With the advent of retinues, you should only look into building cities and holding the max number of counties (preferrable coastal so that you get ports). This is because retinues have greatly increased the importance of technology.
The reasons for building only cities, so well explained by Valinn and many others in another thread on switching holding types, are:
- univerisites: imagine your 6 holding county has the max number of cities, which is 5, and each city has a small university. So coupled with a cathedral school in your bishopric, you can gonna get 5 x 20% + 30% = 130% increase in technology growth rate from settlements alone. This, coupled with your ruler's learning, council's research function and tech focus, your county will have the highest tech in the world within 100 years.
- gold: the thing is, so long as you can keep your mayors happy, those cities, when upgraded, will pay almost as well as your directly held barony. And keeping your mayors are happy is easy so long as your ruler is virtuous and well-liked. And imagine every of your county has multiple cities - the net effect is that each county will bring you more gold than holding 5 baronies in 1 county
- choice of councillors, as explained earlier
And to explain why tech is the most important thing in the game (besides gold), how well your retinue fights and how big your retinue can be are greatly influenced by your tech level. By the time you are a king of well-to-do kingdom or a multi-duke, your main strike force will be your retinues. And having a high-tech retinue will make you very OP.