In the past I was lucky, during the tech bubble  pop, I was lucky enough to be in ebay.  Not only did ebay hold it share price, it double in the 3 years that I had it.  I practically felt like a genius (Note, I not longer own ebay)!

With the “Great Recession“, things were different…  I had some stocks that were in the high beta category.  High beta stocks are stocks that can have wild fluctuations in share price based on the general stock market direction.  One of my worse performing stock dropped 90% in price in 2008!  Just to illustrate what a huge drop that is, if I had $1,000 invested prior to the “Great Recession”, the value of my investment would only be $100!  Ouch!!!  when I realized this, I started to get sick to my stomach, but then I remembered that most of my portfolio is invested in mutual fund and other more stable stocks, not to mention the equity in my house (which took a much smaller hit).

Since my portfolio was well diversified (including asset class), the market downturn didn’t make me worry as much as it probably did with others.  The key is to just have a small percentage of your investment in such high beta stocks (also called speculative stocks) like I talked about in the previous paragraph!  By having asset class diversification, I was able to keep my cool and leave my investments alone so they could recover!  All my accounts are positive again.  My high beta stock is only down 60% and recovering quickly!  I still might use it for tax purposes though instead of letting it fully recover 🙂

How is your investment portfolio diversified?  Do you have all of your eggs in one or many baskets?

-MR