationHow to find a bespoke ocean or river vacation for adults. Many of these options are smaller, charming river cruises, expeditions, or niche experiences.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
Dow Adds 472 Points After September CPI: Stock Market TodayIBM and Advanced Micro Devices created tailwinds for the main indexes after scoring a major quantum-computing win.
-
October Fed Meeting: Live Updates and CommentaryThe October Fed meeting is a key economic event, with Wall Street waiting to see what Fed Chair Powell & Co. will do about interest rates.
-
2026 Social Security COLA is 2.8%: What You Need to KnowThe SSA has announced the 2026 Cost-of-Living Adjustment (COLA), the new maximum taxable wage cap, and the earnings requirements for Social Security credits.
-
The Delayed September CPI Report is Out. Here's What it Signals for the Fed.The September CPI report showed that inflation remains tame – and all but confirms another rate cut from the Fed.
