Concentrated stock is an equity

Stock

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 making up a substantial part (usually, more than 30%) of the investor's portfolio

Portfolio (finance)

Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.-Definition:The term portfolio refers to any collection of financial assets such as stocks, bonds and cash...

. The major risk associated with such a portfolio is a lack of diversification

Diversification (finance)

In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of...

; concentrated stock makes a large portion of the investor's wealth dependent on the performance of one particular stock

Stock

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

. The reasons for keeping a concentrated stock may be restrictions for sale (see restricted stock

Restricted stock

Restricted stock, also known as letter stock or restricted securities, refers to stock of a company that is not fully transferable until certain conditions have been met. Upon satisfaction of those conditions, the stock becomes transferable by the person holding the award.One type of restricted...

), emotional attachment, donation, inheritance

Inheritance

Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...

, stock options, and the selling of businesses.

See also

• Public float
  Public float
  The float of a company whose stock is publicly traded has different default meanings depending on the presumed context.Without a qualifier it may refer to the entire market capitalization of the company or only its publicly traded equity....
  
  
• Free float
• Market capitalization
  Market capitalization
  Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
  
  
• Restricted stock
  Restricted stock
  Restricted stock, also known as letter stock or restricted securities, refers to stock of a company that is not fully transferable until certain conditions have been met. Upon satisfaction of those conditions, the stock becomes transferable by the person holding the award.One type of restricted...
  
  
• Shares authorized
  Shares authorized
  Shares authorized is the maximum number of shares that a company can issue. This number is specified in the company's articles of association but can be changed by shareholders' approval...
  
  
• Treasury stock
  Treasury stock
  A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ....