If you’ve built a large position in companies like Google, Meta, Amazon, or Microsoft, you’re not alone. Many investors—especially those in the tech industry—have seen their wealth grow significantly thanks to these stocks. Whether through stock compensation, early investments, or just a strong belief in their future, Big Tech has been a wealth-building machine.

But there’s a downside: concentration risk.

What Is Concentration Risk?

Simply put, concentration risk means having too much of your wealth tied up in one stock (or even one sector). It’s great when the stock is rising, but if something goes wrong, your net worth could take a big hit.

Even though companies like Microsoft and Amazon are dominant today, history shows that industries shift. Just look at once-mighty companies like IBM or General Electric—both were giants but lost their leadership positions over time.

The Tech Boom, AI, and High Valuations in 2025

Right now, Big Tech is stronger than ever. The rise of artificial intelligence (AI) has fueled even more growth, with companies like Microsoft (thanks to OpenAI) and Google investing heavily in AI-powered products.

But this tech rally has also pushed valuations higher:

• The Nasdaq 100 (which is dominated by Big Tech) surged 30% in 2024.
• Nvidia, a key AI player, saw its stock triple in value.
• Many tech stocks are trading at historically high valuation multiples, meaning future growth expectations are already priced in.

This doesn’t necessarily mean you should sell. Staying invested in strong companies for the long term is usually the best strategy. However, if a single stock or just a few tech stocks make up 50% or more of your net worth, it may be wise to diversify gradually to reduce risk.

How to Manage Concentration Risk

If your portfolio is heavily weighted in Big Tech, here are some ways to protect yourself:

1. Diversify Gradually Without Losing Market Exposure

Selling your stock all at once could create a large tax liability, and if the company continues to perform well, you might experience regret. Instead, a structured selling approach can help you lower risk while staying invested.

Here are some ways to diversify without making drastic moves:

• Systematic Selling: Sell a fixed percentage of your holdings every quarter or year, shifting funds into a broad index fund like the S&P 500. This keeps you invested in the market while reducing single-stock risk.
• Tax-Loss Harvesting: If you own other stocks that have lost value, selling them alongside your high-gain stock can offset capital gains taxes.
• Diversify Within Tech: If you still want exposure to tech but reduce individual stock risk, consider shifting funds into an ETF like QQQ (which tracks the Nasdaq-100) or another technology sector ETF or portfolio.

Gradual diversification helps protect your net worth while keeping you in the market, so you don’t feel like you’re making an all-or-nothing decision.

2. Use Options Strategies to Hedge Risk

If you’re not ready to sell, you can use options to protect your downside.

Here are some strategies that large shareholders use:

• Protective Puts: A put option gives you the right to sell your stock at a predetermined price. If the stock falls significantly, the put increases in value, offsetting your losses. This strategy is like buying insurance on your stock.
• Covered Calls: If you don’t mind selling some of your shares at a higher price, selling covered calls allows you to generate income while waiting for the stock to appreciate. However, if the stock rises above the call price, you may be forced to sell.
• Collars: A collar involves buying a protective put while simultaneously selling a covered call. This limits your downside risk while capping upside potential. Investors use collars when they want to lock in gains without fully exiting a position.

Options strategies allow you to reduce risk without selling, making them a good choice if you’re locked into a stock due to tax reasons or company restrictions.

3. Keep a Cash Cushion for Flexibility and Peace of Mind

If most of your wealth is in tech stocks, you might feel stuck when markets drop. Having one to two years’ worth of expenses in cash or short-term investments provides financial flexibility and reduces the stress of market downturns.

A cash cushion helps in several ways:

• Gives You Breathing Room – If your stock takes a hit, you won’t feel pressured to sell at the worst time.
• Allows for Strategic Investing – If markets dip, you’ll have liquidity to buy at better prices instead of selling in panic.
• Reduces Emotional Decision-Making – Knowing you have cash on hand makes it easier to stick with your long-term strategy.

If holding cash feels unproductive, consider T-bills, money market funds, or short-term bonds, which offer higher yields than a savings account while keeping your money easily accessible.

4. Don’t Let Stock Prices Control Your Emotions

Many investors become emotionally attached to their stocks—especially if they work at the company or have held the stock for years. But checking stock prices daily or reacting to every dip only increases anxiety.

Instead of focusing on short-term moves:

• Set predefined portfolio review dates (e.g., quarterly) rather than watching the stock daily.
• Remind yourself of your long-term goals, not just your stock’s recent performance.
• Accept that volatility is normal—even the best companies have price swings.

Many successful investors avoid emotional decision-making by having a written financial plan that outlines:

✅ How much risk they’re willing to take
✅ How they’ll gradually diversify if needed
✅ How much cash they need for peace of mind

The Need for a Long-Term Financial Plan

Markets will always fluctuate, but your financial plan should be built for the long run.

Having a structured financial strategy brings Tranquility.

If concentration risk is a concern, consider working with a financial advisor who can help align your portfolio with your life goals—whether that means retiring early, funding major purchases, or just achieving financial peace.

At the end of the day, the goal isn’t just more money—it’s Tranquility. A well-balanced portfolio that protects your wealth while still capturing growth gives you the freedom to focus on what truly matters.

Final Thoughts

Tech stocks are a great investment, but no single company is invincible. Even if you believe in Google, Meta, or Amazon for the long term, it’s smart to protect what you’ve built. Diversifying doesn’t mean giving up on tech—it just means reducing the risk of losing too much if the unexpected happens.

Your future self will thank you.

Key Takeaways

✔️ Big Tech stocks have surged, but valuations are historically high.
✔️ Long-term investing is smart, but excessive concentration can be risky.
✔️ Gradual diversification helps reduce risk without missing market growth.
✔️ Options strategies can protect your portfolio while you hold onto shares.
✔️ Keeping a cash buffer can provide financial flexibility.
✔️ A well-structured financial plan leads to Tranquility.