The key insight: vesting = a cash bonus you reinvested
When RSUs vest, you pay income tax on the full value and receive shares. Financially, that is identical to receiving a cash bonus and immediately using it to buy your employer's stock at the market price. So the real question is not "should I sell?" but "if I had this much cash, would I choose to buy this much of my employer's stock today?" For most people the honest answer is no — which points to selling.
Why there is little tax cost to selling at vesting
A common myth is that selling right away triggers a big tax. It does not. Your cost basis is the vesting-date value, so if you sell immediately the capital gain is roughly zero — there is little or nothing extra to tax beyond the income you already owe at vesting. You can diversify at vesting almost tax-free. Holding does not avoid the vesting income tax; that is due either way.
The case for holding
Holding only helps if the stock keeps rising, and it comes with two costs: concentration risk (your job and savings tied to one company) and the fact that any gain while holding is taxed — short-term at your ordinary rate if under a year. If you hold more than a year, further gains get the lower long-term rate, but you are taking real single-stock risk to get there. Hold only if you would actively choose to buy the stock with cash and can afford the risk.
A simple decision rule
Sell at vesting and diversify unless you have genuine, informed conviction in the stock and your total company-stock exposure is within a level you are comfortable losing. A common guideline is keeping any single stock under 5-10% of your portfolio. If vesting pushes you above that, sell the excess.
Don't forget the withholding gap and basis
Two housekeeping points regardless of when you sell. First, the default 22% withholding is often too low, so plan for the gap at filing. Second, whenever you do sell, make sure your cost basis is reported as the vesting-date value, not $0, or you will be double-taxed. Both are covered in our RSU tax and double-taxation guides.
A quick example
100 shares vest at $80 = $8,000 income, taxed now. If you sell the same day at $80, your gain is $0 and there is no extra capital-gains tax — you simply diversify $8,000 (minus withholding) into other investments. If instead you hold and the stock drops to $50, you still owed tax on the original $8,000 but your shares are now worth $5,000. That asymmetry is why selling at vesting is the low-regret default.