There is a new version of this post here.
I have settled, for now at least, on a watercolor palette that I think gives me good flexibility. And delight! You could certainly make do with fewer colors, but I love the pigments just for themselves. It’s amazing how modern technology has brought such beautiful pigments and hues within the reach of so many people, when once a dab of lapis lazuli (ultramarine blue), for example, cost a fortune. I’ve arranged my colors in an approximate color wheel (complementaries more or less opposite each other).

I’ve assigned a number to each color, and noted their pigment numbers. Because color names are so imprecise, and the same name can be made from different pigments and look quite different from different vendors, it is best to think in terms of pigments. Vendors use a consistent numbering system to reference the base pigments, and these numbers are shown on the tubes. The pigments are the usually mineral constituents of the colors, often immersed in a binder such as gum arabic. (The best online guides to pigments I’ve found are by Bruce MacEvoy and Jane Blundell.) Many people prefer single-pigment colors rather than mixes (which vendors call “hues”). I’m generally among them, but there are some hues that are also beautiful and behave well, so I have chosen some of these too. I’ve numbered my colors 1-12 according to their position on a 12-segment (tertiary) wheel. (Sometimes there is more than one pigment within one of the twelve slices, in which case they are numbered things like 7, 7.1 (falling between 7 and 8), etc. Earth tones appear in a fairly narrow segment of the wheel, and are lettered A-F. Payne’s Gray occupies the center.

Artist-grade colors are available in tubes or tins. I like to work from tubes, as they are convenient for mixing and keep the colors fresher, IMO. I prefer Winsor and Newton and Daniel Smith pigments, as they are reliable brands, but there are other quality vendors as well (Consult MacEvoy’s handprint.com when choosing). In the image above, the little plastic containers contain pigments extracted from extremely old tubes dating from my college years. A lot of these seem to have been student grade colors, which are less expensive but tend to be more opaque, include a blend of lesser quality pigments, and flow less attractively than artist-grade colors. Despite the work it took to extract the colors from the old tubes, I will probably get rid of these, as the artist-grade colors are so much lovelier. Watercolors tend to go a long way, and artist colors can be purchased in small tubes, like most of mine.

I squeeze a bit of color from the tubes into little plastic containers. My mixing tray is a porcelain dish. My favorite brush is the blue-handled liner that you see on the tray (a somewhat eccentric preference–I tend to work quite small). The lined green cutting sheet protects the table.

Here’s a closer look at one of the trays. The numbers toward the center are my assigned color wheel numbers. The numbers closer to the colors are the pigment numbers. The notation “Quin Mag” refers to Quinacridone Magenta, because the the same pigment, PR122 (Pigment Red 122), is also used in another of my colors, Opera Rose. (Of course, they are easy to tell apart.) This makes it easier for me to select a pigment. You can see that in the tray my numbers 4 and 5 could be mistaken for each other if one were not careful. With this system I can always refer to my wheel and see that number 5 is indeed cobalt violet.
That’s my system. Maybe it will be helpful to someone. There are probably almost as many systems as artists. This one works for me.