Excerpt from TheStreet, published April 10, 2019
Eric Walters, president and founder of SilverCrest Wealth Planning in the Denver area and a CFP, also recommends a more gradual approach.
Walters views a heavy investment in a single stock as a "challenge" to a client's investment goals and works either hedge it, sell it over time to manage the tax costs, or donate some or all of it to accomplish their charitable goals.
If the client is emotionally attached, Walters will reduce the holding "to an acceptable level (I define this as 5% or less of investable assets) and monitor it closely."
It's not just a large holding in a single stock that can trigger alarms, but also "concentrated portfolios" of 10-20 stocks, Walters noted, pointing out these portfolios have the potential to both do much better but also much worse.
Walters calls them "a foolish risk."
"It is foolish because it is not taking advantage of the free lunch of diversification," Walters said.