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CNN Live Saturday

Technology-Dominated Stock Portfolios Have Been Hit Hard by Recession

Aired September 01, 2001 - 16:16   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DONNA KELLEY, CNN ANCHOR: As the stock market continues to mimic a rollercoaster, an increasing number of investors find that they're not enjoying the ride. Those with technology-dominated portfolios have been especially hard hit, seeing their once-comfortable nest eggs disappear.

CNN's Brian Palmer takes a look at one such case and how you can best avoid a similar fate.

(BEGIN VIDEOTAPE)

BRIAN PALMER, CNN CORRESPONDENT (voice-over): A little more than a year ago, Penny Stiles was looking forward to early retirement and spending more time with her granddaughter Isabella, financed by her 401(k) plan at Lucent Technologies.

PENNY STILES, FORMER LUCENT EMPLOYEE: We were proud of the company. And working in there, you felt that it was secure and you knew that it was doing well, and it was a good long-term safe investment.

PALMER: Good enough to allow Stiles, now 50, to put her two children through college. And so safe, she thought, that Stiles moved all of her 401(k) into Lucent stock. Her fund peaked at over $18,000.

STILES: All the kids were pretty much taken care of by now, and so we were going to start focusing on where we were going. And we thought that was a pretty good start. And now we have $2,000.

PALMER: Lucent stock has lost more than 90 percent of its value in little more than a year. The New Jersey-based telecommunications giant, a child of AT&T, has also cut jobs, about 30,000, including Stiles' position. But Stiles says Lucent continued to push its stock purchase plan even as the stock was plunging.

STILES: I'm not trying to blame anyone else. We certainly made our own decisions.

PALMER: Lucent says it educates its employees about investing and offers diverse options. Stiles says she's learned a lesson.

STILES: Don't put all your eggs in one basket. My mother always said that, but we didn't listen, so -- but we'll do that in the future.

PALMER: That's also the advice of investment specialists.

DAVID WRAY, PSCA: I can tell you that people cannot get rich quick through a 401(k) plan, and when they try to do so, they get in trouble. These are long-term programs. You want to give them time to run in your favor, but you don't get greedy.

PALMER: The key, they say, is diversification -- a mix of bonds, various types of stock and cash.

DOUG FLYNN, FLYNN ZITO CAPITAL MANAGEMENT: If you're properly diversified, what happens is that means every year, something in your portfolio is losing, but the vast majority is moving in the right direction.

PALMER: For now, Stiles is working four days a week as a consultant. She has a small pension from Lucent, and is holding on to her Lucent stock.

But she's steering clear of the stock market, and she's also putting her early retirement plans on hold.

Brian Palmer, CNN, Belleville, New Jersey.

(END VIDEOTAPE)

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