Five Approaches to Diversify Low-Basis Holdings

Abstract

This article discusses remedies to low-basis stock concentration. While diversification is strongly supported in theory in a tax-exempt context, it can be costly for taxable individuals. The author focuses on five possible diversification strategies: borrowing against the stock and reinvesting the proceeds in a diversified portfolio; hedging; costless (or cashless) collars, put-spread collars, and variable-share forward sales. She both describes their attributes and analyzes costs and benefits.