I have wrestled with the same question in regards to investment portfolios, particularly those designed to fund retirement. I can only say that you do not want to mimic mutual or index funds. (Why would anyone managing their own account do that?) If you don't have the time or knowledge to mange your own retirement account, by all means just buy index funds. The results will be mediocre, but that is better than horrible.
If you are going to manage your own account, you want only a couple handfuls of stocks, the ownership of which you must combine with great patience. (You broker is going to hate you.) I think I have about 12 in my Roth IRA that I personally manage . It is up over 30% for the year. In the current world, two stocks have to form the backbone of any equities portfolio, one being Amazon and the other Google. Then add only dividend paying stocks beyond that, Make sure they are diversified, including diversification across national boundaries, relatively recession proof, and have a long history of rising stock price and rising dividends. Use your personal knowledge, and buy into things that you understand, avoid those you don't. Then sit back, be patient, pay zero attention to the daily market press, trust your own judgement, and ignore everyone else! Periodically reinvest your dividends. If uncertain what to do, hold cash, and wait until you have more confidence in your decision. Patience is the key.
If you want to hedge by shorting, do not do it in your primary retirement account. Use a separate account. You could for example go long and short the S&P 500 by trading SPY. But do it in a separate account. And do not do it unless you have long years of market experience.
