What the pros do when the tape looks toppy
When the tape feels toppy (like it has at points this summer ) pros don’t wait for a headline to tell them what to do. They use strength to do the boring stuff: trim crowded winners, rebalance, and refill the cash bucket before they need it. It’s not doom. It’s maintenance. And in 2025, with AI-heavy mega caps carrying a lot of the market’s mood, that maintenance matters.
Here’s the blunt setup. Concentration is back near the highs. In 2024, S&P Dow Jones Indices showed the top 10 names were about a third of the S&P 500’s weight, and the “Magnificent 7” hovered around 30% by various sell-side estimates. The Nasdaq-100? North of half the index tied to a handful of mega-cap tech and tech-adjacent names in late 2024. Different sources slice it slightly differently, but the point’s the same: when leadership narrows, your portfolio’s day-to-day outcomes get more tied to a few tickers. That can feel great, right up until it doesn’t.
So what do the pros do when the tape’s heavy? Three simple moves that aren’t sexy, but save headaches:
- Rebalance into strength. If a name runs 40% and jumps from 5% to 8% of your portfolio, bring it back toward target while you can hit the bid. It’s additive over cycles.
- Raise cash early. Not as a market call, as a risk tool. Liquidity buys you time and choice. If you’ve ever been a forced seller on a down 3% day, you know the tax.
- Right-size single-stock and sector exposure. Mega-cap tech is amazing, but 35-60% tech/AI look-through at the household level (counting funds, RSUs, options) is common right now. That’s a lot of the same bet.
Quick stat that should sting a little: a 2024 Bankrate survey found only 44% of Americans could cover a $1,000 emergency from savings: which means 56% can’t. If that’s you, and your portfolio is also leaning into the same handful of AI winners, your life liquidity risk and your market risk are probably pointing in the same direction. That’s how small market hiccups become household emergencies. Missed bonus, vesting delay, stock down 12% in a week, I’ve seen that trifecta blow up good plans. Twice. Not hypothetical.
And yes, I’m actually excited about the innovation (I genuinely am ) the revenue run-rates, the capex arms race, all of it. But enthusiasm doesn’t pay margin calls. Cash does. Pros keep 6-12 months of essential expenses in true cash equivalents and treat it like gear, not a view. If they’re running a big equity tilt this year, they’ll quietly bump that buffer. They also prefer to hit their “sell-tech-and-build-emergency-fund-now” button on up days, not down ones.
One more uncomfortable truth: if you work in tech, your income risk and your portfolio risk tend to move together. That’s textbook cyclicality. When hiring slows and equity comp wobbles, the same headlines usually pressure your holdings. Correlations go to one right when you want them to go to zero. Liquidity (short-term Treasurys, high-yield savings, laddered bills ) is the shock absorber that keeps you from realizing losses you don’t have to realize.
Liquidity is a risk-management tool, not a market call. You raise it to control your sequence of decisions, not to predict tomorrow’s close.
In this section, we’ll keep it practical (how to trim without torching taxes, how to set a cash target that fits your household, where to park it, and how to keep participating if the rally keeps running. If this is getting overly complex already, fair ) we’ll break it down to simple steps next.
Why trimming pricey tech can fund your safety net, without nuking your thesis
Start with guardrails. Set a max position size and stick to it. I like 5% per single name for most folks, 10% if you truly know the business and your stomach for swings is high. If your AI darling ballooned to 14% after a hot summer, trim it back to 8%-10% and route the overflow to your emergency reserve. You’re not abandoning the story; you’re sizing it so one earnings miss doesn’t hijack your life.
Worried about taxes? Fair. Use partial sells or staged limit orders instead of one big clip. Example: sell 1%-2% of portfolio value every Friday for four to six weeks using specific-lot accounting to prioritize long-term gains. Spread the realization across calendar months if you’re near a phaseout or AMT threshold. This keeps the tax hit from landing in one ugly bucket. And don’t forget the 0% long-term capital gains bracket for lower taxable income: in 2024 it covered gains up to $47,025 for single filers and $94,050 for married filing jointly (IRS). Even if that’s not you, it’s a reminder that timing and lot selection matter.
Sequence risk is the quiet killer here. A 30% drawdown requires about a 43% gain just to get back to even, math nobody enjoys. If that drop hits right before you need cash for a move, a new kid, or, you know, life, you’re forced to sell when it hurts. That’s why I keep harping on liquidity. Bankrate’s 2024 survey found only 44% of Americans could cover a $1,000 emergency with savings; the rest would borrow, cut spending, or sell assets. That’s exactly the trap we’re trying to avoid.
So how do you keep upside after trimming? Replace some single-name exposure with diversified tech ETFs. You can keep the secular AI/cloud/semis theme without betting your rent on one ticker. Concrete options: XLK (Technology Select Sector SPDR, expense ratio ~0.10% as of 2024), VGT (Vanguard Information Technology, ~0.10%), and QQQM (Invesco Nasdaq-100, ~0.15%). They’re not perfect substitutes (XLK is more megacap software/hardware, QQQM brings non-tech heavyweights ) but they blunt single-name landmines while keeping you in the slipstream if the rally keeps running later this year.
Mechanically, a simple playbook works:
- Cap per-name risk: 5%-10% max. Trim anything above the cap.
- Stage sales: Weekly or biweekly limits to manage slippage and taxes; use specific lots to harvest higher basis first.
- Fund the buffer: Route proceeds to 3-6 months of expenses in high-yield savings or 3- to 6-month Treasury bill ladders. If your job is correlated to tech (most are), lean closer to 9-12 months. Yes, that sounds like a lot (because it is.
- Replace exposure: Move a slice into XLK/VGT/QQQM to keep the secular bet alive without single-name whiplash.
And real quick ) market context. Earlier this year we watched mega-cap tech swing 5%-8% in a week on rate whispers and AI capex chatter. Great when it’s up; brutal when it coincides with a cash need. Trimming on strength and parking part in bills is not bearish; it’s adult. I’ve done this with my own comp-heavy tech clients, and yes, occasionally I trimmed a touch early. Did it ruin the thesis? Nope. It bought them time, which is the whole point.
How much emergency cash makes sense in 2025
Short answer: enough to sleep at night and not sell risk assets during a bad week. For most steady W-2 earners, the baseline is 3-6 months of core expenses (rent/mortgage, food, insurance, utilities, childcare, minimum debt service (not the ski pass). If your income is variable, commission-heavy, or concentrated in one sector ) think tech sales, startups, media, real estate, I’d push to 9-12 months. That sounds aggressive because it is. But we’re in a year where rates are still relatively high and markets swing on every rate-cut whisper. Buying yourself time is the whole strategy.
Data point that keeps me honest: a 2024 Bankrate survey found 56% of Americans couldn’t cover a $1,000 emergency from savings. I might be off by a point, but the message is clear, most households are light on cash buffers.
Right now, cash isn’t punitive. As of September 2025, top-tier online savings accounts and money market deposit accounts are printing roughly ~4.25%-5.00% APY, and 3-12 month T‑Bills are hovering in the mid‑4s, give or take a few basis points depending on the auction. You don’t need to stretch for yield, prioritize liquidity and capital preservation first, then rate.
Here’s a clean way to tier it so it’s usable on a random Tuesday:
- Tier 1, Checking (about 1 month): Keep one month of expenses where your bills and card payments hit. Zero yield is fine; predictability matters. This is your same-day cushion for surprise deductibles, travel snafus, or, frankly, a payroll glitch. I’ve seen those (twice this summer, actually.
- Tier 2 ) High-yield savings or money market deposit account (2-5 months): FDIC/NCUA insured, transfers in 1-2 business days at most institutions. Shop for rates but don’t churn accounts for 10-15 bps, it’s not worth the friction when the goal is reliability.
- Tier 3, T‑Bills or short CDs (the rest): Ladder 3-6 month maturities so something is rolling every month. Treasuries settle quickly and are state-tax free; brokered CDs can work too, but make sure you’re comfortable with secondary liquidity before maturity if you use them.
Insurance matters more than the extra 0.10% APY. FDIC/NCUA coverage is $250,000 per depositor, per institution, per ownership category. Translation: you can expand coverage by using multiple banks and different ownership types (individual, joint, trust). If you’re sitting on large cash from a vest or a liquidity event, map out where each dollar lives, don’t accidentally stack $400k in one single-owner account.
Two quick guidelines I use with clients:
- Don’t chase yield at the expense of access. If moving cash means settlement delays or locking funds past when you might need them, pass. A slightly lower APY that you can tap tomorrow is better than a higher one trapped till December.
- Recalibrate quarterly. Expenses drift. If childcare ends or rent resets, adjust the target. After bonus/RSU payouts earlier this year, a lot of folks intended to top up and… didn’t. Automate transfers to the savings tier so it quietly fills.
Final sanity check for 2025’s backdrop: we still have real rates above zero, tech volatility that can yank 5% in a week, and a labor market that’s decent but not bulletproof. Set the buffer first, then take risk. That’s not bearish, it’s just how you avoid selling XLK to pay for a new transmission.
Tax-smart selling: keep more of what you harvest
If you’re trimming tech to refill the buffer or fund a big bill, do it in a way the IRS doesn’t take a victory lap. The rules here are old, boring, and, good, predictable. One big reminder up front: brackets move, surtaxes kick in, and state rules add layers. Confirm 2025 brackets and your marginal rates before you hit sell. Numbers change; the framework doesn’t.
1) Favor long-term when you can. Shares held more than 12 months get long-term capital gains treatment. That’s the 0%/15%/20% federal rate schedule that’s been around for years, with the potential 3.8% net investment income tax for higher earners. If you’re within weeks of the 12-month mark, wait if cash flow allows. Two weeks can be the difference between your ordinary rate and 15%, that’s real money. I’m blanking on the exact 0% threshold for 2025, it’s typically tied to the 15% ordinary bracket, but again, check the current-year table before trading.
2) Use tax-loss harvesting to neutralize gains. If you locked in gains earlier this year (and with mega-cap tech swinging 3-5% in a week lately, plenty of folks did some trimming), realize losses to offset them. Mechanically: realized losses first offset realized gains, then up to $3,000 of net losses can offset ordinary income in a year (an IRS rule that’s been in place for many years). Anything beyond that carries forward. Example: realize $25,000 of gains and harvest $28,000 of losses; you net to a $3,000 loss and can reduce ordinary income by that amount this year, with the extra carrying forward. That’s not exotic, just how the code reads.
3) Avoid wash sales, 30 days means 30 days. If you sell at a loss and buy a “substantially identical” security 30 days before or after, the loss is disallowed and added to the new position’s basis. Practical workaround: swap into a close, but not identical, proxy for at least 31 days. S&P 500 to total-market, semiconductor index A to broader tech index B, single-name to an industry ETF. There’s gray area on how “substantially identical” applies to two ETFs tracking the same index from different sponsors. Plenty of practitioners avoid that swap to be safe. I do too.
4) Harvest around vest dates and bonuses. RSUs and cash bonuses can spike your taxable income, especially in Q1 and Q4. Time loss harvesting in the same tax year as those income events to soften the blow. If your RSUs vested earlier this year and withholding didn’t cover the state bite (happens a lot), you can harvest losses now in Q3 and carry any excess against gains you’ll realize later this year. On the flip side, if you expect a lighter income year, sabbatical, unpaid leave, or a gap between roles, consider realizing long-term gains in those lower brackets. You might fill the 0% or 15% bucket more efficiently in a low-income year. It’s not perfect science… but the directionally right move often saves a chunk.
5) Specify lots. Don’t let FIFO pick your tax bill. Use specific-lot identification when selling. Offload high-basis shares to reduce gains, or selectively realize a modest gain if you’re trying to stay under the NIIT thresholds. Your broker has the buttons; you just need to click the right ones. I’ve seen clients accidentally sell the original low-basis lot because FIFO was default, ugh.
6) Pair sales with giving. If you’re charitably inclined this year, donate appreciated shares instead of cash. You avoid the capital gain and still get the deduction if you itemize. Donor-advised funds keep it simple when timing is tight in December. Not tax-loss harvesting per se, but the cash outcome is similar, more stays in your pocket, or goes to the cause, not the IRS.
Quick reality check for 2025: real rates are still positive, and tech is twitchy. If you need cash in the next 3-6 months, prioritize harvesting losses and selling long-term positions first. Keep short-term gains as a last resort, unless a 5% air pocket knocks a name below your basis. Then… take the loss, redeploy smartly, and mind the 30-day clock.
One last thing, enthusiasm spike here because it’s easy and it works: automate a monthly “tax lot review.” Five minutes. Look for harvestable lots, check your YTD realized gains, and compare to your projected bonus/RSU income. You’ll catch issues early instead of in a panicked December sprint.
Got RSUs, ESPP, or options? Don’t let employer stock run your life
Got RSUs, ESPP, or options? Don’t let employer stock run your life. If you work in tech this year, you’ve probably watched your comp swing with your stock price… sometimes by more than your base salary. That’s a blessing until it isn’t. The playbook is simple, repeatable, and designed not to blow up your tax bill.
RSUs: Taxable as ordinary income the day they vest. No way around that. If your company withholds shares for taxes (sell-to-cover), consider selling an additional slice the same day to reduce concentration risk. I typically suggest clients auto-sell enough RSUs at vest to keep total employer exposure under 10% of investable assets. If you’re in a high-tax state (CA tops out around 13%), holding more stock post-vest doesn’t improve the tax math; it just adds idiosyncratic risk. Same-day sales reset the clock emotionally and financially.
ESPP: The discount is real money. Plans can offer up to a 15% discount (IRC §423 limit), sometimes with a lookback. A clean approach: buy through payroll, then sell as soon as shares hit your account to lock in that built-in gain and reduce single-stock exposure. That’s a disqualifying disposition (taxed as ordinary income on the discount; any extra gain is capital gains), but the after-tax outcome is often better than riding the stock. If you want favorable qualifying treatment, you must hold 2 years from grant and 1 year from purchase, but balance that against concentration and blackout windows.
ISOs: Great when done right, painful when not. Exercising creates a “bargain element” that can trigger AMT, even if you don’t sell. Two practical rules: (1) keep annual ISO exercises small enough that the AMT hit is manageable (there’s also the $100,000 per year ISO limit for first-exercisable value), and (2) model before you move. Run scenarios at different stock prices and exercise sizes with your 2025 projections. If you exercise early in the year and the stock drops 20%, you can be stuck with AMT from a price you no longer have, been there with a client in 2015; not fun.
Automate with 10b5‑1 plans: If you’re subject to blackout periods or just want to remove emotion, pre-set a 10b5‑1 to sell a portion at vest (RSUs) or on a schedule. Plans now require cooling-off periods (commonly at least 90 days) and certifications under the 2023 SEC updates, so get it in place ahead of the next vest. I like tiered triggers, sell X% at vest, then monthly drips for six months, to average price and avoid a single bad print.
How much employer stock is “too much”? My rule of thumb: cap total exposure under 10% of investable assets. I know, 10% feels arbitrary. It’s not magic, just a level that keeps a job + stock shock from derailing your plan. Remember, your paycheck and bonus already hinge on the same company. Stacking shares on top doubles the bet.
Actionable, right-now move: if your emergency fund is light, sell-tech-and-build-emergency-fund-now. Use the next vest or ESPP sale to top up 6 months of expenses. Cash yields are still positive after inflation this year, so you’re not “wasting” the money.
- Tactical checklist:
- RSUs: set same-day sell-to-cover + extra trim to maintain <10% company stock.
- ESPP: capture the 15% discount; default to sell-on-receipt unless you’re deliberately pursuing qualifying holding periods.
- ISOs: model AMT before exercising; stagger exercises; consider early-year small bites.
- 10b5‑1: adopt now so it’s live ahead of the next blackout; expect ~90-day cooling-off.
- Taxes: plan for state rates (CA ~13%), Medicare surtax, and withholdings that can undercollect at high income levels.
One more thing I haven’t mentioned yet: tie your equity sales to your life calendar, tuition, a home down payment later this year, or the vest right before open enrollment. Money is timing. And if your stock jumps around 7% in a week (not unusual lately), don’t mistake volatility for a plan. System beats gut, especially in Q4 when emotions get loud.
Frequently Asked Questions
Q: How do I rebalance when my tech names ran 40% this summer?
A: Keep it simple and mechanical. 1) Set target weights per holding (say 5%). 2) Use tolerance bands (e.g., ±20% of target). If a name drifts from 5% to 8%, trim back toward 5% while liquidity is good. 3) Prioritize tax-efficiency: harvest losses elsewhere, trim long-term lots first, and use specific-lot ID. 4) Rebalance proceeds fund your cash bucket first, then underweights. 5) Put it on a schedule (quarterly) plus a drift trigger, so you’re not guessing. Professionals sell into strength for a reason, prices and liquidity cooperate when you need them to.
Q: Is it better to sell some winners now to fund my emergency cash, or wait for a dip?
A: Sell into strength to build the cash. The article’s point is dead-on: raising cash early is a risk tool, not a market call. Liquidity buys you time and choice. If you’re in the 56% who couldn’t cover a $1,000 hit per that 2024 Bankrate survey, fix that first. Aim for 3-6 months of core expenses (9-12 if you’re commission-based or in a volatile industry). Trim crowded winners that overshot your targets, move proceeds to a high-liquidity account, and stop being a forced seller on a down 3% day. Taxes matter, but solvency beats optimization.
Q: Should I worry about having 40-60% in tech-ish exposure because of my funds and RSUs?
A: Short answer: yes, at least enough to measure it and right-size it. The article flags that a lot of households are effectively running one big AI/mega-cap tech bet. Do a look-through: add up direct stocks, sector funds, your 401(k) funds, and unvested RSUs/options. Cap any single theme to a range you can live with (many folks use 20-30% max at the household level). Tactics: trim equities that ran, redirect new contributions to underweight areas, use tax-advantaged accounts to rebalance where possible, and consider staged selling of RSUs as they vest. Diversification isn’t cute; it’s your seatbelt.
Q: What’s the difference between parking an emergency fund in a high‑yield savings account, T‑bills, or a government money market in 2025?
A: All three are fine, but match the tool to the job. HYSA: daily liquidity, FDIC insurance up to limits, rate can float, great for the first 1-3 months of expenses. 3‑month T‑bills: you lock a yield for the term, backed by the U.S., mark-to-market noise if you sell early; good for the next slice of your cushion if you can tolerate a 4-13 week ladder. Government money market funds: near‑instant liquidity, very low credit risk (mostly T‑bills/repos), NAV stability; check expense ratios and that it’s truly “government.” In 2025, short‑rate products remain competitive, so I like a blended setup: months 1-3 in HYSA, months 4-9 laddered in T‑bills or a government MMF. Keep it boring, keep it liquid.
@article{sell-tech-and-build-an-emergency-fund-now-what-pros-do,
title = {Sell Tech and Build an Emergency Fund Now: What Pros Do},
author = {Beeri Sparks},
year = {2025},
journal = {Bankpointe},
url = {https://bankpointe.com/articles/sell-tech-build-emergency-fund/}
} 