Excess Returns

Too Much Google, Tesla, Nvidia? | Wes Gray & Sri Narayan Explain a Smarter Way Out

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May 24, 2025
Join Sri Narayan, CEO of Cache Financial and former tech giant employee, alongside Wes Gray, CEO of Alpha Architect. They delve into the perils of concentrated stock positions, particularly for tech employees, and how stock compensation can lead to overexposure. Discover innovative strategies like exchange funds and Section 351 ETF conversions for efficient tax management and diversification. They also emphasize practical solutions for financial advisors and investors navigating the challenges of substantial investments, highlighting the importance of tailored products in today's market.
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INSIGHT

Stock Compensation Magnifies Concentrated Risk

  • Stock-based compensation creates massive concentrated stock exposure for many employees.
  • This concentrated wealth problem is magnified by strong performance of top tech stocks over the last 20 years.
INSIGHT

Section 351 Tax-Deferred Transfers Limits

  • Section 351 allows tax-free transfer of diversified portfolios into new C corporations like ETFs.
  • However, strict diversification rules forbid concentrated single-stock contributions, limiting usability.
ANECDOTE

From Personal Problem to Solution

  • Sri Narayan dealt with oversubscription issues in traditional exchange funds while at Uber.
  • This led him to create Cache Financial focusing on Nasdaq 100 exchange funds for better matching.
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