Concentration Risk: When Equity Comp Meets H1B

If you’re an H1B or green card holder receiving RSUs, one company can simultaneously control your paycheck, a growing share of your net worth, and — through visa sponsorship — your legal right to stay in the country. That’s a triple dependency a U.S. citizen colleague with the identical equity grant simply doesn’t carry, and it’s the reason concentration risk deserves more attention from this audience than the generic “don’t put all your eggs in one basket” framing usually gets.

What concentration risk actually means

Every RSU vest adds shares of a single company to your portfolio automatically, without you making an active investment decision. Left unmanaged, this can quietly turn what should be a diversified retirement and brokerage portfolio into one where a large share is tied to a single employer’s stock price. A 20% drop in a diversified index fund is a bad quarter. A 20% drop concentrated in one stock that also happens to be your employer can mean a bad quarter and a harder time at work, at the same time.

Financial advisors commonly flag single-stock positions above roughly 10-15% of net worth as a level worth deliberately managing — not necessarily selling everything, but actively deciding to hold that much in one name rather than accumulating it by default through vesting.

The stacking effect unique to H1B holders

For a citizen employee, concentration risk is a portfolio problem: if the stock drops and the company struggles, both their paycheck and their equity are affected. For an H1B holder, there’s a third layer stacked on top: the same employer’s health determines whether your visa sponsorship continues. A downturn severe enough to trigger layoffs threatens all three at once — your income, your portfolio, and your legal status — in a way that’s specific to sponsored workers.

This is why the “just hold it long-term, it’s a great company” advice that applies reasonably well to a citizen employee needs a second look for an H1B holder. The correlation between your job security and your stock’s performance isn’t a coincidence you can diversify around after the fact — it’s baked into the structure of being paid partly in equity by the same company that sponsors your status.

Worked example: what concentration looks like in dollars

Consider an H1B employee with a $200,000 base salary and three years of RSU vests behind them:

• Total investable assets: $400,000 (401k, brokerage, cash)
• Value of vested employer stock still held: $140,000
• Concentration percentage: $140,000 ÷ $400,000 = 35%

At 35% concentration, a 30% drop in that single stock — not an unusual move for a volatile tech name over a bad earnings cycle — wipes out $42,000, or roughly 10.5% of total net worth, from one company’s performance alone. If that same earnings miss also triggers layoffs at the company, this employee could be facing a $42,000 portfolio hit and a 60-day USCIS grace period to find a new sponsor in the same month.

A practical diversification approach

None of this means selling every vested share the moment it lands — for many people, holding some employer stock is a reasonable bet on a company they understand well from the inside. The distinction is between deliberately choosing to hold a concentrated position and accumulating one by default because selling never became an active decision.

A common approach: set a target percentage of net worth you’re comfortable holding in employer stock (many land somewhere between 5% and 15%), and sell down toward that target as new shares vest, rather than trying to time when to sell all at once. Because cost basis resets at each vest to that day’s fair market value, selling shortly after vesting usually creates only a small additional capital gain or loss — the tax cost of staying diversified is often much lower than people assume.

Don’t forget employer stock inside retirement accounts

Concentration risk isn’t limited to your brokerage account. Some 401(k) plans offer company stock as an investment option, or match contributions in employer stock rather than cash. If your 401(k) also holds a slice of the same company alongside your RSUs and ESPP shares, your effective concentration is higher than a quick look at your brokerage balance alone would suggest — check your 401(k) statement’s fund breakdown specifically, since employer-stock funds don’t always announce themselves clearly in a summary view. Rebalancing inside a 401(k) is usually simpler and has no immediate tax consequence, since trades within a tax-advantaged account aren’t taxable events the way a brokerage sale is.

Cross-border layer

If repatriation to India or another country is part of your plan, concentration risk compounds with currency and cross-border liquidity considerations: a portfolio heavily weighted in one U.S. company’s stock is harder to convert and move than a diversified position, and the timing of a forced sale (say, triggered by a visa status change) may not align with when the stock happens to be favorably priced.

Sources: IRS Publication 525 (Taxable and Nontaxable Income); general diversification guidance widely cited by CFP practitioners regarding single-stock concentration thresholds.