Risks Associated With Concentrated Stock Positions & Importance Of Diversification

New Focus on Wealth with Chad Burton

In this episode of New Focus on Wealth, certified financial planner Chad Burton dives into the important topics of retirement readiness and managing concentrated stock positions.

Chad begins by sharing his personal experience attending his father's retirement party and reflecting on the concept of retirement. He then introduces the upcoming event, "Seven Steps for Retirement Readiness," hosted by EP Wealth Advisors, where he will be discussing crucial aspects of retirement planning such as taxes, income, long-term care, safe money, investing, life goals, and health and wellness.

The conversation shifts to the recent rally in the market sparked by the anticipation of rate cuts by the Federal Reserve. Chad explains the implications of rate cuts and the potential impact on the economy. He also discusses the inverted yield curve and its historical correlation with recessions.

The discussion then delves into the importance of asset allocation, specifically the balance between growth and value investments. Chad emphasizes the need for diversification, especially as individuals approach retirement. He highlights the performance differences between growth and value ETFs and the significance of rebalancing one's portfolio.

The episode also addresses the challenges of managing concentrated stock positions. Chad provides practical steps to mitigate risk, including selling vested RSUs, trimming ESPPs, and reviewing 401(k) investments. He emphasizes the need to diversify and reduce risk as retirement approaches.

Furthermore, Chad explores the strategy of selling covered calls as a way to generate income and manage concentrated positions. He explains the concept of call options and how they can be used to hedge against potential losses or create income. He also clarifies common misconceptions about selling calls and the benefits of actively managing these positions.

Overall, this episode of New Focus on Wealth offers valuable insights and practical advice for individuals preparing for retirement and managing concentrated stock positions. Listeners will gain a deeper understanding of retirement readiness and the importance of diversification in building a secure financial future.

Timestamps:

[00:03:08] Recent rally sparked by rate cuts.

[00:06:06] Inverted yield curve and recession.

[00:07:32] Rebalancing investment portfolios.

[00:12:05] Tech wreck and higher interest rates.

[00:18:08] Concentrated stock positions.

[00:19:30] Concentrating on stock positions.

[00:23:05] Mega Roth 401k option.

[00:26:46] Retirement and wealth issues.

[00:30:09] Selling covered calls.

[00:33:28] Diversification through selling calls.

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