If you’ve watched a single stock grow into a large part of your portfolio whether through appreciation, equity compensation, or a founding stake this is worth reading. Not because something is wrong with the company. Because the data on what tends to happen next might surprise you.
The Odds Are Not What Most People Think
Many investors assume that a single stock is roughly a coin flip with about even odds of beating the market or trailing it. Nearly a century of data says otherwise.
A comprehensive study of the largest 3,000 U.S. stocks from 1926 through 2022 found that the typical stock underperformed the broad market by nearly 8% over a 10-year period.¹ And for stocks that had been strong recent performers, the kind most likely to have grown into a concentrated position, the typical 10-year underperformance was closer to 18%.¹
This pattern held in 93% of all rolling 10-year periods measured since World War II. It showed up across nearly every industry; not just technology, but healthcare, energy, consumer goods, and utilities as well.
Why? Because market returns are driven by a very small number of exceptional companies.2 Most stocks, even strong, well-managed ones, eventually mean-revert.3 And once a stock has already delivered outsized gains, it faces a harder road: higher valuations, more competition, and the simple difficulty of sustaining above-market growth from a larger base.4 The stock that built your wealth is not the same investment it once was.
The Cost of Selling is Worth Examining
We want to be honest about the other side of this. There are legitimate reasons an investor might not have started selling a concentrated position, and the decision to do so is rarely simple.
Taxes matter. If you have a large embedded gain, the cost of selling is real. That doesn’t mean staying put is the right answer, but it does mean the decision deserves careful math, not a reflexive response in either direction.
Some companies do keep winning. Microsoft spent 15 years underperforming after its 1990s run and then delivered one of the great wealth-creating decades that followed. The data tells us that outcome is the exception, not the rule. But exceptions exist, and no one can rule them out in advance.5
Confidence in a company you know well is not irrational. Founders, executives, and long-term shareholders often have real insight. The risk is that this confidence tends to linger long after the informational edge has faded and it’s very hard to see that from the inside. Conviction is valuable. A plan is better.
The goal is not to eliminate a concentrated position at any cost. It is to make a clear-eyed decision about how much concentration risk you are carrying and whether it is intentional.
There Are More Options Than Most People Realize
Reducing a concentrated position doesn’t mean selling everything at once and writing a large check to the IRS. At Summit, we work with clients to build a strategy that accounts for their tax situation, timeline, and goals. A few of the tools we use:
- Gradual sales over time. Spreading dispositions across multiple years manages the tax impact incrementally, often paired with tax-loss harvesting elsewhere in the portfolio to offset gains.
- Direct indexing. We can build a diversified portfolio of individual stocks alongside your concentrated position, generating tax losses that help offset gains as you gradually reduce concentration over time.
- Charitable giving strategies. Donating appreciated shares to a donor-advised fund or charitable remainder trust can eliminate capital gains taxes on those shares. For clients who plan to give anyway, this is often the most efficient move available.
- Hedging strategies. Options tools like protective puts or collars can reduce your downside exposure without an immediate sale. Useful when lockup periods or other timing constraints are in play.
If a single stock represents more than 10% of your investable assets, we’d welcome the conversation. The goal isn’t to talk you out of your position, it’s to make sure the decision is intentional, and that there’s a plan behind it.
Reach out to your Summit advisor to get started.
SOURCE
1. Petajisto, A. (2023). “Underperformance of Concentrated Stock Positions.” All return figures are market-adjusted (relative to the cap-weighted U.S. market portfolio) and reflect median outcomes for the largest ~3,000 U.S. stocks, excluding microcaps, from 1926–2022. “Recent winners” = top 20% of stocks by prior 5-year return. Microsoft performance figures from FactSet, as cited in Elijah, C. (2025), Empirical Wealth Management.
2. Bessembinder, H. (2018). "Do Stocks Outperform Treasury Bills?" Journal of Financial Economics, Vol. 129(3), pp. 440–457. The best-performing 4% of listed companies explain the net gain for the entire U.S. stock market since 1926 — the other 96% of stocks, collectively, only matched Treasury bills. This is the primary peer-reviewed academic citation for that sentence and is widely accepted in the literature. Available on SSRN: https://ssrn.com/abstract=2900447
3. De Bondt, W.F.M. and Thaler, R. (1985). "Does the Stock Market Overreact?" Journal of Finance, Vol. 40(3), pp. 793–805. https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.3.1.189
4. Petajisto (2023), Section III-C and Figure 8.
5. Microsoft performance figures from FactSet, as cited in Elijah, C. (2025), Empirical Wealth Management.
Summit Wealth Group is a registered investment adviser. The information provided herein is for informational and educational purposes only and does not constitute legal advice. Nothing contained in any communication, correspondence, report, or other material prepared or distributed by Summit Wealth Group should be construed as legal advice or as the formation of an attorney-client relationship. Summit Wealth Group does not provide legal advice, legal opinions, or legal services of any kind. Clients and prospective clients with questions regarding their specific legal situation, rights, or obligations are strongly encouraged to consult a licensed attorney in their jurisdiction.