Concentrated Stock Position: How to Manage Highly Appreciated Stock Without Getting Crushed by Taxes
By Todd Stankiewicz | CIO, SYKON Capital | Portfolio Manager, Free Markets ETF (FMKT)
With U.S. equity markets near all-time highs and a significant recovery from early 2026 lows, more investors than ever are sitting on highly appreciated, concentrated stock positions. Nowhere is this more visible than in technology: investors who held names like Nvidia, Apple, Microsoft, Meta, or Tesla through years of volatility now find themselves with positions that represent a majority of their net worth. The appreciation has been extraordinary. So has the concentration.
The concentration is not the problem. The absence of a plan is.
A concentrated position in a single stock carries a risk profile that most investors systematically underestimate. Unlike a diversified portfolio, a single company can lose 30, 40, or 50 percent of its value in a matter of months, or even weeks, without the broader market doing the same. We have seen it play out repeatedly across sectors: defense stocks, software, consumer names, and cryptocurrencies. The wins are real. So is the exposure.
This guide covers the most practical strategies for managing a concentrated, highly appreciated stock position, from systematic tax-managed selling to charitable giving structures, securities-based lending, and the complex vehicles getting the most attention right now. Every situation is different. The goal is to help investors and their advisors think clearly about the full range of options before making a move.
What Is a Concentrated Stock Position and Why Is It Risky?
A concentrated stock position exists when a single holding makes up a large share of your net worth, often a third or more. It is common among long-tenured employees, company founders, people who inherited shares, and investors who simply bought early and held. The defining feature is asymmetry: a single company can fall 30, 40, or 50 percent far faster than a diversified portfolio, and without the broader market moving with it.Investors hold these positions for understandable reasons. The stock built their wealth, it often carries a personal or family history, and selling can feel like a vote of no confidence in a company they believe in. The gains are real, and so is the attachment.
That attachment is the primary risk factor. The math of concentration is straightforward, but the behavioral pull to keep holding is what leaves investors exposed. Recognizing the emotional component is the first step toward managing the position with a clear head rather than a reflex.
The Capital Gains Tax Trap: Why Investors May Overestimate What They Owe
Here is where most people get stuck: they do not want to pay the taxes. Building a sound capital gains tax strategy starts with confronting this fear directly.I understand it. But in my experience, people consistently overestimate what they will owe. When we actually run the numbers, modeling out a systematic sale over two, three, or four years, many clients, in our experience, find themselves in a far more manageable tax position than they expected. Individual results will vary based on income, filing status, and the size of the position.
That said, there are real downstream effects worth planning for before you act:
- Tax bracket creep: A large sale in a single year can push income into a higher bracket
- Medicare IRMAA surcharges: If your modified adjusted gross income crosses certain thresholds, Medicare Part B and Part D premiums increase, sometimes significantly
- Net Investment Income Tax (NIIT): High earners may owe an additional 3.8% on investment income above applicable MAGI thresholds
- SALT deduction cap: The One Big Beautiful Bill Act temporarily raised the state and local tax deduction cap to $40,000 through 2029, before it reverts to $10,000 in 2030. For investors in high-tax states modeling a multi-year selling strategy, this changes the net tax picture and should be factored into projections.
The honest truth: taxes are the cost of a win. And sometimes the simplest path is also the best one.
6 Strategies for Managing Highly Appreciated or Concentrated Stock
There is no single solution here. What works depends on your timeline, your tax situation, your charitable goals, and whether you are in accumulation or distribution mode. Most clients end up using a combination.1. Systematic Tax-Managed Selling: Often a Strong Starting Point
In our view, this is one of the most underutilized strategies, and for many clients it is the strongest starting point.
Sell a deliberate portion each year, managed to your tax bracket, and maintain full flexibility with the proceeds. No lockups. No counterparty risk. No complex structures to unwind later.
Why it often wins:
- Full liquidity after the sale, cash can go anywhere
- Works for many different portfolio sizes
- Can be tightly coordinated with tax planning to manage bracket exposure and IRMAA
- No exotic vehicles, no legal complexity
2. Donating Appreciated Stock: Donor Advised Funds and Charitable Remainder Trusts
This one comes with a critical caveat: it is a strategy for people who already give to charity. Do not give away money you would not otherwise give just to reduce a tax bill. That is a poor trade.
But if philanthropy is already part of your financial life, then here is one of the most underused insights I share with clients: if you are already planning to give to charity, consider donating the stock, not the cash. Contribute the appreciated shares directly. Let the charity sell them. You may avoid federal capital gains on the contributed shares.
Two practical vehicles:
Donor Advised Fund (DAF)
- Contribute appreciated shares directly to the fund
- Receive an immediate income tax deduction at full fair market value
- The DAF generally sells the stock with no federal capital gains tax
- Proceeds are granted to qualified charities over time, on your timeline
- Simple to set up, no lockup, you stay in control of the giving
Direct Gift to a Nonprofit
- Contribute appreciated shares directly to a qualifying nonprofit
- Same core tax mechanics: no capital gains, deduction at fair market value
- Simpler if you already know where the money is going
Charitable Remainder Trust (CRT)
For larger, more complex situations, a CRT is worth understanding. A CRT is an irrevocable trust that generates an income stream for you or other named beneficiaries for a term or for life, and afterwards the remaining assets go to a named charity. You receive an immediate partial income tax deduction when funding it with appreciated stock.
Because a CRT is irrevocable and involves significant legal and tax considerations, you need to work with an estate planning attorney and a qualified tax advisor before pursuing this path.
It is not for every situation, but for the right client with meaningful philanthropic goals and a large embedded gain, it belongs in the conversation.
Tax rules on charitable giving are complex and situation-specific. Consult a qualified tax professional before acting.
3. Gifting Appreciated Stock to Family Members in Lower Tax Brackets
If you have family members in a lower income tax bracket, gifting appreciated stock directly, rather than cash, can be a thoughtful strategy. The recipient pays capital gains tax at their rate when they eventually sell, which may be meaningfully lower than yours.
The stepped-up basis consideration: Under current U.S. tax law, heirs who inherit stock receive a new cost basis equal to the fair market value at the date of death, which can effectively eliminate all embedded capital gains for the next generation. This is a meaningful estate planning tool under current law, though the step-up in basis has been subject to legislative proposals and could change. Consult a tax professional for the most current treatment.
The honest caveat: you will not be there to see them enjoy it. For many clients, the flexibility and risk reduction of diversifying now outweighs the estate tax benefit of waiting. For others, the step-up is a core part of the plan. There is no universal answer; it comes down to your values and your timeline.
4. Securities-Based Lending and Box Spread Financing
Sometimes the right move is to buy time without selling.
A pledged asset line, also called securities-based lending, allows you to borrow against your stock position, providing liquidity without triggering a taxable event. You are not selling. You are accessing capital while your tax strategy develops.
Box spreads are getting a lot of attention right now as an options-based financing alternative. By using options on broad index products, investors can effectively borrow at rates that have tracked near Treasury yields, with rates as of mid-2026 generally tracking near Treasury yields, though this can shift materially. Verify current rates with an advisor before using this strategy. Traditional margin rates have run from 4 to 8 percent or higher.
Important caveats:
- These rates are variable, not fixed
- Amid ongoing uncertainty about the Fed's rate path, carrying costs could rise if rates move higher, a risk worth factoring in before committing to a variable-rate borrowing strategy
- If the underlying stock declines significantly, a margin call can force a sale at the wrong time
- Box spreads add execution complexity and require active management
5. Tax-Loss Harvesting and Direct Indexing
This does not require a complex structure. You may already have it available in your current portfolio.
The concept: if other positions are sitting at a loss, selling those losses can offset the gains you realize when you sell the concentrated position. At SYKON, we use this systematically across client portfolios, both through direct indexing and through the broader ETF portfolios we manage.
Direct indexing takes this a step further. Instead of owning a broad index fund, you own the individual stocks of an index directly. That can create more opportunities to harvest losses throughout the year to offset gains from a concentrated stock sale. It also comes with tradeoffs, including higher implementation and trading costs, potential tracking error versus the index, and greater operational complexity.
But you do not always need a sophisticated direct indexing product to accomplish this. A thoughtfully managed ETF portfolio already provides meaningful opportunities for loss harvesting. The key is active, year-round tax awareness across the whole portfolio, not just the concentrated position in isolation.
6. Section 351 ETF Exchanges, Exchange Funds, and Options Strategies
A few heavily promoted strategies deserve an honest look before you commit.
Section 351 ETF Exchanges
Under Section 351 of the tax code, investors can contribute appreciated stock to a newly formed ETF without immediately recognizing a taxable gain, if specific rules and tests are met. The gain is not eliminated. It is deferred and embedded in the ETF structure.
What the pitch often leaves out:
- You now hold an ETF with embedded basis that can make future liquidity challenging
- It is worth asking whether the structure being offered was designed around your specific goals, or primarily to attract assets. These are not always the same thing.
- Qualifying requirements are strict; not every investor or position qualifies
- You need to understand the ETF's underlying holdings and whether they make sense for your goals
Exchange Funds
The older predecessor to 351 ETFs. You pool your concentrated stock with other investors and receive a diversified interest back. Multi-year lockups and strict qualification requirements typically apply. Limited flexibility for clients in or approaching retirement.
Options Strategies: Collars and Covered Calls
These have technical merit in specific contexts, but in practice they tend to create more confusion than clarity for most investors. Covered calls cap your upside while only partially cushioning your downside through the premium collected. Collars add complexity and can produce unexpected capital gain events if the stock moves sharply. Unless these are being actively managed with full understanding of the tax implications, they have a way of generating surprises.
A Note for Founders and Startup Employees
If your concentrated position is in private company stock rather than a publicly traded name, there is an additional strategy worth understanding: Qualified Small Business Stock (QSBS) under Section 1202 of the tax code.
Under the One Big Beautiful Bill Act signed in 2025, the rules were significantly updated for stock issued after July 4, 2025:
- The per-taxpayer exclusion cap increased from $10 million to $15 million per issuing company
- New tiered holding periods allow partial exclusions: 50 percent after 3 years, 75 percent after 4 years, and 100 percent after 5 years
- The gross asset threshold for qualifying companies was raised from $50 million to $75 million
The Right Approach Is Usually a Combination
No single strategy solves this decision cleanly. What typically works is a combination: sell a portion systematically each year, layer in tax-loss harvesting on the proceeds, use charitable giving to eliminate a slice of the gain if it fits your values, and potentially use a credit facility to bridge short-term liquidity needs.The combination only works if there is a plan behind it. Most people do not have one. They hold because they cannot decide. And holding without a plan is itself a decision, one that leaves you fully exposed with no path forward.
If you are sitting on a significant gain right now, at this market, at these levels, consider it a reminder. Not a reason to panic. A reason to plan.
Work With SYKON Capital
At SYKON Capital, managing a concentrated position is one of the most consequential planning decisions we work through with clients. Not just which strategy to use, but in what order, at what pace, and with which tradeoffs they can genuinely live with. That is what turns a complex situation into a clear path forward.If you are sitting on a significant position and have not yet built a plan, that is the place to start.
Get a second opinion. Not on the stock. On the decision.
About the Author
Todd Stankiewicz | Chief Investment Officer, SYKON Capital
Todd Stankiewicz is the Chief Investment Officer of SYKON Capital, a fee-based registered investment advisor with offices in Westchester County, NY and Jupiter, FL. He is a recurring guest on Fox Business and the Schwab Network, where he discusses markets, portfolio strategy, and investor behavior. Todd is also the portfolio manager of the Free Markets ETF (FMKT).
Learn more at www.sykoncapital.com
To ensure compliance with IRS requirements: any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
The strategies discussed in this article involve complex tax, legal, and financial considerations that vary significantly based on individual circumstances. There are risks involved in all investment strategies. We recommend working with a qualified financial, tax, and legal professional before taking any action.
SYKON Capital is a registered investment advisor. Registration does not imply a certain level of skill or training.
Frequently Asked Questions: Concentrated Stock Position and Capital Gains
What is a concentrated stock position?
A concentrated stock position occurs when a significant portion of your net worth is held in a single stock. This is common among long-tenured employees, founders, and investors who bought early and held. The risk is asymmetric: a single company can decline far more, and far faster, than a diversified portfolio.
What should I do if Nvidia, Apple, or another tech stock is a large part of my portfolio?
The strategies for managing a highly appreciated Nvidia position, or any other concentrated tech holding, are the same as for any concentrated stock. The question is not about the company's future prospects. It is about what a 30 to 50 percent drawdown in that position would mean for your retirement, your income needs, and your overall financial plan. Many investors holding significant positions in names like Nvidia, Apple, Microsoft, Meta, or Tesla have seen extraordinary appreciation, and that concentration itself becomes the primary risk regardless of the underlying company's quality. The six strategies outlined in this guide apply equally to any highly appreciated position. Every situation is different, and there are risks involved in all strategies. Work with a qualified advisor to evaluate your specific circumstances.
Should I sell my highly appreciated stock?
The decision depends on your financial plan, not the stock itself. If a large decline would materially harm your retirement or lifestyle, that is a risk worth addressing. Taxes are real but typically manageable when spread across multiple years. Many investors who model this find the tax burden lower than expected.
How can I reduce capital gains tax on appreciated stock?
Common strategies include spreading sales across multiple tax years to manage bracket exposure, contributing appreciated shares to a Donor Advised Fund if you are already charitable, gifting shares to family members in lower tax brackets, using tax-loss harvesting to offset gains, and coordinating with a CPA before acting to model IRMAA and bracket impacts.
What is a Section 351 ETF exchange and is it right for me?
A Section 351 exchange allows you to contribute appreciated stock into an ETF structure without immediately recognizing a taxable gain, subject to qualifying conditions. The gain is deferred, not eliminated. These structures have grown in popularity, but carry complexity, qualification requirements, and embedded basis limitations. Evaluate carefully with a qualified advisor.
What is the difference between a Donor Advised Fund and a Charitable Remainder Trust?
A DAF is simple: contribute appreciated shares, receive an immediate deduction at fair market value, and grant proceeds to charities over time without triggering capital gains. A CRT is more complex and irrevocable: it provides an income stream to you or other beneficiaries, with the remainder going to charity. A DAF avoids capital gains on the contributed shares. A CRT avoids the immediate capital gains tax at the point of sale, but income distributions to you as beneficiary are taxable under IRS rules. Both require careful planning and different levels of legal involvement.
What are box spreads and how do they apply to concentrated stock?
Box spreads are an options-based financing strategy allowing investors to borrow at rates that have tracked near Treasury yields, as of mid-2026 in a range generally lower than traditional margin rates, though this can change. They have gained attention as a low-cost liquidity alternative without requiring a sale. However, rates are variable, execution adds complexity, and a meaningful drop in the underlying position can create forced liquidation risk.
Does the One Big Beautiful Bill Act change anything about my concentrated stock strategy?
The OBBBA made several meaningful changes worth knowing. For investors in high-tax states, the SALT deduction cap was temporarily raised to $40,000 through 2029, which affects the net cost of a multi-year selling strategy. For founders or early employees holding private company stock, the QSBS exclusion under Section 1202 was expanded: the per-taxpayer cap rose to $15 million, and new tiered holding periods now allow partial exclusions starting at three years. These changes do not affect publicly traded stock positions. As with all tax law updates, verify applicability with a qualified tax advisor.
What happens to highly appreciated stock at death?
Under current U.S. tax law, heirs who inherit stock receive a stepped-up cost basis equal to fair market value at the date of death, potentially eliminating all embedded capital gains for the next generation. It is a significant estate planning tool, but it requires holding the position through your lifetime with the associated concentration risk.
Sources
[1] Envestnet, Concentrated Stock Risk Reduction Strategies: https://www.envestnet.com/financial-intel/concentrated-stock-risk[2] Medicare.gov, Understanding IRMAA Surcharges: https://www.medicare.gov/basics/costs/medicare-costs/part-b-costs
[3] Alpha Architect, Portfolio Tax Strategies: https://alphaarchitect.com/portfolio-tax-strategies-section-351-vs-exchange-funds-vs-long-short-tax-loss-harvesting
[4] Fidelity Charitable, Contributing Appreciated Assets to a DAF: https://www.fidelitycharitable.org/guidance/philanthropy/contributing-appreciated-assets-to-a-donor-advised-fund.html
[5] DAFgiving360, Charitable Remainder Trust: https://www.dafgiving360.org/charitable-remainder-trust
[6] IRS, Gift Tax: https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax
[7] IRS, Stepped-Up Basis (Publication 550): https://www.irs.gov/publications/p550
[8] 3040 Wealth, How to Borrow Below 4% Using Box Spreads: https://www.3040wealth.com/academy/how-to-borrow-at-rates-below-4-and-with-tax-benefits
[9] Alpha Architect, Short Box Spreads: https://alphaarchitect.com/short-box-spreads
[10] Creative Planning, Direct Indexing for Concentrated Stock: https://creativeplanning.com/insights/investment/direct-indexing-tax-efficient-concentrated-stock
[11] Goldman Sachs Asset Management, Diversifying Single-Stock Concentration: https://am.gs.com/en-us/advisors/case-study/2024/diversifying-single-stock
[12] Elm Wealth, Demystifying 351 ETF Exchanges: https://elmwealth.com/351-exchanges
[13] Plancorp, A Guide to 351 Exchanges: https://www.plancorp.com/351-exchanges-guide
Disclaimer
This article is provided for general informational and educational purposes only and does not constitute tax advice, legal advice, or investment advice. The information presented here should not be relied upon as a substitute for consultation with a qualified tax professional, attorney, or financial advisor regarding your specific situation. Tax laws and regulations are complex and subject to change. Sykon Capital makes no representations or warranties regarding the accuracy or completeness of the information herein. Past results and experiences described are not indicative of future outcomes. Please consult with your own tax and legal advisors before making any decisions based on the content of this article.
