Long term investment/diversification strategy

slow mondays...

1. I'm 90% stock, 10% cash. for my non cash investments, I'll always stick with stocks until I get sufficiently close to retirement that I need to switch to wealth preservation mode (unless we have another tech bubble). that's general advice, stocks will always be the best game in town for regular investors. as far as high yield, I wouldn't touch it with a 10ft pole right now if you're indexing. the spreads are way too low so unless you're picking out individual deals, you have a good likelihood of getting fucked (take a look at PHK, it's up over 15% this year but the NAV is down 3%, HY is a time bomb and people will realize why indexing in fixed income is just flat out wrong, practically and empirically)

2. you'll get blue chip stock exposure if you index/buy cheap active. also, the ETFs will pay dividends so you get a "break" on the investment income.

3. see below

your questions 2 & 3 beg the question - should you even bother picking individual names? this is the age old question, and there's a couple of different perspectives on this. I won't go on a diatribe about active/passive because that's been done to death. where you can get into trouble picking individual names is if:

• your job requires strict compliance to various policies, limiting your universe
• you have no interest in doing due diligence on initiating, maintaining, and selling positions
• you don't find it interesting
• you're underdiversified. no matter how much you might like AAPL, it shouldn't make up 40% of your portfolio

I personally love it. while I've outperformed long term, there are times where I want to punch somebody because positions are souring or I have one loser cancelling out 2 winners. it's not for the faint of heart, like any investing, but buying individual names causes all sorts of other psychological effects that are detrimental to investor success - confirmation bias, tunnel vision, fear of admitting to a loss, etc., and while you get the ups and downs of this with index investing, it's not the same as individual names. plus, with index investing, you'll never be staring at 1000 shares of GE on your statement which totally overshadows a few good picks like Mastercard and Conoco, you just see the S&P or R3000 up/down with everything else.

for the lay person, I'd say just pick broad based funds (as outlined above) and save 25%+ of your income. if you want to take chances, here's the ways to hit it big (non exhaustive)

1. venture capital - seed a company, become part of an angel group, start a side business. early equity has the biggest potential profits (low probability) but highest failure rate
2. land - buy land somewhere they eventually discover oil, amazon relocates to, has an original honus wagner card, something like that
3. inherit it - duh
4. have a lot of $ in concentrated equity (likely your employer's stock) and have the company do well
5. find the next AMZN, GOOGL, NFLX, etc. - this is much easier said than done. that being said the best places to look will be in small/mid cap IPOs in an industry you can understand. for example, because of my clientele and family being in tech, I'd have a better chance at identifying a promising mid cap tech name that could get bought/turn into a huge name, versus reading clinical trial data and trying to find the next big biotech.

if you really want to swing for the fences, you'll have to look into more esoteric areas, tie up capital for longer, and so on. if everyone could find the next AAPL, it wouldn't be as lucrative