Tax Strategies for Dealing With Concentrated FAANG Positions

As we head into the final stretch of 2025, just weeks after the S&P 500 hit all-time highs, I’m getting a fresh wave of questions about how to manage concentrated stock positions.

We’ve covered strategies like tax-loss harvesting and direct indexing before, but for many high-earning tech employees with large, concentrated holdings, those tools alone may not be enough. This is especially relevant now as more financial advisors are leading with their tax expertise as a way to win new clients. And while that can add real value, I want the FAANG FIRE community to go into those conversations fully informed.

On the latest Not Advice podcast, I sat down with my co-host Brent Sullivan, an expert in tax-aware investing, to walk through a realistic scenario that many FAANG employees face. Together, we unpacked several potential solutions and their trade-offs.

This post is a high-level recap of that conversation. For the full deep dive, you can listen on YouTube, Apple Podcasts, or Spotify. And if you find it helpful, subscribing and leaving a review goes a long way in supporting the show.

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A Real Conversation With an Advanced DIY Investor

To make the conversation with Brent real, I built a fictional scenario loosely modeled on my own situation. The numbers are inflated, rounded, and simplified so we could focus on the strategies rather than the messy details.

Here’s the backdrop: I sold every single Meta RSU vest during my 10 years there and kept my portfolio diversified. But I wasn’t as disciplined with my partner’s Uber shares. She’s been there for a decade and is still employed, which is why I’m semi-fired and not retired. Now, with Uber at $100 per share, we’re sitting on a position that’s bigger than the percentage I ever said I’d be comfortable holding.

So in this podcast, I stepped into the role of an advanced DIY investor with real questions about how to handle a concentrated position. The scenario we walked through is fictional, but it’s close enough to reality that I’m genuinely working through it myself.

The Scenario Details

In our scenario, the advanced DIY investor has a $10 million invested net worth. Of that, $1 million is tied up in a single concentrated position at their current employer, making up 10% of their entire portfolio. They also have $500,000 in cash in their taxable account waiting to be deployed.

The rest breaks down like this: $5.5 million in their taxable account spread across low-fee index funds like VTI and VXUS, and another $3 million in retirement accounts split between Roth and pre-tax. Outside of the concentrated stock and cash, their allocation looks like a textbook Boglehead portfolio: 55% U.S. equities, 30% international, and 15% bonds.

Profile Snapshot

• Net Worth: $10M

• Location: California

• Status: Married Filing Jointly

• Taxes: 37% Federal, ~10.3–11.3% CA

Portfolio Composition

• Taxable Account: $7M (70%)

  • Diversified Funds (VTI/VXUS): $5.5M (55%)

  • Employer Stock: $1M (10%) — Cost Basis $300K, $700K Unrealized (long-term)

  • Cash: $500K (5%)

• Retirement Accounts: $3M (30%)

Key Issue: $1M concentrated employer stock position with large unrealized gains.

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Some Solutions to Diversifying

1. Just Sell The Damn Thing

It’s fun to nerd out on complex strategies, but every conversation about diversifying a concentrated position should start with the simplest move: sell the stock, pay the taxes, and move on. That’s the baseline to measure everything else against.

In our example, the investor has a $1M position with $700K in unrealized long-term gains. In California, that means roughly a $260K tax bill. Sell, pay, and you’re left with about $740K to redeploy into VTI, VXUS, whatever you want—and you never have to think about that single stock again. Kind of nice, right?

2. Basic Tax Loss Harvesting and Direct Indexing

Perhaps you can look at your individual tax lots and identify the tax impact per share of some lots that are negligible allowing you to sell a significant chunk with more minimal tax impact and spread the remaining out over the next year giving you more time for basic tax loss harvesting or tax loss harvesting with direct indexing.

One option is to dig into your tax lots and sell shares where the tax impact per share is negligible. That lets you move a good chunk now and spread the rest into next year, giving you more room for tax loss harvesting—or even better, harvesting through direct indexing.

Timing really matters here. If you start in Q4, you’ve only got a few months, which won’t move the needle much. But with a full year, the data shows a direct index of the S&P 500 can harvest about 14% of the portfolio in losses. On $1M, that’s roughly $140K—more than half of the $260K tax bill from simply selling outright. So one play could be: sell, reinvest through a direct index, and let tax loss harvesting do a big part of the heavy lifting.

Timestamped Youtube Link to Tax Loss Harvesting and Direct Indexing

3. Long Short Tax Loss Harvesting

Now let’s say it’s late in the year and you don’t have 12 months to let direct indexing work. This is where a more aggressive approach comes in: long short tax loss harvesting.

The idea is simple: by using margin and adding short positions, you expand the “surface area” of your portfolio. More surface area means more opportunities for tax loss harvesting. On the long side, the extra cost basis from margin creates more room for losses. On the short side, if the market goes up, your shorts lose value—which can also be harvested as losses.

In other words, you’re deliberately creating volatility inside the portfolio so there are just more opportunities to harvest. And while a direct index might harvest 30–40% of the initial capital over 10 years, a long short portfolio with leverage can push that number dramatically higher—200–300% in some cases.

The trade-offs? Costs, complexity, and tracking error. More leverage means more fees, financing costs, and exposure to the portfolio manager’s choices. But if you only have a few months left in the year and need to generate meaningful losses fast, long short harvesting can be a powerful tool.

Timestamped Youtube Link to Long-Short conversation

4. Exchange Funds

An exchange fund gives you instant diversification without selling your concentrated stock. You contribute your shares “in kind” alongside other investors and end up holding a slice of the whole pool instead of just one company.

The trade-off: you’re locked in for seven years. That’s the rule to keep the tax benefits intact. Costs are lower than they used to be, and you avoid triggering capital gains on contribution, which is the real draw.

Most funds also include some illiquid assets, usually real estate, to preserve tax treatment. You typically won’t get stuck holding those directly, but it’s worth knowing they’re in the mix.

Bottom line: instant diversification and tax deferral, at the cost of liquidity for seven years.

Timestamped Youtube link to Exchange Fund conversation

5. CRUTs: Charitable Remainder Unitrusts

Overly simplified because I am still trying to wrap my head around this one. This is more typically employed at higher amounts than this specific scenario deals with, but can be a powerful tool to be aware of.

A CRUT lets you move your concentrated stock into a trust, avoid triggering capital gains, and get an immediate charitable deduction (usually 20–40% of the contribution). The trust then sells the stock, reinvests the proceeds, and pays you (or your beneficiaries) an annual income stream.

The catch is big: once the shares go in, they’re gone. The trust is irrevocable, and when the term ends, at least 10% of the assets must go to charity. Along the way, the payouts you receive are taxable based on the character of the underlying income.

It’s a complex, higher-fee solution, but it turns a chunky stock position into a diversified portfolio plus a predictable income stream—while locking in a charitable legacy.

Bottom line: upfront tax break and steady payouts, but loss of control and assets must eventually go to charity.

Timestamped Youtube Link for CRUT conversation

6. 351 Conversion: Seeding an ETF In-Kind

Just when I thought we were wrapping up the conversation Brent teased 351 Exchanges as another option. I didn’t let him cut off the conversation there! So the podcast went an extra 30 minutes as we dove into the topic that Brent has literally written a meme filled guide on:

A 351 exchange lets you contribute a diversified portfolio (no single stock over 25%) into a newly launched ETF. Your concentrated position can go in too, as long as it’s less than 25% of the contribution. In return, you get ETF shares without triggering capital gains.

The mechanics are quirky—these can only happen at ETF launch, so opportunities are limited. But the end result is straightforward: you swap your old holdings (concentrated stock plus diversified assets) for ETF shares that can be traded like any other ETF, while keeping all your original tax lots and deferring gains.

Fees vary by sponsor but are often competitive (15–25 bps for broad-based products). Minimums are usually around $1M in total assets, though some providers will work with smaller accounts.

Bottom line: a way to turn a mix of concentrated and diversified holdings into a single ETF with tax deferral, but only available at ETF launch and with strict diversification rules.

Timestamped Youtube Video Link to the section on 351 Exchanges.

Wrapping It Up

At the end of the day, all these strategies—from tax loss harvesting to exchange funds to 351 exchanges—should be compared against the simplest benchmark: just sell, pay the taxes, and move on. That option may not always feel sexy, but it’s often the cleanest.

The more advanced tools can make sense depending on your situation, your appetite for complexity, and your long-term goals. The key is to know what’s out there so that you understand the trade-offs.

If this conversation was helpful, check out the full episode of The Not Advice Podcast on YouTube, Apple Podcasts, or Spotify. And if you like what we’re doing, subscribing or leaving a quick review goes a long way in helping us keep building this for the FAANG FIRE community.

What are your thoughts on some of these more advanced strategies? Do you want to hear more about how I am thinking about managing my own concentrated position?