If you are building a long-term investment portfolio, aside from “which” stocks to own, “how many stocks” and “in what weights” are also critically important questions that will determine your level of success. If we had a working crystal ball, the answer would be: 1 stock (i.e. the one that is going to go up the most). But because we cannot exactly predict the future, we build an intelligently diversified portfolio that diversifies away the big risks, but still leaves plenty of room for long-term compound growth.

A friend asked me the other day how much money he and his wife should have in their 401K plans at this point to be on track to retire someday. I answered him with a simple 2-Rule Framework that can be useful for everyone.