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LARRY ELLISON, THE 81-YEAR-OLD cofounder of Oracle Corporation, recently became the world’s wealthiest person.
Oracle, a software company, isn’t nearly as large as its peers. So how did Ellison’s net worth manage to surpass that of Bill Gates, Jeff Bezos and the founders of other much larger companies?
The answer is simple: In the nearly 50 years since Oracle’s founding, Ellison has almost never sold a share of his company’s stock. According to an analysis by Smart Insider, which tracks executives’ share sales, Ellison has sold only a tiny fraction—less than 2%—of his shares over the years. The result is that today he still owns more than 40% of the company, worth nearly $400 billion.
In contrast, Ellison’s Silicon Valley peers have sold, or given away, shares much more aggressively. Mark Zuckerberg now owns less than 15% of Meta. Jensen Huang’s stake in Nvidia is under 4%. And Bill Gates’s stake in Microsoft is down to just 1%, following years of systematic sales and gifts to his foundation.
Ellison’s unwavering bet on Oracle has worked out well, but the company’s fortunes easily could have gone the other way. That’s why, for anyone else with a concentrated position in a single stock like this, diversification is what I’d recommend in virtually every case.
Diversification is probably the most important principle in personal finance. The obstacle for many people, though, is the prospective tax bill. At the federal level, the top capital gains tax bracket is 20%. At that level, an additional 3.8% surtax would apply, plus state—and even city—taxes in many places.
How can you strike a balance between managing risk and limiting taxes? Fortunately, the range of available options has expanded in recent years. If there’s a concentrated stock position in your portfolio, here are steps to consider.
You might start by assessing the risk. While there’s no single litmus test, I suggest asking these questions:
If you determine that the stock does represent a risk, the next step is to assess the tax situation. There are a number of questions to ask here: How highly appreciated is the stock? What would the tax be if you exited the entire position? Would it push your income into the next capital gains tax bracket? Do you own multiple tax lots, which could provide more flexibility?
If the answer is that the tax bill would be significant, then you’d want to evaluate strategies for reducing the holding. For starters, you’d want to decide on a target percentage for the stock. I recommend bringing individual stocks down to somewhere between 5% and 10% to manage risk. Why? The great investor Bernard Baruch put it this way: “Sell to the sleeping point.” That answer will be different for each of us, but that’s the gauge I’d use.
How can you begin reducing your holdings?
Many of the strategies are well known. You could sell a fixed number of shares each month and maybe accelerate those sales when the share price is strong. Or you could plan your sales so that you’d stay inside a particular tax bracket. And when you reinvest, you could employ a direct indexing service to diversify without inadvertently buying back the stock you’d just sold.
If you have charitable intentions, you could donate shares to a donor-advised fund, thus sidestepping the capital gains and capturing a deduction on the donation.
If you have adult children who are in lower tax brackets, you could gift them shares.
A somewhat more involved strategy would be to move your shares into what’s known as an exchange fund. How do these work? Imagine three friends. One has a concentrated position in Apple, another has a big holding in Amazon and the third has a big stake in Microsoft. Individually, they are each bearing a lot of risk. But if they contribute their shares into a common pool, the result would be instant diversification. They’d each own a third of a three-stock portfolio instead of just a single stock.
In reality, an exchange fund would have many more participants and many more stocks, providing an even greater benefit than in this simplified example.
Exchange funds have been around for years, but as noted recently in The Wall Street Journal, new competition has helped drive down the cost of these services. They can still be a bit pricey, at 0.4% to 0.9% per year, but investors are only obligated to remain in the fund for seven years. After that, they’re free to exit the fund, taking with them a pro rata share of the diversified portfolio.
If that seven-year lockup is a deterrent, there’s a new option to consider. A firm called Alpha Architect has devised a new ETF structure to help with concentrated stock holdings. This past summer, it launched an ETF (ticker: AAUS) that functions similarly to an exchange fund but with a few wrinkles.
On the one hand, the requirements for entry are more stringent, but in exchange for that, they offer two key advantages: First, they don’t require a seven-year commitment. Investors are free to sell the ETF at any time. And second, the fees are much lower, at just 0.15%. Alpha Architect is launching its second such fund later this year (ticker: AAEQ).
While this construct is new, it’s certainly worth watching.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam’s Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
I’m preparing a lecture for a business class and was surprised by your first statement that Larry Ellison recently became the world’s wealthiest person. It must have been for a hot minute because I just checked the Bloomberg Billionaires Index as of 10/03/25 and Elon Musk is still listed as #1, with over $100B USD more than Ellison.
Sadly, I can point to the exact day as “a friend” sold his 60 shares, tired of waiting for some signs of life from the company. Oracle’s stock price left the atmosphere the very next day and Larry had his 24+ hours of hyper-fame before the price reached apex and came back to a lower orbit and Musk retook the helm. Good for Larry. I’d settle for #2 in that roster.
Sorry, but I couldn’t disagree more. The best way to diversify is to keep investing in other stocks, not to sell really great ones when they have a big increase and become a larger part of your portfolio. And I’ll wager that anyone who prematurely sold any of the Mag Seven agrees with me.
Retired financial advisor here…a lot of times it’s just not feasible for people to buy enough “other stocks” to adequately diversify. I’ve seen clients in which one stock holding is so huge, the only way to diversify would be to sell. As to the Mag Seven, you’re assuming that none of those will ever crash–I’ve been around long enough to see the equivalent stocks of previous generations to know that no particular stock has a long-term lock on out performance.
Thank you, Adam, for yet another insightful article with some good ideas to investigate. While the tech sector has been a wonderful ride, allowing for a 200%+ three year gain that I would have never imagined, especially after a bad-timing early retirement with significant issue$ that came out of left field, right field, the dugout, and…… Even better results, actually, when considering that I’ve been tapping my investments to clear out debt, help others and more. It is a great feeling, for us, to be free and clear of a mortgage and a car payment.
It’s been a slow process chipping away at long term, high gain holdings. It’s not easy to back away from a winning horse at least until there’s the bad week or even a really bad down day. And yes, I watch the tax implications carefully in decision making but also have learned you need to be careful not to let the tax tail wag the dog. The other half of the problem is, what on earth do I invest in now? Pork and beans, clothing, etc aren’t too exciting as investments. That’s the proverbial third half of the problem of a profitable run when you checked your portfolio over several years to see how much you made that day or week, not IF you did.
To be clear here, we have been extremely fortunate over the long run. Nothing more. Not looking for a vacation home, Lambo or the like. It’s just time to lower the risk factor.
Best to all.
Adam,
Great writing as usual with my only qualm being your Apple example. Just because Apple makes up a large percentage of the S&P 500 doesn’t mean one should be less concerned – see Kodak, Sears, Enron, Lehman Bros, etc. In fact many investors (me included) hold individual shares of Apple and other highly weighted S&P stocks that, combined with ETF or mutual fund holdings, further increase exposure that may not be fully accounted for in a diversification strategy.
That was my impression as well – bullet point 2 is the opposite of what it should have concluded, which is that it’s a double risk.
If Apple makes up 7% of ones portfolio and it makes up 7% of the S & P, then if Apple’s stock price were to drop significantly, you would feel the pain twice……your individual Apple stock will go down AND the remainder of your portfolio, which contains a significant amount of Apple stock indirectly, will also drop significantly. A proverbial double whammy.
Reading the article again (!), Adam’s point is only true if the investor has no other holdings other than Apple. That seems highly unlikely, therefore, my point above remains a valid concern.