How much to sell?

Determine the maximum concentration of your stock you should keep holding in the short-term.

Please reference the tax calculator to familiarize yourself with tax rates.

Technical Details

This calculator determines the concentration of stock you should hold to receive the highest ratio of reward to risk. (The Sharpe ratio). It also tells you how much risk you are taking (expressed as volatility and equivalent position in broad-market fund) and allows you to adjust risk downward from the Sharpe-optimal portfolio (by holding cash and earning the risk-free rate on it).

As described here, absent your company's stock delivering excess returns or tax advantages, you should sell your stock immediately. However, the before-mentioned items (especially taxes) ncentivize you in various ways to hold on to your stock for a longer period. This calculator allows you to specify key parameters (how many months until your tax rate changes, what your tax rate on the sales are now and in the future, and how much embedded capital gain your stock holdings have, your own expected view on the stock relative to the market) — and will tell you how much to sell immediately (to reduce risk) vs. later.

If the target concentration exceeds your current and you are comfortable with the risk of holding your position, stop. You should not sell anything until you .

Once the optimal (highest reward to risk) is calculated, fine-tune how much risk you are comfortable with until the specified number of months pass.



This calculator utilizes Modern Portfolio Theory and is effectively calculating the tangency portfolio. between two assets: a broad-based index (e.g. VTSAX) and your stock (of which may have excess return due to favorable tax treatment).

Technical note: No additional return is given for beta, as that doesn't happen with high-risk stocks in the real world.

Read Strategic Asset Allocation if you want a really good overview of everything.