We’ve had a lot of success over the years with the aggressive investing stock picks we recommend in our Stock Pickers Digest newsletter.

Aggressive picks have the potential to give you bigger gains than your conservative selections.

Even so, aggressive stocks are best suited to investors who can accept substantial risk in the portion of their portfolios that they devote to these types of investments. You can be wrong on any of your stock picks, of course. But when you’re wrong on a speculative stock, your losses are likely to be larger than they would be with a well-established company.

Here are three key ways to cut your risk when making aggressive investing stock picks. They’re at the heart of our approach to picking stocks for Stock Pickers Digest, our newsletter that focuses on the more aggressive end of the investment spectrum:

Tip #1: Aggressive investments should make up no more than, say, 30% of your portfolio. Ultimately of course, the percentage of your portfolio that should be held in either conservative or aggressive investments depends on your personal circumstances. An investor with a longer time horizon or without the need for current income from a portfolio can invest more money in aggressive investing stocks. But we think 30% is a good rule of thumb.

Tip #2: You can cut your risk all the more by taking a conservative approach to your aggressive investing.

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For instance, you should hold your aggressive investments within a portfolio that reflects our three-pronged investment philosophy. That is, mainly invest in well-established companies; spread your money out across most, if not all, of the five main economic sectors (Manufacturing, Resources, Consumer, Finance, Utilities); and downplay stocks that are in the broker/public relations limelight.

That way, you protect yourself from an unforeseeable industry downturn. You also increase your chances of stumbling upon a market superstar — a stock that does much better than average.

You may stretch these rules a little in aggressive investing, while still sticking to the general idea. You may invest in more companies that are less well-established, compared to a conservative investor. But avoid loading up on penny stocks, recent new issues or any stocks that expose you to a serious risk of total loss.

Tip #3: Look for aggressive investing stocks with hidden value — value that attracts far less investor attention than it deserves. That gives buyers a bargain. It may also attract takeover bids.

Hidden assets can consist of real estate or underused brand names. For example, companies often carry their real-estate assets on the corporate books at its purchase price, even though its value had multiplied many times over the years. Balance sheets often fail to assign any value to brand names, even those household names that had built up multitudes of loyal customers over the years.

Research and development spending by technology stocks is one of today’s best-hidden assets. High research and development budgets let tech stocks keep adding profitable new products to their lines and improving existing ones.

Looking for hidden value can produce huge profits — and when you lose, you generally don’t lose that much.

You can get all of our latest aggressive buys in Stock Pickers Digest. Click here to learn more about how you can get one month free when you subscribe now.