If you’re a tech professional, chances are you’re getting some form of company stock—likely as RSUs (Restricted Stock Units). When they vest, you own them outright, but the big question is: should you hold onto them or sell and diversify?

 

Welcome to my world of “It depends.”

 

Let's break down what it means to go “Diamond Hands” and hold, versus selling and spreading the risk.

 

The Key Considerations
 

When RSUs vest, they can be both a blessing and a challenge. Now that you own them, they impact your tax situation, investment portfolio, and overall financial goals. It’s time to consider:
 

• Tax Implications: ATO (Australian Taxation Office) will view vested RSUs as income, meaning you’ll need to pay taxes on the market value at vesting. If you hold them and the stock price increases, future gains will be subject to capital gains tax.

• Financial Planning: Think about your bigger financial picture—are these RSUs supporting your goals, or could they be putting too much weight in one company?

• Diversification: How much exposure do you have to your company’s stock? And if you choose to sell, what will you do with the proceeds?

Why Diversify?

Let's look at some reasons why selling and diversifying could be a smart move.
 

1. Avoiding Overexposure

Would you put all your savings in one stock if it weren’t tied to your company? If not, diversifying may feel safer. Consider this: if you were to receive a $50,000 bonus in cash, would you buy $50,000 worth of company stock? For most, the answer is no. The same logic applies here; diversifying your RSUs allows you to spread risk and reduce reliance on one stock’s performance.
 

2. Minimizing Tax Surprises

In Australia, there’s no added tax benefit to holding RSUs after they vest. When RSUs vest, they’re taxed as income, and future gains are subject to capital gains tax(CGT rules applies). Holding onto these shares longer won’t reduce your income tax bill, so selling some could help you avoid unexpected tax obligations.

3. Managing Career and Investment Risk

Your career is already tied to your company’s success, so holding a large portion of its stock amplifies risk. Think about it. You have a lot depending on your company.

• Your income. 

• Your health insurance. 

• Your future unvested shares. 

 

If your company stock goes off a cliff, you may get hit with a double whammy of investment and career risks at the same time.

 

Working with tech leadership teams, I’ve noticed a pattern: as soon as their shares vest, they sell. Curious about this, I’ve asked why, and the answer is consistent. One tech leader put it well: “I sell the shares immediately and move the funds into index investments. I work here because I believe in the company’s success—my unvested shares already tie me to its future. Plus, with both me and my spouse in tech, diversifying keeps my portfolio steady in this fast-paced world, and I sleep better without the volatility.”

 

Why Hold Onto Your RSUs?

On the other hand, holding your vested RSUs can be beneficial, especially if you believe strongly in your company’s future.
 

1. Confidence in Your Company’s Growth

If you have faith in your company’s leadership and market position, holding onto your RSUs can be rewarding. Companies with a strong market share and growth strategy—such as Amazon or Microsoft—can add considerable value over time. However, remember that confidence can sometimes blur risk perception, so balance optimism with realism. Specially when the stock is down. Think about ZIP or A2 Milk – no one is too big to fail.
 

2.Diversification is good when you don’t know what you are doing-

Warren Buffett once said, "Diversification is a protection against ignorance. It makes little sense if you know what you're doing." His point is that diversifying helps reduce risk for those who may not fully understand each investment. While it’s easy to feel confident about knowing your industry or company, keep in mind that personal perspective can sometimes be limited. Market challenges and competitors’ moves are often unpredictable, so diversifying can help you prepare for the unknown and protect your wealth from unforeseen risks.
 

Potential for Significant Wealth

Concentration builds wealth, while diversification protects it.” If you’re aiming for substantial wealth and have a high-risk tolerance, holding onto your company’s stock could help you reach that. However, this approach requires accepting potential downsides, and it’s worth considering how much loss you’re comfortable with.

3. Room to Absorb Losses

If a major dip in your company’s stock won’t affect your financial stability, you may feel comfortable holding onto your RSUs. Perhaps you already have other diversified investments, and your cash flow isn’t dependent on this stock. In that case, a concentrated position in your company’s stock may be less risky for you personally.

 

Making the Decision: A Personalised Approach

Choosing to hold or diversify is ultimately a personal decision. Every individual’s financial situation, goals, and risk tolerance are unique. Take these questions into consideration:
 

• How much of my net worth is tied to my company’s stock?

• Am I comfortable with the risk if the stock price falls significantly?

• Do I need liquidity soon?

• Do I have access to other forms of equity or income for diversification?
   

These questions can provide clarity on whether your current allocation supports or hinders your financial objectives.
 

A Personal Note

A friend recently suggested I share more about what’s going on in my life outside work, so here it goes! Last month was a mix of family fun and financial adjustments.

• With inflation affecting holiday budgets, I decided to increase my holiday investment fund—family trips depend on it!

• On a lighter note, my three-year-old and older daughter have joined forces to wake me up early on weekends, this means I make breakfast dipped in chocolates!

• I am almost done with my first book Shares VS properties, where I try to give a new answer to a very old question.

• I’m now searching for a new hobby that helps me unwind and switch off mentally without adding too much physical strain. I am getting old and your help is much appreciated 😊

 

Work with a Financial Planner to Navigate Your Options

RSUs can be a valuable part of your compensation, helping you fund major goals like retirement, home ownership, or even early financial freedom. A financial planner can help you determine the right course of action, factoring in your personal goals, tax implications, and financial stability.
 

If you’re considering your options, don’t hesitate to reach out. It’s essential to make informed decisions about your RSUs, and I’m here to help you make the most of them.
 

My Financial Clarity Meeting is the most valuable thing you will get from an adviser before paying them a penny. By the end of the meeting, you will get a detailed assessment of your financial positions and how you can get ahead financially.