The Concentration Trap
- Anatoly Iofe
- Sep 20
- 1 min read
He put everything into one stock. And for years, it worked.
The company grew. The share price climbed. On paper, his $20M stake looked untouchable.
Until earnings day. One bad quarter — and 40% of his wealth vanished overnight.
Why It Felt Safe
He wasn’t reckless. He believed in the company. He knew the numbers. He knew the people.
That’s the illusion of concentration. It doesn’t feel risky when you’re close to it. It feels inevitable. Almost safe.
But risk doesn’t ask what you believe. Risk asks: what happens if you’re wrong?
The Problem with Concentration
Markets compress multiples when conditions shift.
Liquidity dries up just when you need it most.
Taxes punish forced sales, especially in down markets.
Even brilliant investors get humbled by single-stock exposure.
What the Wealthy Do Differently
The wealthiest families don’t bet the farm on conviction. They build structures that protect against collapse:
Hedging strategies to smooth volatility
Trusts and wrappers to shift tax drag
Liquidity planning so they never sell at the wrong time
Diversification across sectors, geographies, and asset classes
Conviction makes money. Structure keeps it.
The Lesson
Concentration isn’t strength. It’s fragility disguised as confidence.
The question isn’t whether your stock will rise. The question is whether your wealth plan survives if it doesn’t.
