Index Funds vs Individual Funds

[meditate89]

Bav, I realize I may be more against diversification than many people- I would rather focus on a few great ideas than spread my money over 10 or 20 stocks- but only 1 probably wouldn't make me very comfortable( unless it was BRK-A =p).
Also I am trying to keep some money liquid for merger/ arbitrage opportunities- if I wasn't doing this I might have a few more long positions.

I'm also young and have more time than you probably do to recuperate if I somehow lost money. However, I think the Sarbanes Oxley act will help to prevent future Enrons from occurring. I think it is also very important to scrutinize the actions of management and make sure the financial statements of a company makes good sense to you before you invest of course. It would be devastating if one of the companies I own went bankrupt... but it's hard for me to calculate the likelihood of this. One in a million? It's not that I believe it's impossible... but do you worry about getting hit by lightning whenever there's a storm? I think that because of my tendency to pick stocks with strong balance sheets, solid earnings, trustworthy and competent management, usually low debt to asset ratio, etc, that it wouldn't be fair to say... for example... there are 10,000 companies, 100 went bankrupt, therefore you have a 1% chance of each of your companies going bankrupt.

Also, I don't think it's fair to compare the stock market to blackjack or slot machines which are -EV games that you can never ever win in the long run. I think everyone can agree that with a larger amount of time to dedicate, anyone can beat an index fund- but I don't know anyone who can beat slow machines or blackjack ( assuming no card counting), no matter how much effort/ time they dedicate

I'd say it's more like this:

Would you rather get all in with AA vs AK for a $1200 pot,
or get in with KK vs AK for a $300 pot, 4 times in a row?

Your expectation is higher with AA vs AK, but your likelihood of having SOME money left at the end is MUCH greater showing down KK four times.

Assuming my bankroll could handle the swings, I would much rather buy the one AA 'stock' than the 4 KK 'stocks'