Could you expand on this a little? At what age is it ok to "stick a toe, foot, or leg" into the tiger's cage. (metephore for 20-30% of your portfollio).
Seems that if you are making a good income in your early-mid 30s (and LBYM) that putting 30% of your portfollio into a large cap equity and watching it closely may be an acceptable risk.
Hell, if it hits big it could put your kids through college. If it tanks, you have time to recover.
I would not recommend it for anyone at any age, but that's me. Watching it closely is of little value, IMO. So it drops 10% - what do you do? Sell it because you are watching it closely, and want to avoid further losses, or buy more because if it was a good deal 10 points ago, it is a screaming deal now?
When a single stock makes up more than 5% of your portfolio, those decisions get very emotional. And they often leave you cursing either with "I should have sold that POS when it first dropped!", or.... " I should have bought more when I had the urge - I would be rich today!". And how can you know until after the fact?
It gets argued from time to time on this forum, but I think it's tough to do better than an index fund by trying to pick winning stocks. I hold a few from time to time (usually blamed on testosterone, or just a little gambling urge). I have not been able to convince myself that I can do better on average.
haha likes to roll his own, I take it. I'm pretty sure he stays well diversified though. I know there is the argument that you can weed out the "obvious" dead weight in an index portfolio, but I've also seen studies that show it is the current down-and-out stocks that reap superior returns over time.
Maybe haha tries to pick those out? I know he refers to "undervalued" stocks. I know what he means, but I also have trouble deciding that my vision of "undervalued" is better than the markets' vision. At least on average.
At any rate, if you stay diversified across sectors and have no more than 5% company specific risk, you are much more likely to avoid a big meltdown (or at least bigger than the overall market). You won't do better either - that's the tradeoff. As far as "time to recover", that's why it is generally accepted that a younger person has a higher equity exposure (but diversified), they have time on their side, and over the long run, equities are likely to have higher returns than fixed investments.
-ERD50