You may have a large portion of your portfolio in one appreciated stock, perhaps one that you bought many years ago and that has done well since. You should diversify your holdings to reduce the risk of loss, but selling those shares will trigger a large tax bill.

Possible strategies include:

1. Take losses. If you hold other stocks, in addition to your concentrated position, take losses on those issues whenever possible. After you take a capital loss, sell enough of your concentrated position to take an equivalent gain.

No net tax obligation will result. And the proceeds from both sales (the loss and the gain) can be reinvested to increase overall diversification.

2. Borrow against your concentrated position. Use the proceeds to buy an assortment of stocks, then take losses on those that decline. Again, the losses can offset gains you take as you whittle down your concentrated position.

Suppose you hold $20,000 worth of appreciated XYZ stock. You might borrow $10,000, secured by your XYZ stock, and reinvest in different stocks. Borrowing the money won’t trigger a tax bill and the interest payments may be deductible.

Of those 10 stocks, some will probably gain while others lose. You can take capital losses, as opportunities appear, and take offsetting gains on the concentrated position, as above.

Also, if you need to cash in stocks to help pay for college, you can give appreciated securities from your own accounts to your child, who probably will be in a lower tax bracket. In fact, if the securities have been held more than five years, your child likely will owe only 8 percent tax on any gains.

Yet another approach to minimize the tax bite is to use a tax-deferred retirement plan such as an IRA or a 401(k) or a tax-deferred variable annuity as a mirror portfolio. That is, if your asset allocation calls for holding $100,000 in large-cap growth stocks, you can hold $50,000 in a tax-deferred vehicle and $50,000 in a taxable account.

When you need to re-balance, you would take gains inside the tax-deferred annuity or retirement plan, avoiding taxes. Losses can be harvested in the taxable account, providing tax deductions and offsets to any taxable gains. New money going into the taxable or tax-deferred accounts can keep your portfolio in balance.

The bottom line: With mirror portfolios, you can take losses in your taxable account and gains within your tax-deferred variable annuity or your tax-deferred retirement account.