Let’s say you invested $100K in a single stock 5 years ago and today it’s worth $500K. This could be your company stock, a block of stock options or an investment you made on your own….say in a brokerage account that you manage.

[That’s a pretty big gain in a short period of time, and not all that unusual for a lot of the biotech execs and life science professionals we work with].

At this point, what’s typically going through your mind is should I sell and lock in my $400K profit? Or let it ride because the stock might keep going up. This is even more difficult if you like the stock and are fairly confident that it will reach a higher price, esp if it’s a buyout candidate.

It it’s employer stock, you may feel a strong sense of loyalty to your company, whose stock incentive plans (options, RSUs, etc.) have made you fairly wealthy in the first place.

Of course, there’s always the flip side…what if you don’t sell the stock and it goes down? What if instead of 500K, this is $5M? How will that affect my overall financial plan…my family’s future?

Here’s one simple mental framework that tends to help clients feel good about taking action, regardless of what happens next.

Keep in mind, in our example, this is either employer stock or an investment you made in a brokerage account that you personally manage. Again, everyone’s situation is different…really no right or wrong answers here, just some perspective around this situation.

If you sell $200K worth of the stock, you’ve locked in a 100% gain on your original $100K investment over a period of 5 years. Regardless of what happens from this point – whether the stock continues going up, slips a bit, or falls hard, at least you know you’ve doubled your money in a relatively short period of time.

And if the stock keeps going up, you still have $300K that will continue to grow.

Again, everyone’s financial, tax & family situation is different so this may not be relevant to you…and this is by no means a recommendation to go out and sell a concentrated stock position. But if this happens to be on your mind, I hope this framework provides a simpler perspective around making a decision like this.

All the work we do here is highly personalized and tailored based on our client’s unique perspectives, preferences, values and goals. Always consult your CPA, tax advisor, reach out to our team…make sure that something like this is appropriate for you and your situation.

Disclaimer: For information purposes only and should not be interpreted as legal, tax or financial advice. Always consult your CPA/tax advisor/attorney (or reach out to us;) to discuss your specific situation. Past performance is no guarantee of future results.