Concentrated Positions

A single holding that makes up more than 5% to 10% of your portfolio can create risk because if that stock (or the respective sector that stock is in) experiences a significant decline, your portfolio may suffer much greater volatility than if you held a diversified asset mix. 

A disproportionately large single stock holding can potentially create additional volatility and risk in your portfolio. There are many options to help dilute the concentration of your position, including selling in a tax-efficient manner, gifting shares, employing an exchange fund, or hedging strategies. Many investors can benefit from using several of these techniques. The best options may depend on the value of the shares, the unrealized gain, and the investor’s time horizon.