If you are employed by one of the myriad tech companies here in Silicon Valley, you have likely accumulated lots of company stock through stock options and/or restricted stock units (RSUs). If you haven’t been selling your shares as they vested, the runup in stock prices over the past decade has probably been a cause for celebration as you watched your net wealth grow. But there is a downside to having too much of your savings concentrated in a single company. If something should cause your company’s stock to fall, it would have an outsized negative impact on your overall investment portfolio.

How much of one stock is too much? That’s quite subjective. I generally recommend 10% as an appropriate threshold. But the greater the percentage, the greater the overall risk to your savings.

It may be hard to imagine your company’s stock price declining if it’s been doing very well over the years. But nothing keeps growing forever. Just look at the top ten U.S. stocks by market capitalization in 2000:

1. Microsoft
2. General Electric
3. Cisco
4. Walmart
5. Exxon Mobil
6. Intel
7. Citigroup
8. American International Group (AIG)
9. Merck
10. Pfizer

Some of them had been in the top ten stock for multiple decades. But by 2010 only four of them (Exxon, Microsoft, GE, and Walmart) remained on the list. Today the only company that is still in the top ten is Microsoft. And one of the companies (AIG) would have totally collapsed in 2008 if it had not been for a massive bailout provided by the U.S. government. The same kind of shifting is likely to be true for today’s leaders. At some point investors will prefer to invest more in companies other than Nvidia, Apple, or Alphabet (Google).

If you’re holding onto your company’s stock because you believe it will outperform the market’s average growth, consider this: as your company’s stock price increases, it becomes more expensive. There’s no difference between buying a stock at today’s price vs. holding onto the same stock. You’re still in effect acquiring it at its latest price. At what point does it become so expensive that it’s no longer worth buying (or holding)? Also recognize that the bigger a company gets, the harder it becomes for it to grow. A company with $10 million in revenue requires only an additional $1 million in revenue to grow by 10%. A $100 million company needs $10 million more to achieve the same 10% growth. At some point growth will slow. What do you think that would do to its stock price?

If you want to reduce your portfolio’s concentration risk and volatility from your company’s stock, what can you do? The simple solution would be to sell some or all of it. Unfortunately, that has tax consequences. The challenge is to balance the transition to a more diversified portfolio against the taxes you’ll owe during the transition period. There’s no holy grail here; you will end up paying taxes on the gains no matter what you do (unless you die first or donate the stock to charity). But there are ways of deferring those taxes, ideally to tax years in which the gains may have a lesser impact on your overall taxes.

I’ll discuss some of those approaches in Part 2.

(Artie Green is founder of Cognizant Wealth Advisors dba Perigon Wealth Management, LLC, a registered investment advisor. For more information visit cognizantwealth.com. More information about the firm can also be found in its Form ADV Part 2, which is available upon request by calling 877-977-2555 or by emailing compliance@perigonwealth.com).