What Is a Concentrated Position?
An executive is compensated in company stock, or a business owner sells a company and receives proceeds in stock. These are just two of the situations that can result in a concentrated position—an allocation of 10 percent or more to a specific security or asset group.
Often concentrated positions can be instrumental in building wealth. Yet they can also have a devastating effect on a portfolio if it underperforms, as experienced by holders of internet and technology stocks in the early 2000s and real estate investors in 2008.
Therefore, investors often look for ways to:
- Reduce a portfolio’s concentration risk
- Optimize the tax efficiency of a portfolio
- Manage concentrated positions through key strategies
To learn more, download your free guide on what to consider regarding concentrated positions.
Wells Fargo Investment Institute, Inc., is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.