Stock Options are just that - an option to buy a share of stock at a future date. They are a bet on a future outcome which contains lots of risk.

Restricted Stock Units are cash. They are new shares issued to you with restrictions on exercising them. Once they vest, there is no value in not selling them immediately. The tax consequences are the same if you hold them, and you gain the value of diversification by selling.

The above should tell you something about the calculation you are espousing. Yes, the very risky asset called stock options is much less likely to hold any future value. The risk implied should also tell you that for a rare good pick with lots of well managed influence to the outcome, you can succeed with fantastic gains where you cannot simply by holding public shares.

YMMV. The only way to win the startup lottery is to work very hard to influence the outcome. I can't think of any other lottery like that.

> The tax consequences are the same if you hold them

The gains that occur after vest-and-release are capital gains. Capital gains for assets held over a year are much lower than ordinary income rates for most people receiving RSUs. (It's still reasonable advice to diversify in the typical case.)

I think I'm either misreading your comment, or there's a misunderstanding here.

When RSUs are issued, they typically appreciate in value due to either an increase in share price or a discount or both.

When the RSUs vest, one of 2 things happens: either the number of shares is reduced by a sum equivalent to pay income taxes, or (more rarely) income taxes are paid by the recipient later at tax time. In either case, the shares didn't exist in the recipient's account before that vesting date.

If the shares are sold, those funds can be used to buy other shares if desired. If they are held, they are just normal shares in that company. In either case, they appreciate as capital gains instead of income, starting with the point in time when they were either purchased or vested whichever the case may be.

When the RSUs vest, what typically happens is both of the things you describe. A number of shares is withheld at vesting and the value sent to the Treasury as an income tax withholding. The following April, you true-up the full tax liability with the full number of shares treated as ordinary income. (The withholding is typically at the supplemental wage rate [22%, used to be 25%], which is frequently not enough to cover the full amount of tax due.)

Your initial comment suggested that you didn't distinguish between the ordinary income and capital gains taxation for the pre and post time periods. It turns out you did understand that distinction, but I didn't glean that from your prior text.