Are you a tech professional who avoids investing because you are risk averse? Read on to make sure you’re not making this one critical mistake.

A number of my friends claim to be risk averse when it comes to investing. Brianna (name changed) is a super accomplished tech professional who freely admits that she just doesn’t “get” investing. When I ask her what she’s done to diversify her portfolio, she says, “When you say diversification, I hear investing, and it all sounds super risky and scary!”

The thing is, diversification is exactly what Brianna needs to take care of her future self and protect all that she earns today in her high-pressure job. She’s shocked when I tell her that what she’s currently doing is actually very risky.

“How’s that possible?” she asks. “I’m hardly doing anything. I just earn good money, get good benefits, and receive my company stock grants throughout the year. That’s not anything particularly risky.” Umm, actually, it is.

Let’s look at Brianna’s situation. On the back of the coffee shop napkin, I draw a lopsided pie chart (because who doesn’t suck at drawing circles?).

Participates in employer’s 401(k) retirement plan – about a quarter of all saved assets
Receives employer’s company stock in the form of Restricted Stock Units (RSUs) – has lots!
Participates in company’s ESPP offering: buys more employer’s company stock at a heavily discounted price

While Brianna clearly has a great compensation package, my ugly pie chart shows that she is overly concentrated (75%) in one company’s stock. Imagine, if something were to happen to her company next week. Not only could she lose her income, but she stands to lose up to three-quarters of her assets (more than several hundred thousands of dollars).

Furthermore, because Brianna has been breathing and living the tech industry for so long, I’m betting that she’s even picked several tech stocks for her retirement account because, well, that’s what she knows best. So her retirement account could also take a big hit in the event of a downward turn in the tech sector.

So what’s a smart sassy woman (really, any tech professional) to do to build a strong financial foundation from her hard-earned compensation? Diversify! Sell those RSUs as they vest, and invest the cash in a diversified, low cost mutual fund portfolio that matches her risk tolerance. This will insulate her from downturns in a single sector or company. Once she’s achieved a solid, diversified financial foundation that will set her up to achieve her future goals, she can choose to keep more of that company stock (or other speculative tech stocks) to see what extra “icing on the cake” it can bring her. But for now, let’s keep it low risk – exactly as Brianna would like it – by diversifying.

ADDITIONAL THOUGHTS: We would need to look at Brianna’s tax situation to figure out which RSUs she should sell and when. But the bottom line is that for Brianna to establish a solid financial foundation, she needs not have all her eggs in one proverbial basket – in this case, that basket is her company equity.

Diversify and DeRISKify your RSUs