If you really want to see how badly small growth stocks returned compared to small value, large value, large growth, and the Total Stock Market, Money Chimp has an excellent
asset class calculator. If you really want to be aggressive, you might consider a whole lot of small value stocks, and not small growth stocks.
As for individual stocks, the evidence seems to point to the conclusion that we/you/investors are pretty horrible investing this way. Check out
Terrance Odean's website (Berkeley Finance Professor). The streaming video presentation is an excellent overview of his research on investor behavior, especially with individual stocks. His article,
You Are What You Trade, was also hilarious. I'd agree w/ previous posters, that if you're going to go this route, I'd try and limit individual stocks to a small portion of my portfolio (like 5% or under). Think of it as play money - if you lost it all, you'd still be on track for retirement.
As far as portfolio design goes, Roger Gibson has some very good articles/charts to look over:
Investment Portfolio Design Format from Roger Gibson. It's a good decision tree for deciding on your asset allocation.
Virtue of Diversification
The Rewards of Multiple-Asset-Class Investing
Related to the last link, a
chapter from his book "Asset Allocation: Balancing Financial Risk".
You might want to ask yourself, "Am I really diversified?" Do you own all kinds of different stocks (large, small, value, growth; domestic, int'l; Europe, Asia, Emerging Markets)? You might consider REITs for added diversification (preferably held in your 401(k) or Roth IRA)? Can you handle the volatility of an all equity portfolio?
I'm 29 and, personally, I cannot handle 100% equity, nor can my wife. So we use about 20-30% intermediate term bonds in our 401(k)'s. We currently use almost nothing but index funds. S&P 500 index fund, MSCI EAFE Index fund, Small Cap Value index fund, REIT index fund, managed large value fund (Vanguard Windsor II) in 401(k), stable value fund in 401(k) for Bonds. First two index funds are through 401(k)'s (managed by Barclays for around 0.10%); next two are with Vanguard. Our portfolio is pretty small, so that's about all the diversification we can do without racking up more fees in our IRA.
I think we'd all agree that the really heavy lifting is done. No debt, except mortgage. Saving a good deal. I can't stress enough how important it is to minimize investing costs. So, whichever index funds you choose, make sure they charge as little as possible (like Vanguard's). Also, make sure that you're investing tax efficiently in your taxable account. Index funds like Vanguard's S&P 500 fund, TSM fund, and Tax Managed funds are very tax efficient. As are individual stocks, if you don't trade much. Index funds like Vanguard's small cap funds, REIT fund, and Emerging Markets fund aren't very tax efficient. I'd first decide on your asset allocation (see first Gibson link). Only after this is done, go about choosing investment vehicles - mutual funds and such
- Alec
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