Having $10 million in one stock sounds like a fantastic problem to have. Maybe you spent decades working for the company, founded the business, inherited the shares, or simply made one spectacular investment and had the discipline, or good fortune not to sell it.
Whatever the story, the stock did its job. It helped make you wealthy. Once it represents a significant percentage of your net worth, however, the question changes from “Do I still like this stock?” to “How much of my family’s financial future do I want riding on one company?”
The obvious answer seems easy: sell some stock and diversify. Then somebody shows you the potential tax bill.
Welcome to the $10 Million Problem
Imagine you own $10 million of a single stock with a $1 million cost basis. You’re sitting on a $9 million unrealized gain and you live in California. Congratulations. California would also like to congratulate you.
Selling the entire position could expose the gain to federal long-term capital gains tax, the 3.8% Net Investment Income Tax, and California income taxes, where capital gains are taxed as ordinary income. At that income level, the combined marginal tax rate on much of the gain could approach roughly 37%, potentially creating a tax hit north of $3 million.
Now we have a dilemma. Keep everything and you keep the concentration risk. Sell everything and you potentially create an enormous tax bill. Fortunately, those aren’t your only choices.
This is a hypothetical and simplified illustration. Actual taxes depend on your complete financial and tax situation. Always coordinate with your CPA before implementing a tax strategy.
Stop Thinking of It as One $10 Million Decision
Instead of asking, “Should I sell my stock?” ask a better question: “What do I want different pieces of this stock to do for me?”
Some may be money you’ll eventually spend. Some may be intended for your children. Some could fund charitable giving. Some may need to be diversified because you’ve already won the game and don’t need to keep taking so much risk. Another portion may be stock you genuinely want to own for the next 20 years.
Once you stop treating $10 million as one giant block, you suddenly have a lot more options.
1. Sell It Slowly
Nobody said you have to sell $10 million on Tuesday. Selling shares gradually over several tax years can reduce your concentration while giving you more control over when gains are recognized.
The trade-off is simple: every share you haven’t sold is still exposed to the stock. Your five-year diversification plan won’t be much comfort if the stock drops 40% in year two.
2. Make Your Losers Earn Their Keep
Those red numbers elsewhere in your portfolio may finally have a purpose. Realizing investment losses can potentially offset gains as you sell your concentrated stock.
Direct indexing can create additional opportunities because you own many individual stocks rather than one index fund. Even when the overall market is up, individual companies may be down and available for tax-loss harvesting. Losses aren’t guaranteed and wash-sale rules apply, but when you’re sitting on millions in embedded gains, a few losers can suddenly become surprisingly attractive.
3. Consider an Exchange Fund
Picture a room full of wealthy investors. One has millions in Apple, another has Nvidia, another has Amazon, and everyone has the same problem: too much money in one stock and no desire to generate a giant tax bill just to diversify.
An exchange fund allows qualifying investors to pool concentrated shares and gain exposure to a more diversified portfolio, generally without triggering an immediate taxable sale. The catch? There are fees, qualification requirements, liquidity restrictions, and typically a holding period of approximately seven years. Your original cost basis also follows you. It’s not financial magic, although for the right investor it can be a very useful tool.
4. Give Away the Right Asset
If you’re already charitable, appreciated stock may be a much better asset to give than cash. A donor-advised fund (DAF) may allow you to contribute appreciated shares, potentially receive a charitable deduction, avoid recognizing the embedded gain on the donated shares, and recommend grants to charities over time.
A charitable remainder trust (CRT) can take the concept further by accepting appreciated shares, selling them inside the trust, reinvesting the proceeds, and providing an income stream to you or other beneficiaries, with the remainder ultimately passing to charity.
There is one important requirement: you actually have to want to give money to charity. If philanthropy is already part of your plan, the better question may be not how much to give, but what asset to give.
5. Maybe You Shouldn’t Sell All of It
If you’re financially secure and expect part of your wealth to eventually pass to your children, selling every share during your lifetime may not always make sense.
Under current law, assets held until death generally receive a step-up in cost basis to their fair market value at that time. California community property rules can make this particularly important for married couples. Estate-planning techniques such as GRATs and lifetime gifting may also provide opportunities to transfer future appreciation.
Taxes shouldn’t be the only reason you hold a risky investment. A stock that falls 60% has a remarkably effective way of solving your capital-gains problem. The objective is to balance investment risk with tax and estate-planning opportunities.
6. Need Cash? Selling Isn’t Your Only Option
A securities-based line of credit may provide liquidity without immediately selling appreciated stock. That can be useful if you’re buying property, funding a business, helping family, or simply need cash while a longer-term diversification strategy unfolds.
Wall Street has yet to invent free money, however. You’re borrowing against an asset that can decline. A large drop could require additional collateral or force shares to be sold at exactly the wrong time. Borrowing can be a useful tool; turning a concentrated-stock problem into a concentrated-stock problem with debt attached usually isn’t an upgrade.
Comparing the Options at a Glance
| Strategy | Reduces Concentration? | Tax Impact | Main Trade-Off |
|---|---|---|---|
| Staged sales | Gradually | Spreads gains over time | Remaining shares stay exposed |
| Tax-loss harvesting | As shares are sold | Can offset gains | Depends on available losses |
| Exchange fund | Yes | Defers gain | ~7-year lock-up; basis carries over |
| Options hedge | Reduces economic risk | May defer sale | Cost and/or limited upside |
| Charitable remainder trust | Yes | Can defer gain; possible deduction | Remainder goes to charity |
| Donor-advised fund | On donated shares | Avoids gain; possible deduction | Gift is irrevocable |
| Hold for step-up / estate plan | No | May eliminate built-in gain for heirs | Keeps concentration risk |
| Borrow against shares | No | Avoids immediate sale | Leverage and collateral risk |
The Best Answer May Be a Combination
A $10 million position doesn’t necessarily need one strategy. You might gradually sell and diversify one portion, use tax losses to offset some of the gains, contribute another portion to an exchange fund, donate appreciated shares you already intended to give to charity, hedge another piece, and intentionally hold a smaller amount as part of your estate plan.
The percentages aren’t the important part. Different dollars can have different jobs. The goal isn’t to discover one magical investment product or tax loophole. It’s to build a strategy around what you actually want your wealth to do.
The Stock Isn’t Really the Question
When someone asks me, “What should I do with my $10 million stock position?” I’m less interested in guessing where the stock will trade next year than understanding the bigger picture. How much money does your family actually need? What happens if the stock drops 40%? What do you want to leave your children? Is charitable giving important to you? What other assets do you own, and what is your cost basis?
Those answers turn a stock decision into a planning decision involving investments, taxes, estate planning, charitable giving, liquidity, and risk management. Your financial advisor, CPA, and estate attorney shouldn’t be solving those pieces independently. The real opportunity comes from getting everyone working from the same playbook.
Your stock may have done an extraordinary job creating your wealth. The next job is making sure one stock doesn’t get to decide what happens to it.
(See Do I Need a Financial Advisor, CPA and Estate Attorney, or Can One Person Coordinate Everything?)
