Most high earners accept a big capital gains hit as the cost of selling concentrated stock. There's a lesser-known approach that changes that math entirely.
If you've spent years watching company stock vest — and watching it grow — you're sitting on something most people would envy. You're also sitting on a problem most people don't talk about until it's too late.
You know the position. Your RSUs have vested. The shares have appreciated significantly — maybe dramatically. You're concentrated in one company's stock, which your financial instincts tell you is a risk. But every time you think seriously about selling and diversifying, the same thing stops you: the tax bill.
Long-term capital gains taxes, California state taxes, the net investment income tax — it adds up fast. For many San Diego H.E.N.R.Y.s in biotech, defense, and tech, the realistic tax hit on a meaningful block of appreciated shares can feel like it wipes out a significant portion of the point of selling in the first place.
So the shares sit. The concentration risk stays. And the problem compounds.
The Default Answer — and Why It may Leave Money on the Table
Most financial advisors present two paths: sell and absorb the tax hit, or hold and hope the stock keeps climbing. Neither is wrong on its face. But both treat the tax bill as something you have to fund out of the same proceeds you just unlocked — and that assumption is worth questioning.
What if you could sell, diversify, and handle the tax bill — without liquidating what you just built to do it?
That question has a real, legitimate answer. It doesn't involve aggressive tax shelters or anything exotic. It involves a straightforward three-part sequence that uses tools already available in the world of portfolio finance — tools most high earners simply haven't been introduced to in this context.
How the Approach could Work — at a High Level
The strategy has three steps, and the logic behind each one matters.
Step one: liquidating the concentrated position and reinvesting the proceeds. One approach some investors consider is selling the appreciated RSUs — fully, or in a meaningful portion — and reinvesting the proceeds into a diversified portfolio. With this strategy, concentration risk is addressed at the source: the capital moves from a single stock into a mix of asset classes, sectors, and geographies, rather than continuing to ride on one company's performance. For those who prioritize simplicity and a clean break from the concentrated position, this option is often seen as the most direct path.
Step two: take a portfolio-backed loan to cover the tax bill. Rather than pulling cash out of the newly diversified portfolio to pay the IRS, you borrow against it. Brokerage accounts with sufficient assets can support what's called a non-purpose loan — a securities-backed line of credit that uses the portfolio as collateral. The loan funds go to cover the capital gains tax liability. Your portfolio stays intact and invested.
Step three: service the loan over time using the portfolio itself. The loan doesn't have to be paid back in a lump sum. Each year, a combination of dividends generated by the diversified portfolio and selective, strategic asset sales can be used to pay down the principal and interest. The key variable — and the reason this approach can make compelling mathematical sense — is that the interest rate on a securities-backed loan is typically quite low. If the portfolio grows at a rate that meaningfully outpaces the loan's interest cost, you could come out ahead compared to simply liquidating assets to write the tax check on day one.
Consider a scenario like this
A concentrated position. A big decision. A different outcome.
Imagine a principal engineer at a San Diego life sciences company who has watched $800,000 in vested RSUs appreciate significantly over five years. She's uneasy about concentration risk — but equally uneasy about selling and absorbing a six-figure tax bill that would immediately shrink her investable base.
Under this approach, she sells, diversifies the full proceeds, borrows against the new portfolio to cover the tax liability, and services that loan over several years using dividends and planned withdrawals. The portfolio keeps compounding on a larger base. The loan cost is modest relative to her expected returns. Over a five-to-ten year horizon, the math can look meaningfully different than the write-a-check alternative.
Whether it actually pencils out for her — and by how much — depends on her tax bracket, her existing income, the size of the position, current interest rates, and her investment time horizon. That's where the analysis has to happen.
Why This Isn't a DIY Strategy
Understanding the concept is one thing. Executing it correctly is another. The loan terms, the portfolio construction, the loan-servicing schedule, and the tax timing all have to work together — and the wrong combination in any of those variables can erode the advantage or create new problems.
This approach also isn't appropriate for every situation. Position size, income level, existing debt, risk tolerance, and time horizon all affect whether the numbers actually work in your favor. The only way to know is to model it against your specific picture.
This is the kind of planning that sits at the intersection of investment management, tax strategy, and financial structure — which is exactly why it's central to how I work with high-earning professionals through the San Diego H.E.N.R.Y. Strategy. Equity compensation doesn't exist in isolation, and neither should the plan for managing it.
Is This Worth Exploring for You?
If you have a meaningful block of vested, appreciated RSUs and you've been putting off the diversification decision because the tax bill feels paralyzing — this is the conversation to have before you make any moves.
The worst outcome is running the numbers and finding it's not the right fit for your situation. The second-worst outcome is never running them at all and spending another year concentrated in a single stock while the decision sits on the back burner.
Let's Run the Numbers for Your Situation
A 30-minute conversation is enough to tell whether this approach could work for you — and what it might actually mean for your tax picture and your portfolio.
Schedule a ConversationNo obligation. No pitch. Just a look at whether the math works in your favor.
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5405 Morehouse Drive, Ste 245
San Diego, CA 92121
Phone: (858) 335‑4945
If you would like to talk through how this applies to your situation, you are welcome to reach out through our Contact Us page.
Important Disclosures: This content is for informational and educational purposes only and does not constitute investment, tax, or legal advice. The scenarios described are hypothetical and for illustrative purposes only — they do not represent any specific client's experience or results. All investing involves risk, including the potential loss of principal. Lending and portfolio financing involve additional risks and are not appropriate for all investors. Tax strategies discussed may not be suitable for your individual situation. Please consult a qualified tax professional before making decisions based on this content.