We investment advisors can always be counted on to counsel you to hold onto your portfolio through tough times. We dispense sage advice like “buy and hold” and “the market always comes back.”

But that advice doesn’t always hold true. It’s true that the market as a whole does go back up after a swing; but it’s not necessarily true that your portfolio will follow suit. As for “buy and hold,” just ask Nortel shareholders what they think of that strategy.

When markets go on a roller-coaster ride, investors are completely justified in worrying about their nest eggs. Their concern is most acute if they’ve chosen a particular buying philosophy, and built a portfolio that performs differently from the overall market.

Sad to say, history is littered with shattered portfolio ideas that once seemed brilliant. Consider the “tech wreck” of the late nineties. The rationale behind concentrating on technology stocks was that the economy was becoming totally digitized, so market participants should follow suit.

The “baby boomer” portfolio of the 1990’s focused mainly on pharmaceutical stocks and old-age homes. Then there was the “financials” portfolio, all about banks and investment firms - again, catering to the boomers’ need for financial services. And today, the big thing is the “resources” portfolio. If oil is heading for $150 a barrel, then a resource portfolio obviously can’t fail to earn a bundle.

Or can it? The problem with adopting a particular investing strategy is that you’re essentially betting the farm on the principle that the future is a derivative of the past - or at least that a current trend will continue.

For instance, it is true that boomers will need lots of drugs in the years to come. Unfortunately, pharmaceutical stocks have paid little attention to this obvious truism: they’ve tanked by 75 per cent or more over the last few years. And nursing homes are certainly a growth industry, both in Canada and the U.S. But ten years ago, a legislative change knocked 90 per cent off the value of Extendicare, a firm that operate retirement homes in the U.S.

I could go on; but my point is, these are just a few examples of “can’t miss” portfolio ideas that floated about as well as dump trucks filled with manhole covers.

The economist Joseph Schumpeter once coined a phrase I like: “creative destruction.” It describes the process by which capitalism continually renews itself. Capital constantly flows toward the best use, with the highest profits, while stagnant businesses go under. Market innovations destroy old businesses and create new and improved ones. It’s like the business version of Darwinism.

The problem: it makes it hard to call a market winner. If a company becomes successful with a new idea, for instance, hordes of competitors descend on the industry - and sometimes ruin it for the original innovator. Conversely, sometimes old businesses that were written off for dead can turn into new-market darlings. The oil business is a perfect example. In 1999, oil was $15 a barrel and share prices were getting thumped: all the money was flowing over to the new tech darlings. But today oil is the place to be, and tech shares are viewed with suspicion.

All this explains why the portfolio I recommend for a “buy and hold” strategy is one that best resembles the overall shape of the market. If you own bits of all sectors, you’re not betting on one particular sector or trend. In that case, you should definitely heed conventional wisdom and hold onto your portfolio through the tough times.

No matter what sector, country, resource or industry is the next winner, you own them all - and you’ll do just fine. Actually, you’ll do better than fine. Since 90% of active managers fail to beat the market, your portfolio will put you in the top 10%.

That’s why I strongly suggest to all my clients that they NOT hold onto any portfolio that bets heavily on a particular sector. My advice: stop trying to be right! Diversify your holdings, and “buy the market.” It’s easier, cheaper - and usually a lot more profitable.

Alan MacDonald is an investment advisor who helps high tech entrepreneurs make smart decisions about money. Contact Alan at Alan.Macdonald@RichardsonGMP.com