To all,
Some comments I hope will be helpful.
If your portfolio has dropped roughly 75% or more, I'm truly sorry that you're experiencing that much of a decrease in your net worth. That might not be easy to accept even if your net worth is higher now than it was a year or two ago. However, if it is higher than a year or two ago, concentrate on that positive, not the negative stuff.
Considering that the Naz has dropped about 40% from its high, it shouldn't be a total surprise that a portfolio would drop 75%. If yours is doubling the index on the downside I hope it was also doubling it on the upside.
If you've been investing in high-tech stocks (or any stocks) for less than two years, it should not be devastating that your net worth is lower now than two years ago. That's because you happened to catch this recent crash in the tech market at the beginning of your high-tech investing career. Not to worry. As the market goes back up -- it always has and there is no reason whatsoever to think this time is different -- I trust that you will continue saving and investing, making use of those dollars buying cheaper shares. After a few up-and-down cycles, with continued saving and investing you'll likely have prosperous returns that may not be evident now.
However, if you've been investing in this arena only for about six months, don't be surprised if the magnitude of your overperformance on the way up is less than the magnitude of your underperformance on the way down; you need more time to have a valid measurement of portfolio performance.
Since it was helpful to people to see examples of my portfolio, I'll mention its performance and my emotional response to it. I'm very pleased that my portfolio has dropped 50% while the Naz has dropped 40%. No, I'm not pleased that it dropped 50%. In context though, considering that my portfolio is 100% high-tech, I'm pleased that it has fallen only 25% faster than the Naz. It tends to outpace the Naz on the upside to a far greater degree so I'll take the slight underperformance on the way down.
If you are bothered that your portfolio is overwhelmingly underperforming the index for a couple of years and if your portfolio is heavily weighted in high-tech stocks, now is a good time to re-evaluate your portfolio and the processes you use. If you wait until the market turns upward -- which I hope you know it will certainly do! -- you might get caught up in the euphoria of your increasing net worth and not make the necessary time to re-evaluate.
Things to consider: Do you spend far more time evaluating and researching a stock and a company than you spend on the purchase of a car? (If not, do so!) Are you diversifying among different industries or subsectors? (If not, do so!) Is your portfolio heavily margined or overlyweighted in LEAPS and option contracts? (If so, use less of them!)
Finally, there are some interesting numbers to appreciate. From the beginning of 1999 through May 11, 2000, (little more than 14 months) the Naz increased an astounding, unprecedented 134%. At that rate, it was doubling on average in one year. But during the 8-month period between the weeks beginning May 11, 1999, and March 10, 2000, the Naz did a complete double. Those stats are amazing! We might have lived through the most upwardly volatile 15-month period in the history of the Naz.
More important, understanding the perspective of that upward volatility, we shouldn't be surprised or particularly dismayed that the Naz has tanked nearly 40% in the last ten weeks. We live in a highly reactionary society and the stock market proves it almost monthly to me. And just as the market reacted to rapidly increasing highs, it will eventually react to the current downward trend and return to new highs.
Hope this helps.
--Mike Buckley |
