Restricted stock units are the shiny prize for countless employees in technology and other growing industries. However, RSUs are taxed differently than stock options, and many employees who receive them simply don't understand the serious implications.

Stock options have a tax advantage because they are taxed when you exercise your option. RSUs, however, are taxed at the time they are vested, not when you sell.

As RSUs grew more popular over the past five years or so, we've seen a problem emerging with how they're handled. Too many recipients insist on holding on to their RSUs, even after they vest. In doing so, they are falling into the trap of concentration risk—otherwise known as putting all your eggs in one basket. Read More Is your advisor more sizzle than steak?

In and of themselves, RSUs are a good, solid equity compensation vehicle.

Stock Options, Restricted Stock, Phantom Stock, Stock Appreciation Rights (SARs), and Employee Stock Purchase Plans (ESPPs)

An RSU is a grant valued in terms of company stock, but company stock is not issued at the time of the grant. Once the units vest, the company distributes shares, or sometimes cash, equal to the their value. Unlike stock options, which are worthless if share prices dip below the option price, RSUs maintain an intrinsic value unless your company goes out of business.

The challenge with RSUs grows out of how to use them. For most recipients, the correct approach is to cash the units out once they vest and then use the proceeds to build a diversified investment portfolio.

Diversifying your holdings across complementary asset classes allows you to balance risk and reward so that you have the best chance of reaching investment goals without worrying about getting cleaned out. It's standard practice among people who have become financially successful and want to stay that way. This isn't to say that you shouldn't keep any of your company's stock—far from it. It's exciting to be an owner and not just an employee.

The key is to surround that company stock with complementary investments, such as bonds and stocks in other industries. Read More Why is asset allocation important? But too few RSU recipients are doing that; many hold on to their units, at their peril. This is happening because of the misunderstanding of RSUs' tax treatment.

We recently added a client who wanted to use the proceeds from his RSUs to help build a house. The client's plan was to wait a year, sell the vested units and then start building.

After a year, he explained, his RSUs would be taxed at the long-term capital gains rate—which is lower than the short-term capital gains rate. The client was laboring under a common misperception.

RSUs, in fact, are taxed as soon as they vest. Often, employers will hold back an amount of shares equivalent to the tax bill upon vesting. That tax bill is onerous, by the way: Depending on where you live, the Internal Revenue Service, along with your state of residence, could end up taking nearly 50 percent of your RSUs' value. And there's not much to be done about it. Back to that client: We explained to him that not only did he not have to wait to dip into his vested stock, but that waiting could actually be counterproductive.

Should the price of his company's stock fall before he sells, he'd lose twice. First, his shares will have lost value, and second—because RSUs are taxed as soon as they vest—he'll have paid taxes on their higher, original value. Read More Come down from that buyback high. A more common reason that employees hold on to their RSUs is the straightforward hope of growing richer.

Stock Options, Restricted Stock And Taxes

When I suggested to one something client that he sell his RSUs and invest the proceeds in a diversified portfolio, he basically accused me of being a buzz kill. His tech company's stock had been appreciating fast, he explained, and there was no reason to believe it would stop. You can't see the future. Like all companies, tech firms have long periods of flat or falling stock prices—and yes, they often go bust.

Just look at late, great firms such as Pets. And remember, recessions are a fact of life, and the havoc they can wreak on stock prices and on companies themselves is very real. It's natural to think that the company you work for is different. And maybe it is. But when you limit your investments to the stock of any one company, that's really risky behavior.

If your company runs into trouble, not only will your stock crater but you might find yourself out of a job, as well.

When your wealth is all in the form of your company's stock, you're not just putting all your eggs in one basket—you're living in that basket, too.

Read More Stay balanced in risky bond market.

Many employees cling to their RSUs because they're afraid of being "left out. One way to deal with these kinds of jitters is to use a form of dollar-cost averaging.

If your company is growing and its stock is rising, sell small portions of your RSUs at regular intervals and invest the proceeds in your diversified portfolio. That way, you'll participate in at least part of your company's gains while creating a solid financial foundation.

If RSUs have pushed you into the ranks of the wealthy, congratulations. You'll need to make wise decisions in order to stay there.

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Register Log In Profile Email Preferences PRO Sign Out. How to avoid the tax traps of restricted stock units Bijan Golkar, CEO and senior advisor at FPC Investment Advisory. Henrik Sorensen Getty Images. Get this delivered to your inbox, and more info about about our products and service. Read More Come down from that buyback high A more common reason that employees hold on to their RSUs is the straightforward hope of growing richer. Read More Stay balanced in risky bond market Many employees cling to their RSUs because they're afraid of being "left out.

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