RSU concentration risk is the financial exposure created when too much of your wealth depends on a single company's stock — specifically, your employer's. For tech workers paid in Restricted Stock Units (RSUs), it's the most common and most underestimated risk in personal finance, because it stacks two correlated dependencies: the same company that pays your salary also controls most of your net worth.
When your employer's stock drops, you don't just lose paper wealth. You also face a higher probability of layoff (because companies cut headcount when stock prices fall), reduced future compensation (RSU grants shrink), and a market environment where finding a new job at similar pay is harder. The losses compound.
This guide explains what concentration risk is, how to quantify yours, and why tech workers face a uniquely concentrated version of it.
The basic definition
Concentration risk in personal finance is when a single asset represents an outsized portion of your net worth. Traditional financial planning suggests no single stock should exceed 5–10% of your portfolio. For RSU-heavy tech workers, the actual number is often 50–80%.
That gap — between what's recommended and what's typical for tech compensation — is the source of the risk.
Why tech workers face a uniquely bad version
Most "concentrated stock" scenarios involve someone who inherited Apple shares from a grandparent or made a winning bet on Tesla in 2018. Their wealth is concentrated, but their income comes from somewhere unrelated. If the stock crashes, they lose money but keep earning.
Tech workers face a triple overlap:
- Wealth concentration — vested RSUs and ESPP shares often represent 40–80% of net worth
- Income correlation — salary, bonus, and future RSU vesting all come from the same employer
- Job security correlation — when employer stock crashes, layoffs typically follow
This means a single event — your employer's stock dropping 40% — can simultaneously erase your wealth, shrink your future income, and threaten your job. None of these are independent.
A 2022 example: Meta employees holding META at the 2021 peak watched the stock drop 76% by November 2022. The 11,000-employee layoff happened in the same window. Many engineers lost the value of their unvested grants (forfeited on termination), the value of their vested holdings (down 76%), and their job — within the same six-month window.
How to quantify your concentration risk
Three numbers matter:
1. Concentration percentage
Above 25%, risk starts compounding meaningfully. Above 50%, you are functionally betting your financial life on one company's stock price.
2. Wealth-at-Risk
A 2-standard-deviation move (roughly 5% probability in any given year) is the realistic "bad year" scenario. For a tech worker with $1M net worth, 70% in a stock with 50% annualized volatility:
That is the dollar amount you could plausibly lose in a single bad year. For many tech workers, this exceeds their total non-employer assets, meaning a bad year erases their entire diversified buffer.
3. Income dependency
If this is above 80% — common for single-earner tech households — you have no income diversification to soften an employer-stock crash.
What's a "safe" concentration level?
There isn't a single number that applies universally, but most fee-only financial planners use volatility-adjusted thresholds:
| Stock annual volatility (σ) | Recommended maximum |
|---|---|
| Above 50% (high-volatility tech: Tesla, NVDA pre-2024, Palantir) | 20% of net worth |
| 30–50% (most large-cap tech: Meta, Amazon, Snowflake) | 25% of net worth |
| Below 30% (mature large-cap: Microsoft, Apple, Alphabet) | 30% of net worth |
The intuition: more volatile stocks should have tighter concentration caps because the same percentage of net worth produces more dollar-loss risk.
These caps assume the stock is NOT your employer. When it is, most planners recommend reducing the caps by another 5–10 percentage points to account for the income correlation problem.
Historical examples worth knowing
Concentration risk isn't theoretical. The following are real peak-to-trough drawdowns of stocks tech workers commonly hold:
- NVIDIA in 2008: down 85% (financial crisis)
- NVIDIA in 2022: down 66% (rate-hike sell-off)
- Meta in 2022: down 76% (Reels/CapEx panic + ad revenue concerns)
- Amazon in 2000: down 95% (dotcom crash)
- Tesla in 2022: down 73% (rate-hike sell-off)
- Snowflake in 2022: down 69% (SaaS multiples reset)
- Palantir in 2022: down 84% (multiples reset)
None of these companies were doomed. NVIDIA, Meta, Amazon, and Tesla all recovered and then some. But anyone who held concentrated positions during these drawdowns either had to ride out the loss for years or capitulate at the bottom. For a tech worker who also lost their job during the same period, the situation was much worse.
The hidden multiplier: unvested RSUs
Most tech workers count their unvested RSU grants as wealth. They are not, in a stress scenario.
Unvested RSUs are conditional on continued employment. If you're laid off — exactly the scenario where you most need them — they typically vanish. The grants are forfeited on termination.
This means in a "crash + layoff" scenario:
- Your vested stock loses value with the market
- Your unvested RSUs vanish entirely
- Your salary stops
- Your job market is worse than normal
Anyone calculating their "true" net worth should heavily discount unvested RSUs. Treating them as full-value wealth gives a false sense of security.
The most common mistakes
Three patterns appear repeatedly when tech workers underestimate their concentration risk:
- Anchoring to recent gains. "NVDA only goes up." This is the same logic that wrecked people in 1999, 2008, and 2022. Past performance does not adjust the risk math.
- Counting unvested RSUs as durable wealth. They aren't. They are conditional grants that disappear in the exact scenario you most need them.
- Ignoring the income correlation. Concentration risk in an unrelated stock is bad. Concentration risk in your employer's stock is categorically worse, because the same event hits multiple parts of your life simultaneously.
What to actually do
This article is informational, not financial advice. But the structural moves people typically discuss with a fee-only planner include:
- Selling vested RSUs at vest and immediately reinvesting in a diversified index fund (the "sell on every vest" rule)
- Maintaining a liquid buffer (cash + diversified investments) of at least 25–30% of net worth before adding more concentration
- Modeling realistic worst-case scenarios — not "what if it drops 10%" but "what if it drops 60% AND I lose my job?"
- Treating each RSU vest as cash bonus, not a re-investment in your employer
The goal isn't zero concentration. For early-career tech workers, some concentration is unavoidable — you can't help being paid in stock. The goal is making sure the concentration doesn't compound into a catastrophic scenario you can't recover from.
Run your own concentration risk score
MyRSU is a free calculator that quantifies your specific situation: Risk Score, Wealth-at-Risk in dollars, a "Freedom Number" projection, and an interactive scenario lab to model crash + layoff scenarios. Runs entirely in your browser — no signup, no data stored.
Open the calculator →Frequently Asked Questions
What percentage of my net worth is "too much" in one stock?
For most stocks, financial planners use a 20–30% threshold depending on the stock's volatility — 20% for high-volatility tech stocks (Tesla, Palantir), 25% for moderate (Meta, NVIDIA), 30% for lower-volatility (Microsoft, Apple). When the stock is your employer, reduce those caps by another 5–10 percentage points.
Should I sell my RSUs as they vest?
The "sell on every vest" rule treats RSU vesting as cash compensation rather than a re-investment in your employer. Most fee-only planners recommend this for over-concentrated employees. Holding vested RSUs is functionally choosing to invest your bonus money in your own employer — the same company you already depend on for income.
Do unvested RSUs count toward concentration risk?
Yes for return potential, but they should be heavily discounted for stress-test math. Unvested RSUs are forfeited on termination, so in a layoff scenario (often correlated with stock crashes), they go to zero. Treating them as full-value wealth understates your real risk.
Does ESPP count as concentration risk?
Yes. ESPP holdings concentrate your wealth in your employer's stock just like RSUs do. The discount you get on ESPP shares (typically 15%) is real value, but doesn't change the underlying concentration math. Most planners recommend selling ESPP shares immediately after the required holding period.
Is concentration risk the same as portfolio risk?
No. Portfolio risk is the overall variability of your total investments. Concentration risk is the specific exposure created by one asset dominating that portfolio. You can have a low-volatility portfolio that still has high concentration risk if 70% of it is in one stock.
Can I just hedge with options instead of selling?
Sometimes. Protective puts, collar strategies, and exchange funds can reduce concentration exposure without triggering tax events. These are complex and typically only available above ~$500K in concentrated stock. Talk to a CPA before pursuing any of these.
What if I work at a private company with illiquid stock?
Concentration risk is worse, not better, for private-company employees. You have the same concentration problem plus illiquidity (can't sell to rebalance) plus IPO uncertainty (the stock may never trade publicly). Most planners treat pre-IPO equity as having lower expected value than the strike-price-based grant statements suggest.
This article is informational and educational. It is not financial, tax, or legal advice. For decisions about your specific situation, consult a licensed Certified Financial Planner (CFP) or Certified Public Accountant (CPA). Historical drawdown figures are approximations based on public market data. Past performance does not predict future results.
Published June 2, 2026 · MyRSU