There are many ways investors try to diversify a concentrated position, each with its own set of trade-offs:

• Outright sale: Converts shares to cash and enables broad diversification immediately, but may trigger substantial capital gains taxes.
• Charitable giving: Donating appreciated shares through a donor-advised fund or directly to a charity can avoid capital gains and support causes you love, though it’s irrevocable.
• Gifting to heirs: Shifts wealth to family, potentially reducing your taxable estate, but your cost basis carries over.
• Exchange funds: Pool your stock with other investors to achieve diversification without an immediate sale, but often require large minimums, long lock-up periods, and are limited to accredited investors.
• 10b5-1 plans: Allow executives to systematically sell shares over time, helping avoid insider trading concerns, though flexibility is limited once the plan is set.
• Covered call strategies: Generate income while holding your stock, but cap upside if shares rally. Each path can play a role in reducing concentration risk. But most either trigger taxes today, tie up your money for years, or relinquish control.
• Variable Prepaid Forward Contract (VPFC): Provides upfront cash by committing to deliver shares in the future, potentially deferring capital gains taxes and retaining some upside, though it requires complex structuring and limits flexibility.
• Section 351 ETF conversion: Contribute your concentrated stock to a specially structured C-corp that converts into a diversified ETF, deferring capital gains taxes in the process. It’s a powerful way to maintain control and diversify without an immediate sale, though it involves specific requirements and legal structuring.

Each path can play a role in reducing concentration risk. But most either trigger taxes today, tie up your money for years, or relinquish control.