avoid bad businesses at all costs and avoid industries that you don't feel comfortable with. how do you get comfortable? you have to figure it out. see what kinds of industries (that don't suck) you feel compound gains as you like. For example i just can't really get comfortable with watch paint dry insurance, financial, and oil stocks. just not for me. i'm sure they're great for someone. however i do love garp, tech-industrials, consumer franchises, up and coming end markets, saas. be very skeptical all the time. have a high threshold for new action. position size is feel and trying to avoid overlaps. always moving higher position size to increase quality. How do you get comfortable? i'm afraid for me its a bit reflexive. while stock price is not only indicator if a company does badly for a while or the stock doesn't have some gains over time you have to ask what you are missing about the company - usually worse business than you thought or poor management decisions or bad end markets. Sometimes its temporary but usually the market is more right than not. don't fall for the value investing stuff about price is not right. price is very useful information over time. it isn't the only criteria and you should have internal views about company and industry dynamics but use the price action after purchase, or while watching, as some input to "learning" about what markets like and dislike about various companies. Reverse engineer that to understand business better. That wisdom is key to comfort with positions and adding to them or discarding them. Finally I would be diversified. I own about 20-25 positions. Try to spread it so there is not too much overlap. Doesn't mean you shouldn't specialize in some fields but if you have tech, have some brk or something perhaps. All tech or all healthcare , even if the trend now, is too risky. But you can't miss it out either. find a vehicle if you aren't comfortable picking in that area.