Diversify or keep current stock to increase capital gains
The biggest challenge with owning any individual stock is price fluctuation, which is called risk. The scenarios you describe assume that the stock behaves exactly as you predict (price/portfolio doubles) and you need to consider risk. One way to measure risk in a stock or in a portfolio is Sharpe Ratio (risk adjusted return), or the related Sortino ratio. One piece of advice that is often offered to individual investors is to diversify, and the stated reason for diversification is to reduce risk. But that is not telling the whole story. When you are able to identify stocks that are not price correlated, you can construct a portfolio that reduces risk. You are trying to avoid 10% tax on the stock grant (25%-15%), but need to accept significant risk to avoid the 10% differential tax ($1000). An alternative to a single stock is to invest in an ETF (much lower risk), which you can buy and hold for a long time, and the price/growth of an ETF (ex. SPY) can be charted versus your stock to visualize the difference in growth/fluctuation. Look up the beta (volatility) of your stock compared to SPY (for example, IBM). Compare the beta of IBM and TSLA and note that you may accept higher volatility when you invest in a stock like Tesla over IBM. What is the beta of your stock? And how willing are you to accept that risk? When you can identify stocks that move in opposite directions, and mix your portfolio (look up beta balanced portolio), you can smooth out the variability (reduce the risk), although you may reduce your absolute return. This cannot be done with a single stock, but if you have more money to invest you could compose the rest of your portfolio to balance the risk for this stock grant, keep the grant shares, and still effectively manage risk. Some years ago I had accumulated over 10,000 shares (grants, options) in a company where I worked. During the time I worked there, their price varied between $30/share and < $1/share. I was able to liquidate at $3/share.
"There is nothing legal you can do in the United States to avoid the tax burden of income earned as an employee other than offsetting it with pre-tax contributions (which it sounds like you're already doing), making charitable contributions, or incurring investment losses (which is cutting off your nose to spite your face).  So that $660K can't be helped. As for the $80K in stock dividends, you could move those investments into ""growth"" companies rather than ""value"" companies.  Growth companies are those that pay less in dividends, where the primary increase in wealth occurs only in share price increase.  This puts off your tax bill until you finally sell your shares, and (depending on how the tax laws are at that time) your tax bill will be lower on those capital gains than they are currently on these dividends. Regarding rental income I know nothing, but I think you're entitled to depreciate your property's value over time and count that against the taxes you owe on the rents.  And you can deduct all the upkeep expenses.  As with employment income, intentionally incurring rental losses to lower your tax bill is not logical:  for every dollar you earn, you only have to give about 50 cents to the government, whereas for every dollar you lose, you've lost a dollar." "This is an excellent question, one that I've pondered before as well. Here's how I've reconciled it in my mind. Why should we agree that a stock is worth anything? After all, if I purchase a share of said company, I own some small percentage of all of its assets, like land, capital equipment, accounts receivable, cash and securities holdings, etc., as others have pointed out. Notionally, that seems like it should be ""worth"" something.  However, that doesn't give me the right to lay claim to them at will, as I'm just a (very small) minority shareholder. The old adage says that ""something is only worth what someone is willing to pay you for it."" That share of stock doesn't actually give me any liquid control over the company's assets, so why should someone else be willing to pay me something for it? As you noted, one reason why a stock might be attractive to someone else is as a (potentially tax-advantaged) revenue stream via dividends. Especially in this low-interest-rate environment, this might well exceed that which I might obtain in the bond market. The payment of income to the investor is one way that a  stock might have some ""inherent value"" that is attractive to investors. As you asked, though, what if the stock doesn't pay dividends? As a small shareholder, what's in it for me? Without any dividend payments, there's no regular method of receiving my invested capital back, so why should I, or anyone else, be willing to purchase the stock to begin with? I can think of a couple reasons: Expectation of a future dividend. You may believe that at some point in the future, the company will begin to pay a dividend to investors. Dividends are paid as a percentage of a company's total profits, so it may make sense to purchase the stock now, while there is no dividend, banking on growth during the no-dividend period that will result in even higher capital returns later. This kind of skirts your question: a non-dividend-paying stock might be worth something because it might turn into a dividend-paying stock in the future. Expectation of a future acquisition. This addresses the original premise of my argument above. If I can't, as a small shareholder, directly access the assets of the company, why should I attribute any value to that small piece of ownership? Because some other entity might be willing to pay me for it in the future. In the event of an acquisition, I will receive either cash or another company's shares in compensation, which often results in a capital gain for me as a shareholder.  If I obtain a capital gain via cash as part of the deal, then this proves my point: the original, non-dividend-paying stock was worth something because some other entity decided to acquire the company, paying me more cash than I paid for my shares. They are willing to pay this price for the company because they can then reap its profits in the future. If I obtain a capital gain via stock in as part of the deal, then the process restarts in some sense. Maybe the new stock pays dividends. Otherwise, perhaps the new company will do something to make its stock worth more in the future, based on the same future expectations. The fact that ownership in a stock can hold such positive future expectations makes them ""worth something"" at any given time; if you purchase a stock and then want to sell it later, someone else is willing to purchase it from you so they can obtain the right to experience a positive capital return in the future. While stock valuation schemes will vary, both dividends and acquisition prices are related to a company's profits: This provides a connection between a company's profitability, expectations of future growth, and its stock price today, whether it currently pays dividends or not." Since then I had gotten a job at a supermarket stocking shelves, but recently got fired because I kept zoning out at work This is not a good sign for day trading, where you spend all day monitoring investments.  If you start focusing on the interesting math problem and ignoring your portfolio, you can easily lose money.  Not so big a problem for missed buy opportunities, but this could be fatal for missed sale opportunities.  Realize that in day trading, if you miss the uptick, you can get caught in a stock that is now going down.   And I agree with those who say that you aren't capitalized well enough to get started.  You need significantly more capital so that you can buy a diversified portfolio (diversification is your limitation, not hedging).  Let's say that you make money on two out of three stocks on average.  What are the chances that you will lose money on three stocks in a row?  One in twenty-seven.  What if that happens on your first three stocks?   What if your odds at starting are really one in three to make money?  Then you'll lose money more than half the time on each of your first three stocks.  The odds don't favor you.   If you really think that finance would interest you, consider signing up for an internship at an investment management firm or hedge fund.  Rather than being the person who monitors stocks for changes, you would be the person doing mathematical analysis on stock information.  Focusing on the math problem over other things is then what you are supposed to be doing.  If you are good at that, you should be able to turn that into a permanent job.  If not, then go back to school somewhere.  You may not like your schooling options, but they may be better than your work options at this time.   Note that most internships will be easier to get if you imply that you are only taking a break from schooling.  Avoid outright lying, but saying things like needing to find the right fit should work.  You may even want to start applying to schools now.  Then you can truthfully say that you are involved in the application process.  Be open about your interest in the mathematics of finance.  Serious math minds can be difficult to find at those firms.   Given your finances, it is not practical to become a day trader.  If you want proof, pick a stock that is less than $100.  Found it?  Write down its current price and the date and time.  You just bought that stock.  Now sell it for a profit.  Ignore historical data.  Just monitor the current price.  Missed the uptick?  Too bad.  That's reality.  Once you've sold it, pick another stock that you can afford.  Don't forget to mark your price down for the trading commission.  A quick search suggests that $7 a trade is a cheap price.  Realize that you make two trades on each stock (buy and sell), so that's $14 that you need to make on every stock.  Keep doing that until you've run out of money.  Realize that that is what you are proposing to do.   If you can make enough money doing that to replace a minimum wage job, then we're all wrong.  Borrow a $100 from your mom and go to town.  But as others have said, it is far more realistic to do this with a starting stake of $100,000 where you can invest in multiple stocks at once and spread your $7 trading fee over a hundred shares.  Starting with $100, you are more likely to run out of money within ten stocks. "Your employer sends the money that you choose to contribute, plus employer match if any, to the administrator of the 401k plan who invests the money as you have directed, choosing between the alternatives offered by the administrator. Typically, the alternatives are several different mutual funds with different investment styles, e.g. a S&P 500 index fund, a bond fund, a money-market fund, etc.  Now, a statement such as ""I see my 401k is up 10%"" is meaningless unless you  tell us how you are making the comparison. For example, if you have just started employment and $200 goes into your 401k each month and is invested in a money-market fund (these are paying close to 0% interest  these days), then your 11th contribution increases your  401k from $2000 to $2200 and your 401k is ""up 10%"". More generally, suppose for simplicity that all the  401k investment is in just one (stock) mutual fund and that you own 100 shares of the fund as of right now.  Suppose also that your next contribution will not occur for three weeks when you get your next paycheck, at which time additional shares of the mutual fund will be purchased Now, the value of the mutual fund shares (often referred to as net asset value or NAV) fluctuates as stock prices rise and fall, and so the  401k balance = number of shares times NAV changes in accordance with these fluctuations. So,  if the NAV increases by 10% in the next two weeks, your 401k balance will have increased by 10%.  But you still own only 100 shares of the mutual fund. You cannot use the 10% increase  in value to buy more shares in the mutual fund  because there is no money to pay for the additional shares  you wish to purchase.  Notice that there is no point selling some of the shares (at the 10% higher NAV) to get cash  because you will be purchasing shares at the higher NAV too. You could, of course, sell shares of the stock mutual fund at the higher NAV and buy shares of some other fund available to you in the 401k plan.  One advantage of doing this inside the 401k plan is that you don't have to pay taxes (now) on the 10% gain that you have made on the sale. Outside tax-deferred plans such as 401k and IRA plans, such gains would be taxable in the year of the sale.  But note that selling the shares of the stock fund and buying something else indicates that you believe that the NAV of your stock mutual fund is unlikely to increase any further in the near future. A third possibility for your 401k being up by 10% is that the mutual fund paid a dividend or made a capital gains distribution in the two week period that we are discussing.  The NAV falls when such events occur, but if you have chosen to reinvest the dividends and capital gains, then the number of shares that you own goes up.  With the same example as before, the NAV goes up 10% in two weeks at which time a capital gains distribution occurs, and so the NAV falls back to where it was before.  So, before the capital gains distribution, you owned 100 shares at $10 NAV which went up to $11 NAV (10% increase in NAV) for a net increase in 401k balance from $1000 to $1100. The mutual fund distributes capital gains in the amount of $1 per share sending the NAV back to $10, but you take the $100 distribution and plow it back into the mutual fund, purchasing 10 shares at the new $10 NAV.  So now you own 110 shares at $10 NAV (no net change in price in two weeks) but your 401k balance is $1100, same as it was before the capital gains distribution and you are up 10%.  Or, you could have chosen to invest the distributions into, say, a bond fund available in your 401k plan and still be up 10%, with no change in your stock fund holding, but a new investment of $100 in a  bond fund. So, being up 10% can mean different things and does not necessarily mean that the ""return"" can be used to buy more shares." The biggest benefit to having a larger portfolio is relatively reduced transaction costs. If you buy a $830 share of Google at a broker with a $10 commission, the commission is 1.2% of your buy price.  If you then sell it for $860, that's another 1.1% gone to commission.  Another way to look at it is, of your $30 ($860 - $830) gain you've given up $20 to transaction costs, or 66.67% of the proceeds of your trade went to transaction costs. Now assume you traded 10 shares of Google. Your buy was $8,300 and you sold for $8,600.  Your gain is $300 and you spent the same $20 to transact the buy and sell.  Now you've only given up 6% of your proceeds ($20 divided by your $300 gain). You could also scale this up to 100 shares or even 1,000 shares. Generally, dividend reinvestment are done with no transaction cost.  So you periodically get to bolster your position without losing more to transaction costs.  For retail investors transaction costs can be meaningful.  When you're wielding a $5,000,000 pot of money you can make your trades on a larger scale giving up relatively less to transaction costs. For a long term gain you must hold the stock a year and a day, so, the long term hold period will fall into 2015 regardless. This is the only tax related issue that occurs to me, did you have something else in mind?  Welcome to Money.SE. diversifying; but isn't that what mutual funds already do? They diversify and reduce stock-specific risk by moving from individual stocks to many stocks, but you can diversify even further by selecting different fund types (e.g. large-cal, small-cap, fixed- income (bond) funds, international, etc.).  Your target-date fund probably includes a few different types already, and will automatically reallocate to less risky investments as you get close to the target date. I would look at the fees of different types of funds, and compare them to the historical returns of those funds.  You can also use things like morningstar and other ratings as guides, but they are generally very large buckets and may not be much help distinguishing between individual funds. So to answer the question, yes you can diversify further - and probably get better returns (and lower fees) that a target-date fund.  The question is - is it worth your time and effort to do so?  You're obviously comfortable investing for the long-term, so you might get some benefit by spending a little time looking for different funds to increase your diversification. Note that ETFs don't really diversify any differently than mutual funds, they are just a different mechanism to invest in funds, and allow different trading strategies (trading during the day, derivatives, selling short, etc.). For the record, now that 2011 is here we know that the capital gains tax rate didn't change. Congress extended it for two more years. This shows the uncertainty in trying to maximize earnings based on future changes to the tax code.