The easy answer is to index it. The hard way is to make your own portfolio. Playing around with fewer than 30-50 stocks exposes you to unnecessary risk, howeve

The easy answer is to index it. The hard way is to make your own portfolio. Playing around with fewer than 30-50 stocks exposes you to unnecessary risk, however. At least according to modern portfolio theory. The way I would pick stocks (if I didn't just buy an index) would be to calculate a reasonable, rational value for the security based on its financial performance - sort of simplistic discounted cash flow model. Then you just repeat, over and over again with lots of stocks, observing trends and buying when the market gets out of whack. There is judgment involved, so you can't fully automate the process. Done right, it's a full time job and takes a good chunk of change.