Restricted Stock Units, or RSUs, are one of the most important wealth-building tools in the modern tech industry.

For employees at companies like Google, Nvidia, PayPal, Intel, Adobe, and many others, RSUs can meaningfully increase total compensation. In strong markets, they can create life-changing wealth. But they can also create a risk that is easy to underestimate:

Your income and your investment portfolio may become tied to the same company.

Most RSU grants vest over several years, often with a one-year cliff followed by quarterly vesting. Once shares vest, they usually become actual tradable stock. At that point, employees face an important decision:

Do you keep the shares, or do you diversify?

This decision matters because holding vested RSUs can expose employees to Concentration Risk and Idiosyncratic Risk. Your salary, bonus, future RSUs, career prospects, and investment portfolio may all depend on the same company performing well.

That can work beautifully when the stock rises.

But when it does not, the downside can be painful.

To explore this risk, we ran a Historical Backtest using stresstest.pro’s market engine, looking at several large technology stocks over the last 5 years. This period includes the pandemic-era growth boom, the 2022 rate-driven selloff, and the AI-led recovery.

The goal is not to say that employees should always sell or always hold. The goal is to show how different the outcomes can be when compensation becomes concentrated in a single stock.

The Winners: Why Holding RSUs Can Feel Obvious

It is easy to understand why many employees keep their vested RSUs.

When your company’s stock is rising quarter after quarter, selling can feel like a mistake. Employees may see coworkers becoming paper millionaires and start believing that their company is different from the rest of the market.

For some employees, that belief was rewarded.

If you held RSUs in Nvidia (NVDA) or Alphabet (GOOG) during parts of the last 5 years, concentration could have produced exceptional results.

NVDA & GOOG RSU Winners

In this scenario, holding concentrated company stock paid off. Nvidia’s extraordinary AI-driven run created returns that dramatically outpaced broad-market exposure. Alphabet also remained one of the stronger large-cap technology businesses over this period.

This is the upside of concentration.

A single great company can outperform a diversified index by a wide margin.

But this is also where the risk begins. Positive outcomes can create a dangerous feedback loop. The longer a company stock performs well, the easier it becomes to believe that selling is unnecessary, or that diversification is only for people working at weaker companies.

That confidence can disappear quickly when the cycle turns.

The Losers: When Concentration Cuts the Other Way

Now compare that with PayPal (PYPL) and Intel (INTC) over the same broad period.

Both are well-known technology companies. Both have had large employee bases. Both have issued meaningful equity compensation. Neither was an obvious “bad company” to employees receiving RSUs during the market peak.

But the stock outcomes were very different.

PYPL & INTC RSU Losers

This is the other side of concentration risk.

An employee who kept vested shares in PYPL or INTC instead of diversifying into a broad-market fund would have experienced severe underperformance and large Max Drawdowns.

The risk is not just that the stock falls.

The bigger problem is that multiple parts of the employee’s financial life can weaken at the same time:

Existing vested shares may decline in value.
Unvested RSUs may become worth much less than expected.
Future refresh grants may be smaller.
Job security may become more uncertain.
Large life goals, such as buying a home or retiring early, may get delayed.

This is why RSU concentration can be so dangerous. It is not only an investment risk. It is also a career-income risk.

A $200,000 RSU grant can look very different depending on what happens to the stock before and after vesting. In a rising stock, the grant can become much more valuable. In a falling stock, the expected value can shrink dramatically, and the vested shares already held can decline at the same time.

Meanwhile, a diversified index such as SPY may also fall, but it is not dependent on one company’s execution, product cycle, management decisions, valuation, or competitive pressure.

The Rollercoaster: Even Good Companies Can Be Hard to Hold

Not every concentration-risk story ends in disaster.

Sometimes the company remains strong, but the stock path is extremely volatile. Adobe (ADBE) is a useful example.

ADBE RSU Volatility

Adobe did not become a failed business. But the stock experienced a major drawdown during the 2022 selloff. For employees holding a large amount of vested ADBE shares, the experience was still difficult.

This is the “volatility tax” of single-stock exposure.

Even when the final return looks acceptable, the path can be stressful. A 40% or 50% drawdown can affect real-life decisions. Someone planning to buy a home, pay for education, move cities, support family, or reduce work hours may not have the luxury of waiting years for a recovery.

This is where portfolio risk metrics become useful.

A concentrated stock position may offer higher upside, but it often comes with higher volatility, larger drawdowns, and a less stable Sharpe Ratio. A diversified portfolio may not capture every single-stock winner, but it can reduce dependence on one company’s outcome.

The Key Question: Would You Buy the Stock Today?

One simple way to think about vested RSUs is the “cash bonus test.”

Imagine your employer gave you a cash bonus today instead of stock.

Would you use that entire bonus to buy your employer’s stock?

If the answer is yes, then holding may be consistent with your actual investment view.

If the answer is no, then keeping vested RSUs may simply be inertia. You may be holding the stock because it arrived in your account by default, not because you would actively choose to buy it today.

That distinction matters.

Once RSUs vest, they are no longer just compensation. They are part of your investment portfolio.

Practical Ways to Manage RSU Risk

There is no single RSU strategy that fits everyone. Taxes, trading windows, blackout periods, company rules, personal goals, risk tolerance, and local regulations all matter.

But employees can still build a more systematic process.

1. Separate your job from your portfolio

Your employer already affects your income, career growth, bonus, future RSUs, and job security. Holding a large amount of company stock can make your portfolio depend on the same source of risk.

The more your financial life depends on one company, the more important it becomes to measure that exposure.

2. Decide before the vesting date

The hardest time to make a decision is right after shares vest, especially if the stock has recently moved sharply.

A pre-defined rule can help reduce emotional decision-making. Some employees sell all vested shares. Some sell a fixed percentage. Some keep a limited amount and diversify the rest.

The important part is having a process before emotions take over.

3. Avoid accidental concentration

Many employees do not intentionally build a concentrated portfolio. It happens slowly.

One quarterly vest becomes two. Then refresh grants arrive. Then the stock rises. Suddenly, a large percentage of net worth may be tied to a single company.

This is why tracking concentration over time matters.

4. Understand the Tax Trap

A common misconception is that holding RSUs avoids taxes. It does not. RSU vesting is a taxable event—the value of the vested shares is taxed as ordinary income the moment they vest. Your company usually performs a "sell-to-cover" to automatically pay these taxes.

Many employees don't realize that holding the remaining stock after this tax withholding is mathematically identical to taking your post-tax cash paycheck and buying your company's stock at the current market price.

Furthermore, if you hold the stock and it crashes (like the PYPL or INTC examples), you've already paid high income taxes on the vested value. If you sell at a loss later, you can only claim up to $3,000 per year in capital losses against your ordinary income. It is a highly asymmetric tax risk.

5. Plan around blackout windows (10b5-1 plans)

Tech employees are heavily restricted on when they can buy or sell company stock. If you choose to hold your RSUs, a crash might happen during a blackout period when you are legally forbidden from trading. You could be trapped watching your net worth plummet without the ability to hit the sell button.

To solve this, employees should utilize 10b5-1 plans. These are automated trading plans that allow you to pre-schedule the sale of your RSUs (e.g., "sell all shares immediately upon vesting") before a blackout period begins, ensuring you are never trapped by insider trading restrictions.

6. Stress test the downside

The question is not only, “How much could I make if this stock keeps rising?”

It is also:

What happens if this stock falls 40%, 50%, or 70% while the rest of my financial life is still connected to the same employer?

That is the question many employees do not ask until after the drawdown has already happened.

Final Thought: RSUs Are Powerful, But They Are Not Risk-Free

RSUs can be an incredible compensation tool. For many employees, they are one of the fastest ways to build wealth.

But they can also create hidden concentration risk.

The danger is not receiving RSUs. The danger is treating vested RSUs as “free shares” instead of recognizing them as real portfolio exposure.

Some employees will benefit enormously from holding company stock. Others will suffer major losses from doing the exact same thing. The difference is often only clear in hindsight.

That is why the better question is not:

“Will my company stock go up?”

The better question is:

“How much of my financial future should depend on one company?”

Use stresstest.pro to analyze your portfolio, measure concentration risk, and see how your holdings may behave across different market scenarios.

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