Ok, everything you said was understandable. One last question when it comes to purchasing individual stocks. I understand what you are saying about avoiding pitfalls by choosing individual stocks that may not perform so well over time. What if the stock is that of a company you work for and they have had a past performance that has been good over time and the company offers a good purchase/match plan?
Be really careful when purchasing employer stock. Think Enron. Those folks rolled much of their investment into their company stock and they also relied on their company to provide their income so when the company went belly-up they not only lost their current income but they lost all of their investments as well. Had they diversified, the job loss would have been bad but at least they would still have their investments.
You should never have more than 10% of your money in company stock. If they give you good incentives, take them but then get rid of that stock as soon as you can (while mitigating taxes). Don't let it just build and build because that is really putting too many eggs in one basket. You may want to spend a little money and talk to an EA or some other sort of tax advisor who knows about ESOP and ESPP plans and the tax consequences that go along with them so you make sure you're planning appropriately.