Why Most Tech Employees Have Concentration Risk (and How/Why to Diversify)

As a tech professional, it's almost a guarantee that you have too much investment exposure to your company according to modern financial theory. Here's why:

1. You have explicit ownership via vested stock options or RSUs (or stock, if you purchased your options)

2. You also have a lot of implicit ownership via your unvested stock options or RSUs. Most individuals are not planning to leave their job in the next few months (or likely years), then while this may be taxed different, the value of your unvested equity comp is 100% tied to the company stock value. Most individuals don't factor in this "ownership", but your definitely should

3. Outside of stock/equity ownership, your company is also your employer and pays your salary (e.g. if the company were to struggle financially, that frequently both (i) negatively impacts the stock price, as well as (ii) increases employment risk (via an increase in risk of being laid off)

Holistically, the combination of 1, 2, and 3 above result in a high amount of concentration risk for most tech workers. That doesn't mean you absolutely should be selling, but it's very important that you consider all three of the items above when you think about your overall exposure to your company.

As you consider, if you want/need help developing your selling plan, make sure to read: Divestment/Sale Planning