RSUs at Vest: Should You Sell Right Away or Keep Holding?
When RSUs vest, a lot of otherwise-decisive people get stuck. Do I hold or sell?
The problem many executives face: a big chunk of your financial future is already tied to your employer. It may be much more than you realize.
You probably know the company well. Hopefully, you believe in the company’s future (you are working there, after all). You likely don’t want to miss out if the stock price goes up (nobody enjoys watching coworkers get rich while they sit on the sidelines).
The decision can quickly get emotional. And we aren’t big fans of making financial decisions based on emotion.
at vest, start with one question
Start by looking at the vested RSU balance. A simple way to cut through the noise is by asking yourself:
If you were holding the same amount in cash, would you turn around and buy this stock?
Choosing to hold RSUs is no different than deciding to buy the company’s stock over every other possible option.
A lot of smart executives keep vested stock almost by default. They’ll figure out what to do with it later. But, in reality, they already decided.
Holding is a decision. The moment RSUs vest, they stop being a future benefit and become part of your intentional investment portfolio.
Why many executives are more concentrated than they realize
There’s an old saying in the investment world: concentrate to get rich; diversify to stay rich.
It should say, concentrate and be right to get rich; diversify to stay rich. Having your financial future significantly tied to one company can be risky.
Most people underestimate this risk because they only count the shares they can see. That’s not the whole picture.
Your salary comes from the company. Your bonus may depend on the company. Your future equity depends on the company. Your career momentum may depend on the company. And then there is the vested stock sitting in the account.
That stack adds up. You are concentrated.
That is not automatically wrong. But it should be intentional.
This comes up often with executives around Kansas City, too, especially at public companies or growth-oriented employers where equity has quietly become a meaningful part of compensation. I don’t know many people who say, “I would like half my financial life tied to my employer.” More often, it just sort of happens.
A personal anecdote
Before Divvi, I worked for a Kansas City-area company, Waddell & Reed, for about 15 years. It was a great experience. I was fortunate to work alongside a lot of smart, generous, and hard-working people.
RSUs were a part of my compensation for many years.
I got to experience the fun side of RSUs, holding shares in a company whose price rose from the mid-teens in 2008 to over $73 per share in 2014.
And I also experienced the painful side of owning RSUs. From March 2014 through September 2020, we saw the price fall from the mid-70s to about $15 per share. Over 70% of the value…poof. To add insult to injury, the S&P 500 more than doubled over this period.
This experience went from ‘who would ever sell these RSUs!’ to ‘how soon does the next grant vest so I can sell?’ It didn’t make me pro- or anti-company stock. But I have a greater appreciation for making executive comp part of a broader plan, rather than a stand-alone buy/sell decision.
Other Kansas City-area executives have likely experienced some of these highs and lows. We identified publicly traded companies with a significant Kansas City presence, then we looked at their stock performance from the last five years. The chart shows the best 12-month returns (green bars) and worst peak-to-trough losses (orange bars) during this period.
Holding RSUs can be an emotional roller coaster.
Why selling at vest could be a sensible default
Choosing to sell at vest can be a reasonable default.
It has nothing to do with feelings toward the company or personal opinions on where the stock price is heading.
Instead, it forces discipline. Your portfolio does not need to double down on the same risks that are already tied to your career, salary, and bonuses. And, for many executives, another round of RSUs will be granted soon.
For a lot of households, vested RSUs may be best treated like compensation that happened to arrive in stock form. Once they vest, selling and reallocating into the broader, more diversified plan can be a sound move.
That is not automatically the right move in every case, but for many households it can be a disciplined starting point. The better answer depends on how large the position is, how much of the household’s financial life is already tied to the company, and whether there is a clear reason to keep the shares. More on that below.
The tax piece
The tax side matters, but it does not need to turn into a painful deep dive.
This may be the cleanest way to think about it:
Vesting creates compensation income
Holding after vest creates a new investment decision
Those are two separate things.
In general, when RSUs vest, the value of those shares is treated as compensation income, right then. If you continue to hold the stock, you are deciding whether you want the capital gains or losses from that point forward.
Most of the time, it doesn’t need to be more complicated than that.
When holding may still make sense
Selling at vest is not always right. There are good reasons to keep some shares in your employer’s stock. Maybe…
The position is still modest relative to your overall net worth.
You already have a clear cap on how much company stock you want to own, and this fits inside it.
Charitable gifting is part of the picture.
There is a broader tax plan behind the decision.
You simply want to keep some exposure because you know the company well and are passionate about its future.
Those are all perfectly reasonable. However, there is a difference between choosing to hold some stock and just avoiding the decision altogether.
“We want 5% of our investable assets in company stock” is a plan. “We just keep whatever vests” is not.
We are generally less interested in whether someone owns shares of a specific company and more interested in whether they have a thoughtful plan behind the decision.
Summary
As we mentioned at the beginning, this topic can easily get framed too narrowly. Should I hold or sell?
The question we would ask: How much of our financial future is already tied to this company’s future.
We do not think this is a stock-picking question. It’s a risk question. And it may help to frame it as part of a broader financial plan.
If company stock, RSUs, and bonuses are becoming a bigger part of your financial life, it may be time to pressure-test how much of your plan depends on one employer.
This article is for informational purposes only and is not individualized investment, tax, or legal advice. RSU decisions can involve significant tax consequences, so readers should consult their tax advisor or other qualified professional regarding their specific situation. Any company or security references are illustrative only and not a recommendation to buy, sell, or hold any security.
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