Most equity comp mistakes don't announce themselves. You don't get a warning, a pop-up, or an email from HR. You find out at tax time, or after you've left a company, when the window to do anything about it has already closed.
After working through hundreds of equity scenarios, the same mistakes come up again and again. Some are expensive. Some are permanent. A few of them are quietly brutal in the way they compound over time.
Here are the ten worth losing sleep over, and what to do instead.
Mistake #1: No Inventory of What You Own
You probably know you have RSUs. You may know you have ISOs. But do you know how many shares across how many grants, at what strike prices, with which vest dates, and how long until each grant expires?
Most people don't. They have a vague sense of their equity, which is basically the same as having no plan for it. Vague doesn't catch the grant vesting in six weeks. Vague doesn't flag the options expiring in eight months. Vague doesn't notice that two of your ISO grants have different strike prices that change which to exercise first.
Build an inventory. For each grant, track the type (ISO/NSO/RSU), grant date, vest schedule, expiration date, number of shares, and strike price. If you hold NSOs, note the bargain element at current FMV. If you hold ISOs, determine whether exercising the grant would trigger AMT at current prices.
This isn't a one-time task. Equity changes: new grants, partial exercises, vest events, price moves. A live inventory is the foundation every other decision builds on.
Mistake #2: No Sell Discipline Before the Trading Window Opens
The trading window opens. Your RSUs are sitting there. You weren't sure what to do, so you didn't sell. Window closes. Repeat for three quarters.
This is how tech employees end up holding 60% of their net worth in a single stock without ever making a deliberate decision to do so.
The mistake isn't waiting. Sometimes waiting makes sense. The mistake is having no framework for when you will sell.
Before the next window opens, set your answer to three questions: At what concentration level in company stock do you force a sale, regardless of what you think the price will do? Where do those proceeds go, so the decision doesn't stall on "sell into what?" And what, if anything, would change either answer?
The trading window has a deadline built in. Your decision framework shouldn't be formed the week it opens.
Mistake #3: Treating Concentration as a "Later Problem"
The JPMorgan data on this is worth sitting with. Over the 40-year period from 1980 to 2020, a concentrated position in a single stock produced a negative absolute return, meaning it underperformed cash, about 40% of the time, and underperformed the Russell 3000 66% of the time.
The same study tracked something else. About 40% of companies in the Russell 3000 suffered what it calls a catastrophic loss: a fall of 70% or more from the stock's peak, never recovered. Broken out by sector, technology is the worst on the list, at 57%.
The reason this becomes a later problem is that concentration builds gradually and feels like success on the way up. You got the grants. The stock performed. You didn't sell. Now you have more company stock than you probably should, but selling feels like betting against yourself, and against the team.
Here's the reframe: holding company stock you received as compensation is not the same decision as buying more of it with cash. One came with the job. The other is a discretionary investment. But every RSU vest and every exercise collapses that distinction: the moment the shares are yours to sell, keeping them is the same decision as buying them at that day's price.
The FOMO is real, and the concern about leaving upside on the table isn't irrational. The answer isn't to sell everything immediately. It's to have a target allocation and a path to get there. Future grants will continue to create new exposure. You don't need to concentrate harder on a position that will keep rebuilding itself.
Mistake #4: Ignoring Taxes Until the W-2 Arrives
RSU vesting is ordinary income. NSO exercise is ordinary income. AMT from ISO exercise can create a tax bill due in April on income you haven't yet received in cash. These aren't surprises: they're knowable in advance.
The mistake is treating equity compensation like W-2 income, where withholding more or less handles it. It doesn't.
RSU and NSO withholding runs at the IRS supplemental rate of 22%. For a senior tech employee in a high-income year, say $400k base plus $300k of RSU vesting and NSO exercises, a married couple's federal marginal rate is 35%, and state tax (depending on where you live) may be 9–13% on top of that. The federal withholding gap alone can be $30,000 to $40,000 in underpayment.
The fix is a tax projection you keep current through the year, not a tax return in April. Every vest, exercise, and bonus moves the number, and each one is a decision you can still shape: adjusting estimated payments, timing discretionary income, or changing how you handle the next vesting event. By September, most of the year's decisions have already been made for you.
RSU and NSO mechanics are covered end to end in the RSU guide and the NSO guide.
Mistake #5: Exercising ISOs in December Without Modeling AMT
This one doesn't just cost money. It can be catastrophic.
When you exercise ISOs and hold the shares, the spread between your strike price and fair market value at exercise is not taxable income under the regular system. It is, however, a preference item under the Alternative Minimum Tax. That spread gets added to your income for AMT purposes, and if your AMT liability exceeds your regular tax, you owe the difference: due in April, in cash, regardless of whether you've sold a single share.
Consider a hypothetical: a senior engineer holds 50,000 ISOs at a $10 strike. FMV at exercise is $45. They exercise 10,000 shares in December, creating a $35 spread on each share: $350,000 of AMT preference income. They file jointly, with about $693,000 of taxable income, so their regular tax runs around $180,000. Adding the preference pushes AMT income to $1.07 million, past the $1 million mark where the $140,200 exemption begins phasing out, leaving about $103,000 of it. Tentative minimum tax comes to roughly $267,000 against $180,000 of regular tax, and the difference, about $87,000, is due in April, in cash, on shares they're still holding.
The December timing makes this worse. Exercise in December and the preference locks in at year-end, days later, with the bill landing in April. Exercise in January and you have eleven months to watch the stock and decide before the year closes, which is a different strategy entirely.
The question isn't "should I exercise?" It's "how many shares can I exercise this year before AMT makes holding them too expensive, and what's the plan if the price drops?" That number exists. It takes a tax projection to find it.
For the full mechanics, see our ISO taxation guide and the post on the ISO bail-out strategy.
Mistake #6: Making Exercise Decisions Based on Slack Chatter
"Everyone on the team is selling into the tender offer." "A guy in my org said to skip the tender and wait until after the lockup." "My co-worker says the strike price won't matter at IPO."
These conversations happen constantly, and they produce confidently delivered advice based on someone else's situation: their tax bracket, their cash position, their risk tolerance, their existing portfolio, their timeline.
Equity decisions are not fungible. Two people with identical grants at identical companies can reach opposite correct decisions based on their individual circumstances. One exercised ISOs earlier in the year and is carrying AMT exposure the other doesn't have. One has a spouse with high W-2 income that pushes the household into a different tax bracket. One is buying a house in six months and needs liquidity.
The person offering advice at lunch is not making it with your situation in mind. They're making it with theirs. Absorb the information, ignore the recommendation.
Mistake #7: Letting In-the-Money Options Expire Worthless
This one is well documented. Carta's 2022 Employee Stock Options Report found that 46.1% of in-the-money options expired worthless. Nearly half. For the same mechanical reason every time: the expiration date arrived before a decision was made.
Some of this is cash-constrained (exercise requires money the employee doesn't have on hand). Some of it is decision paralysis: the tax complexity feels overwhelming enough that doing nothing becomes the default. From the same Carta report, 13% of employees cited fear of making a mistake or the mistaken belief that they already owned the shares as the reason they didn't exercise.
Options expire on a fixed date. That date does not move. The cost of doing nothing is, eventually, losing the entire in-the-money value.
The fix is calendar discipline. Put every option grant's expiration date somewhere you'll actually see it. If you have grants expiring within 18 months, that's a current planning problem, not a future one.
Mistake #8: Not Knowing Your Post-Termination Exercise Window
You leave the company. You have vested options. You have a countdown clock, and most people don't know it started.
The standard post-termination exercise window for stock options is 90 days. For ISOs specifically, this is an IRS requirement: any unexercised ISOs that aren't exercised within 90 days of termination automatically convert to NSOs, losing their favorable tax treatment. After that, the options expire or convert depending on what the plan document says, but either way, the ISO tax benefit is gone.
Some companies now offer extended windows of five, seven, or ten years. If yours does, the options typically convert to NSOs after 90 days but don't expire immediately: you retain the right to exercise, just under NSO rather than ISO rules. That's a meaningful difference worth knowing before you resign.
The planning failure here usually looks like this: an employee leaves a company, gets caught up in the transition, and doesn't get around to reviewing equity until month three. By then, the window may be two weeks away: not enough time to model AMT, arrange financing, and make a deliberate decision about a grant that might be worth six figures.
Read your equity plan documents before you leave. Know exactly which grants vest, which are vested and unexercised, what each expiration looks like, and what the post-termination window is. This is not something to reconstruct under time pressure.
We mapped this out as a chain of decisions, one triggering the next, starting the day you give notice. See how it unfolds.
Mistake #9: Missing the 83(b) Election Window on Early-Stage Grants
For employees at early-stage companies, seed through Series B, this is one of the most expensive and most time-limited mistakes on this list.
When you receive early-stage equity (restricted stock, or options you exercise early before vesting), you typically have the option to file an 83(b) election with the IRS within 30 days of the grant or exercise date. The election tells the IRS: tax me now, on the current value, rather than at vesting when the value may be much higher.
At a seed-stage company, shares may be worth $0.001 at grant. If the company eventually goes public or is acquired at $40 per share, the difference between paying ordinary income tax on $0.001 versus $40 is the entire economic gain from early employee status. The 83(b) election starts the holding-period clock right then, at grant for restricted stock or at exercise for options, so that gain becomes long-term capital gain once the shares have been held more than a year, taxed at preferential rates instead of ordinary income rates of up to 37% federally.
Miss the 30-day window and the election is gone. There is no extension, no exception, and no way to undo it. The IRS is not interested in the explanation.
For employees joining early-stage companies or receiving new restricted stock grants, the 83(b) election should be on the checklist for day one. Not week two. Day one.
Mistake #10: Using Equity as an Emergency Fund
Company stock is not an emergency fund. The two things that make it feel like one (large notional value, ability to sell) are the same two things that make it fail at the job.
An emergency fund needs to be accessible, stable in value, and available exactly when you need it. Company stock fails all three at the worst possible time. One bad earnings report can drop the price 20–30% in a day. Trading windows may be closed, or you may be subject to blackout periods, precisely during the periods when you most want to sell (earnings pressure tends to correlate with insider concern about results). And pre-IPO equity can't be sold at all without a secondary market or company program.
The emergency fund should be cash. Three to six months of expenses, in a high-yield savings account or money market fund, completely separate from company equity. The equity does different work: long-term wealth building, tax efficiency, funding goals years out. It is not a short-term liquidity reserve.
Conflating the two creates financial risk. It also distorts the equity decisions: a position that looks like a buffer keeps you from building a real one, so the cash that should already be in savings stays in the stock, and the emergency fund never gets funded because, on paper, it already exists.
Keep them separate.
The Common Thread
Read back through the list and one theme runs through most of them: these are errors of omission, not commission. Nobody exercised ISOs in December to trigger AMT on purpose. Nobody decided to skip building an inventory. The options expired worthless because nothing happened, not because someone made a bad decision.
The equity compensation decisions that cost the most tend to be the ones that got deferred long enough to become non-decisions.
If your grants are complex enough that the right move isn't obvious, the planning work should happen before the window opens, not during it.
Equity compensation is one piece of a coordinated financial picture. The exercise timing, the AMT projection, the sell discipline, the tax withholding: none of them exist in isolation from your income, your other tax events, and what you're building toward.
For more on individual equity topics, start with the equity compensation master guide or the AMT and equity compensation post.