[DesertCat]

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DC,

For #2 what do your recommend? I've always heard that ~20 is a golden zone. Too few and you have greater risk, too many and as you said you dilute yourself needlessly.

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My goal is 5. Reality is I end up with 10 since I can't control how much I can buy of some positions or when I can sell some others, but if I really love a single position I'll make it up to 25% of my portfolio. I've had half my portfolio in two positions before.

There is some good discussion in "You can be a stock market genius" (goofy title, great book) where Joel Greenblatt discusses how little extra protection you get from volatility in a larger portfolio. He estimates the markets standard deviation is around 18%, i.e. it's average return is 10% two thirds of the time it will be between -8% and 28%. He then estimates that a portfolio of 5 stocks will have a standard deviation of 21%, i.e. between -11% and +31%. Not much difference in volatility range between one of the least diversified portfolios possible and the most diversified portfolios (the market).

Of course if you are -EV at picking stocks, then concentration into a smaller portfolio is likely to help you lose money faster. It only works if you are skilled at valuing businesses and if you pay attention to what you have. Otherwise I've given you very bad advice.