Makeover for a Bear-Mauled Portfolio: How to Create a Winning Game Plan

by Vern C. Hayden

Makeover For A Bear Mauled Portfolio: How To Create A Winning Game Plan Splash image

Like a desert mirage, the stock market shimmered its way through the dream merchants of Wall Street to investors all over America. For example, on March 10, 2000, Merrill Lynch introduced, with great fanfare, their brand new Internet fund—joining the tech feeding frenzy the day the Nasdaq hit a peak of 5028 and started to crash. It gives new meaning to the old cliché “timing is everything.”

In January of 2002, Herb and Jocelyn Edwards (fictitious names, but real circumstances) walked into my office with what was left of a portfolio of mutual funds. They had bought into the hype of the times, and then suffered as the bear market started to trash their lifetime of savings. Their experience has a number of important lessons that other investors can readily learn from.

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Their original investment was about $450,000 when they went to a stockbroker for advice on investing their assets. But when they walked into my office, the then-current value was about $210,000, for a loss of about 53%.

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