When One Investment Becomes a Big Part of Your Net Worth

How to Think About Concentration Risk Without Panicking

It happens more often than people think: one investment grows so large that it becomes a meaningful share of your net worth.

That could be a single stock, a concentrated sector, employer equity, or a position you’ve held for years that simply outpaced everything else.

This isn’t automatically a “problem.” But it is a moment worth paying attention to—because once one holding becomes a big driver of outcomes, your portfolio may behave differently than you expect.

Why concentration risk sneaks up on investors

Concentration typically builds gradually.

A position performs well. You hold. It keeps outperforming. And eventually, it can represent 30%, 40%, or more of investable assets.

Portfolios with heavy concentration may experience larger swings, both up and down. That volatility can test discipline—especially when headlines get loud and the numbers start moving fast.

The issue isn’t that concentration is always “wrong.”It’s that concentration can increase the impact of a single outcome on your overall plan.

A better starting question than “Should I sell?”

A common instinct is to ask: Should I sell?

A more useful question is:What role does this investment play in my financial plan today?

That answer depends on things like:

• Time horizon

• Cash flow and upcoming spending needs

• Risk tolerance (what you can live with, not just what looks good on paper)

• Tax considerations

• Whether future goals depend on this capital

In many situations, the conversation isn’t strictly “sell or hold.” It’s about building a decision framework you can stick with through different market environments.

Taxes can change the math

Large, appreciated positions often come with embedded tax considerations if sold.

Depending on your situation, selling can affect:

• Capital gains taxes

• Adjusted gross income

• Medicare premium brackets and other phaseouts

• The flexibility you have for future planning moves

Because of that, many investors prefer to evaluate concentration decisions in a way that considers both investment strategy and tax context. (Your tax professional can help you understand how a specific decision may impact your return and cash flow.)

Risk isn’t only market risk

Concentration isn’t just about price movement. It can also affect:

• Liquidity

• Flexibility (especially if your needs change)

• The ability to stay disciplined during volatility

• Confidence in your plan when markets get rough

Even investors who consider themselves “risk tolerant” sometimes feel differently when one holding dominates results.

What diversification can look like in practice

Diversification doesn’t have to mean “sell everything and start over.”

In many cases it can involve:

• Reviewing how exposure lines up with long-term goals

• Considering whether you have sufficient liquidity for near-term needs

• Creating guardrails for decision-making during volatility

• Exploring gradual, structured approaches (where appropriate)

The point is not to eliminate upside. The point is to make sure one position doesn’t unintentionally become the entire plan.

How Halter Ferguson Financial can help

At Halter Ferguson Financial, we help clients evaluate concentrated positions in the context of the bigger picture—goals, timelines, cash flow needs, and overall risk exposure.

If you’re unsure how concentration fits into your plan, a conversation can help you:

• Clarify tradeoffs

• Stress-test different scenarios

• Build a decision process you can live with

If you’d like to talk through your situation, you can reach out to the team at Halter Ferguson Financial.

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Important disclosure: This article is for informational and educational purposes only and is not individualized investment, tax, or legal advice. Investing involves risk, including the possible loss of principal. Past performance is not a guarantee of future results. Any examples are general in nature and may not apply to your situation. Please consult with your financial advisor, tax professional, and/or attorney regarding your specific circumstances.