Ownership · 7 minutes · General educational material
Concentration is not a portfolio question
For most owners the largest exposure is not in an account statement, and describing it plainly is the first useful step.
Related planning area
Reserves and ownership concentration
This article is general information. It does not consider your circumstances and is not investment, tax or legal advice.
Concentration is usually discussed as a portfolio characteristic: too much of one holding, measured as a percentage. For an owner of a closely held business the concept applies, but the framing does not. The exposure is not a line item. It is the source of income, the bulk of the household's value, the employer, and frequently the collateral behind personal borrowing at the same time.
Four dependencies, one asset
It helps to separate them. Income dependency: what proportion of household spending is funded by the company. Value dependency: what proportion of household net worth the ownership stake represents. Occupational dependency: whether the owner's own working life is tied to the same entity. Credit dependency: whether personal obligations rest on company performance. These can move independently, and listing them separately usually shows the picture is less uniform than it felt.
Why the plain statement matters
Owners rarely lack awareness of the concentration. What is usually missing is a written, specific description of it. Awareness produces vague unease; a written statement produces a decision. It also makes the exposure discussable with a spouse, a partner, or an adviser without the conversation becoming an argument about optimism.
What follows from it
Nothing about concentration implies it should be reduced quickly, or at all. A profitable business the owner understands may be a perfectly rational place for capital to sit. The decision that does need making is narrower: how much of the household should be able to function independently of it, over what horizon, and what has to leave the company for that to become true.
A note on general information
This is general educational material. What is appropriate depends entirely on individual circumstances, and nothing here is a recommendation to take or refrain from any particular action.