Executive Summary

The standard advice for anyone holding too much company stock is simple: sell some and buy an index fund. It is good advice, and most tech professionals who follow it feel diversified afterward. Many of them are less diversified than they think.

Today, roughly 40% of the S&P 500 sits in its ten largest companies¹ — a higher share than at the peak of the 2000 technology bubble.² Four of those companies — Microsoft, Amazon, Alphabet, and Meta — all have major engineering operations in the Puget Sound region, and together they make up about 18% of the index.¹ An engineering director who sells employer stock and buys an S&P 500 fund is buying back a meaningful slice of the same company, along with its closest peers.

That matters more for a tech professional than for most investors, because the same bet already shows up in their paycheck, their unvested RSUs, and often their bonus. This paper explains how to measure that overlap, walks through a hypothetical household, and lays out how a portfolio can be built around your job rather than alongside it.

Q&A: Diversification for Tech Professionals

Q: I sold my company stock and bought an S&P 500 index fund. Am I diversified now?

More than you were, but probably less than you think. An S&P 500 fund owns 500 companies, but it weights them by market value, so the largest few carry most of the influence. If your employer is one of the biggest companies in the index, part of every dollar you move into the fund buys your employer back. The rest goes heavily toward the same large technology companies whose results, valuations, and hiring move together with your employer's. Selling company stock reduces your single-company risk. It doesn't necessarily reduce your exposure to the forces driving that company's stock.

Q: How concentrated is the S&P 500 today?

Very, by historical standards. As of September 22, 2026, the ten largest companies make up roughly 40% of the index¹, compared with about 27% at the 2000 peak.² The single largest holding is about 7.5% of the index on its own.¹ Technology and communication services companies together account for more than 40% of its value.³ Funds that track the Nasdaq-100 or the technology sector are more concentrated still; technology alone is about 61% of the Nasdaq-100.⁴

None of this predicts what happens next. Periods of high concentration have ended in different ways, and some have lasted for years. The point is what you actually own when you buy the index.

Q: Why does this matter more for a tech employee than for other investors?

Because your portfolio isn't your only exposure to the technology sector. Your salary, bonus, unvested RSUs, and ESPP purchases all depend on the same company, and often on the same spending cycle that drives the largest stocks in the index. The four largest hyperscalers alone plan roughly $700 billion of AI-related capital spending this year⁵, and that spending is now a major driver of both technology earnings and technology hiring decisions.

When the cycle turns, the pressures tend to arrive together. In 2022, the S&P 500 returned about -18% and the Nasdaq-100 about -33% on a total-return basis⁶, and 2023 then became the largest year for tech layoffs on record, with about 263,000 employees cut across the sector — 59% more than in 2022.⁷ A household exposed on all four fronts at once can see its income, its unvested equity, and its investments decline in the same year.

Table 1: Four Places the Same Bet Shows Up

Q: What is look-through exposure, and how do I calculate mine?

Look-through exposure is what you own once you look inside your funds. Start with every account: brokerage, 401(k), IRA, HSA, and any equity plan account. For each fund, multiply your balance by the fund's weight in your employer and in the largest companies; most fund providers publish holdings daily or monthly. Add any stock you hold directly. Then, separately, add your unvested RSUs at today's share price. The result is two numbers that matter more than your account count: the share of your net worth that depends on your employer, and the share that depends on the same handful of large technology companies. Don't forget target-date funds in your 401(k), which usually hold a broad U.S. stock index and carry the same tilt.

Q: What does this look like for a household like mine?

Consider a hypothetical director at a large Puget Sound technology company whose employer is about 5% of the S&P 500 (for illustration only).¹ The household has $3.8 million invested: $1.5 million in company stock, $2.0 million in S&P 500 index funds across a brokerage account and a 401(k), and $300,000 in cash and bonds. Counting the index funds' holdings, 42% of the portfolio depends on the employer and 61% depends on the ten largest companies.

They sell $1 million of company stock and buy more of the same index fund. Their direct stock position falls from 39% to 13%, which feels like a major change. But their exposure to the ten largest companies only falls from 61% to 45%.

Now suppose the same $3 million equity allocation were built to exclude the employer and hold the other nine largest companies at half their index weight. Employer exposure falls to 13%, and exposure to the ten largest companies falls to 31%. The dollars and the decision to sell are identical in both cases. The difference is how the money was put back to work.

Table 2: Same $1M Sale, Three Different Outcomes (Hypothetical)

Hypothetical example for illustration only; not representative of any specific investor. Uses an employer weight of 5% and a top-10 weight of 40% in the S&P 500, consistent with index weights as of September 22, 2026. Taxes on the $1 million sale are ignored for simplicity.

Q: Do my unvested RSUs count?

For planning purposes, yes. You don't own them yet, but your household's future depends on their value, and you can't sell or hedge them. In our illustration, the household also has $1.2 million of unvested RSUs. Counted alongside the portfolio, employer exposure starts at 56%, and even after the $1 million sale it's still 37%.

That's the case for treating your vested portfolio differently from that of an investor without equity compensation. Because unvested equity can't be sold and keeps growing with each new grant, the part you can control usually needs to lean further away from your employer and its sector than a standard allocation would.

Q: Isn't owning these companies the best way to benefit from AI?

Maybe, and this paper doesn't argue otherwise. Nobody can reliably predict whether the largest companies will keep leading, and concentration has favored index investors in recent years. Past performance does not guarantee future results. The better question for a tech professional isn't whether AI succeeds. It's whether your household could absorb a period when large-cap technology valuations reset at the same time your employer is cutting costs. If the answer is yes, a heavy tilt may be a reasonable choice. If a year like that would change your plans, the tilt is a risk you're carrying without having chosen it.

Q: What does it mean to build a portfolio around my job?

It means designing the portfolio as the complement to what your career already gives you, rather than as a standalone allocation. Planners sometimes call this a completion approach. You start with the exposures you can't easily change — your salary, your unvested equity, and the stock you're still working through — and then build the investable portfolio to fill in what's missing. For most senior tech professionals, that means owning less of their employer and its closest peers than the index does, and more of the parts of the market that depend on different drivers. The goal isn't to avoid technology. It's to make sure the household's total exposure is a decision rather than an accident.

Q: How does direct indexing help?

Direct indexing replaces a single fund with the individual stocks the fund would own, held in your own account. That structure allows two things a fund can't offer. First, you can exclude your employer and close competitors, or cap exposure to a sector, while keeping broad market exposure elsewhere. Second, you can sell individual positions at a loss to offset gains — including gains from selling company stock — and replace them with similar holdings. The trade-offs are real: the portfolio will perform differently from the index, loss-harvesting opportunities vary with market conditions and tend to shrink over time, and the approach works best in larger taxable accounts. It's a construction tool, not a guarantee of better results.

Q: Are there other ways to reduce the tilt?

Yes, and they're often combined. Equal-weight and other size-diversified index strategies reduce the influence of the largest companies. Explicit sector limits can be set across the whole household rather than account by account. And allocations to mid- and small-cap stocks, international markets, fixed income, and real assets add exposures that depend less on the same drivers. Each approach will behave differently from the S&P 500, sometimes for long stretches, and that difference is the point.

Table 3: Approaches to Reducing Technology Concentration

Strategy categories are shown for education only. All investing involves risk, including loss of principal. Diversification does not ensure a profit or protect against loss.

Q: Do I have to sell all my company stock to fix this?

No, and selling everything at once is rarely the most tax-efficient path. The tools covered in our earlier paper, Diversifying Concentrated Company Stock, still apply: a multi-year sales schedule, exchange funds, options strategies such as collars, long/short direct indexing, and charitable gifts of low-basis shares. What this paper adds is where the proceeds go. Each time you reduce the position, the money should move into the part of the portfolio designed to offset your remaining exposure, not back into the same companies through a broad index fund. How fast to move depends on your tax picture, your vesting schedule, and your view of the risk, and it's worth deciding in advance rather than vest by vest.

Q: Are there tax traps when I sell company stock and reinvest?

A few. If you sell employer shares at a loss within 30 days before or after an RSU vest or an ESPP purchase, the wash-sale rule can disallow the loss, because the newly acquired shares count as a repurchase.¹² Buying a broad index fund that happens to hold your employer generally isn't treated as buying substantially identical stock, but confirm the details with your CPA.

Large sales can also push gains into higher federal brackets and trigger the 3.8% net investment income tax.¹³ In Washington, long-term gains above the state's annual exemption are taxed at 7%, rising to 9.9% on gains above $1 million¹⁴, so spreading sales across tax years can matter as much as the sale itself.

Q: How much of a tilt away from technology is enough?

There's no universal number, but there is a sound way to set one. First, decide the most you're willing to have riding on your employer across your whole household, including unvested equity. Published industry guidance offers a starting range: the Schwab Center for Financial Research writes that generally holding more than 10–20% of your company stock can put your portfolio at risk of overconcentration.⁸ Russell Investments defines a concentrated position as more than 10% of a portfolio in a single stock.⁹ T. Rowe Price treats 5% to 10% as the level that merits attention, with more than 10% warranting more immediate planning.¹⁰

Second, set a separate limit for your look-through exposure to the largest technology companies. Third, write both limits down and check them at each vest and each rebalance. These ranges are general guidance rather than a rule, and the right limits for you depend on your age, income stability, other assets, and how much volatility you can tolerate.

Q: How is a portfolio built around you different from one chosen from a menu?

Most portfolios are selected from a list of prebuilt models designed for a generic investor with a given risk tolerance. Those models don't know where you work, what you've already been granted, or what vests next quarter. We construct and maintain our own model portfolios, which lets us start from your plan and decide how the portfolio should be built around the exposures you already carry — including what to exclude, what to cap, and what to add. The plan comes first; the portfolio is built to fit it. That's a difference in process, not a promise of results, and it's the question worth asking any advisor you work with.

Q: What's the most useful thing to do this quarter?

Run your look-through numbers before your next vest and before year-end tax planning. Two figures — total employer exposure and total exposure to the largest technology companies — will tell you more than any account statement. If either is higher than you'd choose, fall is a practical time to act: loss harvesting, charitable gifts of low-basis shares, and the timing of sales all come together in the fourth quarter. Consider reviewing the tax side with your CPA before you move.

Final Thoughts

Selling company stock is the step everyone talks about. Where the money goes next gets far less attention, and it matters just as much.

A broad index fund is a sound default for most investors. For a tech professional whose paycheck, equity, and career already rest on the same companies that dominate that index, it can end up repeating a bet you meant to reduce. The question isn't whether you're diversified by account count. It's how much of your household depends on one sector's next few years — and whether that amount is one you chose.

Sources

1. S&P 500 constituent weights: Slickcharts, "S&P 500 Companies by Weight," accessed September 22, 2026. Index weights change daily.
2. Goldman Sachs, "Is the S&P 500 too concentrated?" (2024) — reports a 27% top-10 share at the peak of the 2000 technology bubble.
3. S&P 500 sector weights: ChartRow, "S&P 500 Sector Weights," as of September 15, 2026 (technology 38.3%; communication services 10.0%).
4. Nasdaq-100 sector weights: ChartRow, "Nasdaq-100 Sector Weights," as of September 22, 2026 (technology 61.0%).
5. CNBC, "Tech AI spending approaches $700 billion in 2026, cash taking big hit," February 6, 2026.
6. 2022 index returns: Slickcharts, "S&P 500 Total Returns by Year" (-18.11%); ChartRow, "Nasdaq-100 Returns by Year" (-32.6%). Past performance does not guarantee future results.
7. Layoffs.fyi data as reported by TechCrunch, "A comprehensive archive of 2023 tech layoffs," May 1, 2024 (262,735 employees in 2023; 59% above the 2022 total).
8. Schwab Center for Financial Research, "Why Overconcentration Is Risky—and How to Avoid It," January 10, 2025.
9. Russell Investments, "Concentrated stock positions: High rewards, higher risks," February 6, 2025.
10. T. Rowe Price, "Helpful actions you can take to reduce concentration risk in your portfolio," August 2026.
11. Ascent Wealth Solutions, "Managing Concentrated Stock for Technology Professionals."
12. Internal Revenue Service, Publication 550, Investment Income and Expenses (wash-sale rules).
13. Internal Revenue Service, Net Investment Income Tax (3.8%), Internal Revenue Code section 1411.
14. Washington State Department of Revenue, "Capital gains tax" (7% on long-term gains above the annual standard deduction, with an additional 2.9% on gains above $1 million).

This paper is intended for educational purposes and does not constitute tax, legal, or investment advice. Individual circumstances vary significantly. Consult a qualified tax or financial professional before making decisions. Hypothetical examples are for illustration only and do not represent any specific investor, portfolio, or investment. Companies named are identified only to describe index composition and regional employment; this is not a recommendation to buy, sell, or hold any security. Index weights are as of September 22, 2026 and change daily. Indexes are unmanaged and cannot be invested in directly. Past performance does not guarantee future results. Securities and Investment Advisory Services are offered through Osaic Wealth, Inc., member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Osaic Wealth does not offer tax or legal advice. Investing involves risk, including the possible loss of principal. Asset allocation, diversification, and planning strategies do not assure a profit or protect against loss in declining markets.