Age and your overall net worth is important as well. People quote Buffet and Munger all the time. But you are not Buffett nor Munger. None of us are. Yes, you maybe an Autist like Roaring Kitty. But that's a special breed of special. If you are in your early 20s, have a good job and good prospect in life and have good safety net, you can probably do a few 30-50% bets. If you are in your 40s, 50s, and this is a lot of your nest egg, you probably want to be a lot more diversified.
Personal story, in 2011, 2012 ish. I put 30-50% into my top ideas in my IRA. The balance was $30k or so. I was buying a cash box at 1/2 of liquidation value. That sizing really helped as I got a payout that was almost double. I did that a couple times and got my IRA into the med to high 5 figures. But once I crossed over 6 figures, something in my mind mentally changed and I realized that I need to be more diversified. I have 15 positions in my IRA now. 6 figures is real money and I am in my late 30s. So I was much more aggresive in my early 30s and now that my balance is about 8x (some contributions, not all performance) from 2011ish, I manage the IRA a lot different. I manage money for other people and it never reached the level of concentration that it did in my IRA. Ironically, it is the stuff that I size in 1-5% that tend to out perform lately. So all this talk about concentrating on your best ideas, sometimes it is good to get some "right tail" exposure to some Saasy companies that doesn't make sense using 2021 P/FCF multiples. But if you understand the business and realize that this is a "winner take all" category that could be worth 5x the current price in 5-8 years, it's not a bad portfolio allocation strategy to put 1-5% into it. I prefer 1-2%. So I have a basket of what Peter Lynch call multi-baggers that I don't necessarily have a ton of confidence in like my Griffin Realty idea. But allocating 10-20% to a basket like that is a wise way to catch some of that "right tail" return. I do think there is something about digital market places, software, and other digital native businesses that are different than traditional manufacturing that makes it different this time around. Famous last words.
There are others that are much smarter than me who have evolved and developed the skills to invest in purely compounders and YOLO investments, I am not there yet. Not sure if I want to be fully there. As Robert Downey Jr said in Tropic Thunder "You never go full retard." I never go full compounder. Sometimes the stuff that you size at 2% wind up returning the same as the stuff that you size at 10% because the former is a 5 bagger the latter is a double. Nothing wrong with that outcome as your degree of confidence is likely much higher in the latter.
Happy investing, good luck compounding, and may your mind be exposed to wonderful growth.
