[maxtower]

Stocks aren't more risky than index funds. Stocks are in index funds. So it depends on how you are discussing risk. If you own a stock or an index fund, you have the same asset class risk. A lot of the time, especially large caps, the share price of a particular stock will move with the market.
The risk you are talking about is the risk of owning one or a few companies versus owning hundreds through an index. This is hard to quantify. I think you would obviously want to be in more than one position to eliminate the risk of bad information creating a nightmare scenario for you, but if you have about 10 positions across different industries and geographies, you could eliminate most of this risk.

Some people also talk about risk in terms of the daily fluctuations of the price of the asset when compared to another. (Look up Beta) You could probably pick 10 stocks that have less of this kind of risk than the entire S&P 500. It has a lot to do with the type of business. Utility stocks for example don't move around a lot. A lot of them have a virtual monopoly, and inelastic demand for their services. Owning 10 utilities would give you a pretty stable portfolio.