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No. of Recommendations: 5
I also am a value investor looking to retire in 17 to 20 years. I own no mutual funds, and have over 75% of my main account in 6 stocks.

In your case, there are two ways to look at it. An average of 2.7% of your portfolio in each individual stock is very diversified. There is some math in "How to be a stock market genius" but essentially even 8 stocks as your entire portfolio won't give you much excess volatility over the market itself.

But there are a couple things from your post that I find worrisome. First, you say you own "mutual funds", not "index funds", which implies you are trying to pick managers who can outperform, a very difficult task.

Secondly you call your micro/midcaps "speculative picks", which gives the impression you are gambling with them and don't really have any good idea of their value.

Lastly if you are really a value investor, you wouldn't own mutual funds at all, and you probably wouldn't make this post. You would only buy at such large discounts to intrinsic value that you'd be confident putting a large percentage (i.e. 20%) of your portfolio into a single idea because of the margin of safety you'd have. And you wouldn't pay significant fees to have other managers manage your money.

My guess is that you have a full time job and do this in your spare time, and don't feel like you can spent the time to really vet all of your ideas, and this gives you a lack of confidence to fully commit to any of them. I would suggest you review your ideas carefully (take your time) and keep reresearching all of their facts, and focus your 30% equity allocations to the best four or five. That way your best ideas can have a stronger impact on your performance.

For starters, your mega caps are probably well represented in most mutual funds, do you really have any special insight into those companies that the thousands of analysts/managers researching them don't?

One final word of advise. If you like a stock greatly because of it's huge upside potential, but it has the potential to go to zero or near it, don't make it a large allocation because you have no real downside protection. I keep those types at the 5-10% range in my portfolio.
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