{"id":394,"date":"2013-09-01T20:26:42","date_gmt":"2013-09-01T20:26:42","guid":{"rendered":"http:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/"},"modified":"2023-10-23T22:41:50","modified_gmt":"2023-10-24T02:41:50","slug":"concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker","status":"publish","type":"post","link":"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/","title":{"rendered":"Concentrated Stock Portfolios"},"content":{"rendered":"<ul>\n<li>Many families have significant wealth tied up in the publicly traded shares of a single firm. Concentrated exposure to a single stock\u2014often the family\u2019s original source of wealth\u2014represents a significant risk to the family\u2019s wealth and its future spending and charitable-gifting power. Single stocks, on average, are about 68% more volatile than a diversified portfolio, and are much more crash-prone. This greater risk is generally uncompensated, with single stocks offering a lower return, on average, than a diversified portfolio. Investors who are not in a position to control the company\u2019s operations and who do not have confidence it will outperform can generally benefit from paring back their exposure.<\/li>\n<\/ul>\n<ul>\n<li>Emotional ties to the company that may have made the family wealthy can discourage diversification. Additional impediments to diversification include: <b>anchoring<\/b> to a particular reference price (\u201cI will not sell until the share price gets back above $100\u201d), <b>loss avoidance<\/b> (investors tend to prefer avoiding losses, such as the guaranteed loss associated with capital gains tax, to acquiring gains), and an <b>attraction to long shots<\/b> (an investor tendency toward over-optimism about favorable low-probability outcomes).<\/li>\n<\/ul>\n<ul>\n<li>For families who commit to reducing their single-stock risk, a variety of strategies are available. <b>Outright sales<\/b> are straightforward and effective (these can take place immediately, or can be structured over time with covered calls to ensure a disciplined approach and add income). For families who have charitable goals, <b>granting concentrated low-basis shares to a charitable investment pool<\/b> (such as the family\u2019s private foundation, to a donor-advised fund, or to a community foundation) is a simple yet effective strategy to permanently eliminate exposure to the concentrated position. For temporary hedging, <b>zero-premium collars<\/b> can be effective.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Families can use several strategies to mitigate the risks of single-stock exposures, thereby supporting both wealth-preservation and philanthropic goals.<\/p>\n","protected":false},"author":26,"featured_media":2926,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_searchwp_excluded":"","footnotes":""},"categories":[56],"class_list":["post-394","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-clients-family-offices","topics-portfolio-strategy"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Concentrated Stock Portfolios - Cambridge Associates<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.cambridgeassociates.com\/wp-json\/wp\/v2\/posts\/394\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Concentrated Stock Portfolios - Cambridge Associates\" \/>\n<meta property=\"og:description\" content=\"Families can use several strategies to mitigate the risks of single-stock exposures, thereby supporting both wealth-preservation and philanthropic goals.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/\" \/>\n<meta property=\"og:site_name\" content=\"Cambridge Associates\" \/>\n<meta property=\"article:published_time\" content=\"2013-09-01T20:26:42+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-10-24T02:41:50+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.cambridgeassociates.com\/wp-content\/uploads\/2013\/09\/AdobeStock_183104051-s.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"683\" \/>\n\t<meta property=\"og:image:height\" content=\"383\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Michelle Phan\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/\"},\"author\":{\"name\":\"Michelle Phan\",\"@id\":\"http:\/\/www.cambridgeassociates.com\/#\/schema\/person\/9ff9b39353d9737a2f3b2ab0529820ea\"},\"headline\":\"Concentrated Stock Portfolios\",\"datePublished\":\"2013-09-01T20:26:42+00:00\",\"dateModified\":\"2023-10-24T02:41:50+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/\"},\"wordCount\":284,\"publisher\":{\"@id\":\"http:\/\/www.cambridgeassociates.com\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.cambridgeassociates.com\/wp-content\/uploads\/2013\/09\/AdobeStock_183104051-s.jpeg\",\"keywords\":[\"Portfolio Strategy\"],\"articleSection\":[\"Private Clients &amp; Family Offices\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/\",\"url\":\"https:\/\/www.cambridgeassociates.com\/insight\/concentrated-stock-portfolios-deborah-christie-sean-mclaughlin-and-chris-parker\/\",\"name\":\"Concentrated Stock Portfolios - 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