If you were starting from scratch to build a speculative equity portfolio, how would you do it? I say speculative because the vast majority of stocks are in this category. No matter how big or successful a company is, anything can happen to that stock.

Don't believe me? Consider the household name Procter & Gamble. There's no doubt that this is one of America's great companies. Traditionally, it has been a good investment, but don't forget that the company is also equity security. In 1999, the stock was experiencing a record year, having appreciated dramatically in prior years. Then, growth didn't meet expectations and the stock dropped more than 50% in a very short period of time.

It's taken until now, about six years later, for the stock to recover to its 1999 level. But this is Procter & Gamble! This is a hallmark blue chip corporation! There's no doubt it is hallmark, but it is also a stock--and stocks can be volatile!

This is why I view all stocks as speculative. I look at the stock market in terms of risk, not potential return. Now, getting back to the point. I would build a new speculative equity portfolio with maybe seven to ten stocks, likely all weighted in equal portions of the total portfolio. I wouldn't add a stock until the timing and the opportunity was right. It would probably take me a full year to build this portfolio.

First, I'd consider two alternative energy plays. Perhaps a solar play and a pollution control play. Second, I'd pick an eye care stock. I love the eye care business. Third, I'd chose two technology stocks with one related to fiber optics and the telecommunications industry. I'd probably choose a risky China stock, and finally, I'd finish off with one or two precious metal stocks. One most likely a gold producer and the other a mining services company. There's ten investment themes in which to speculate.

I wouldn't need more than ten holdings, but I wouldn't have less than seven. I like to be diversified and frankly, there are a lot of good investment opportunities out there.

So, I guess what I'm saying is that it's good to spread a speculative portfolio around a bunch of industries. All the companies would have to have existing track records of success, reasonable financial metrics, and be genuine innovators in their industries. Again, from my view, a speculative portfolio is all about risk, not potential return. This is why if I was building a new portfolio right now, I'd probably look to build a basket of seven to ten stocks from my favorite investment themes.