"I don't want to achieve immortality through my work. I want to achieve it through not dying." -- Woody Allen
The Rule Breaker Portfolio fell a long way again today. We're down over 30% for the year. It's not just us, though. Lots of high-flying stocks -- from Rule Makers Yahoo! (Nasdaq: YHOO) and Intel (Nasdaq: INTC) to Breaker wanna-bes like Akamai (Nasdaq: AKAM) and Infospace (Nasdaq: INSP) -- have taken serious beatings in the last month. In fact, the Nasdaq market is down 38% from its March high, and 23% from early September.

Today, the Breaker Team (sans David Gardner, who has written about it in the past) offers its take on the decline.

Jeff Fischer (TMF Jeff)

Over the past five years, the Nasdaq has gained:
Year     Gain 
1999    85.59% 
1998    39.63% 
1997    21.64%
1996    22.71% 
1995    39.92%
Look at that. An 85% gain in 1999 alone! It's easy to forget last year's record surge, and that big gain doesn't make this year's decline any more fun, does it? We've seen record volatility the past three years, with each year's swings trumping the previous year, and this year takes the cake. This year's stock market downswing emphasizes one thing in particular: the importance of having a business-focused investing strategy -- a strategy that ignores the stock market's gyrations.

One goal of Foolish investing is to buy companies that will create value over the next five years, 10 years, and longer regardless of what the stock market does. Then when the stock market's mood changes for the better, the value created at your companies during the darker market years will fully surface in their stock prices.

With Rule Breakers, we accept higher risks. We buy what we think will be great businesses. Whatever the outcome, though, we work to keep our heads above the roiling waters of the volatile stock market and to keep our eyes focused on our businesses.

In a nutshell, if you own great businesses, then you should click off the evening stock report and have an enjoyable autumnal evening. You're investing for a reward to come in the many years ahead. You did not plan on selling your great businesses anytime soon -- for at least three to five years. Therefore, don't let a volatile, currently falling stock market dampen your mood today when what matters in your investing strategy are the years far ahead.

Finally, as always, beware of using margin, or borrowed funds -- especially when buying Rule Breakers. Buy what you can afford with your own money, and then be confident that you can hold your investments through any market volatility for as long as the business merits it. Relax, enjoy... and Fool on!

Paul Commins (TMF Buster)
As the Nasdaq plummets and the Rule Breaker Portfolio takes shots from the fans and critics alike, I'm compelled to ask the burning question: What the h-e-double-toothpicks did you expect? Did people really think that we'd never see another downturn in the stock market? If so, somebody did a really lousy job of educating the investing public.

When it comes to the Rule Breaker investment strategy, I take David Gardner at his word. Nowhere in his book, nor in his online writing, nor in our team discussions, have I come across any mention of adjusting the strategy to the current macroeconomic climate. Where in the portfolio principles are bull and bear markets even mentioned, let alone factored into the strategy?

I don't know if the Rule Breaker strategy will ultimately be successful. Nobody does. When the long-term arrives, if the best that we can say is that we scored big when times were good, then we'll have nothing. If the strategy can't weather a downturn and recover to beat the market over the ups and downs of the broader economy, then it's a fundamentally flawed strategy. These are legitimate questions, of course, but they're nowhere near being answered yet.

Brian Lund (TMF Tardior)
Pain and pleasure are two sides of the same coin. I'm not a masochist -- really, I'm not -- but I sort of enjoy the sting of a drop in my holdings. It's a reality check, a reminder that things can't always be good, and, most importantly, a call for self-reevaluation. It's very important to continue to question assumptions. When the market is hot, it's easy to believe that I'm the best stock-picker ever. When it's down, I get a close-up view of my faults and start thinking about that index fund I passed up to buy Yahoo!, Intel, and Akamai.

While it's important to question and reevaluate yourself and your companies constantly, it's equally important not to let the market draw you into its manic depression. As the saying goes, "Bad things happen to good people." You're not necessarily wrong about a stock just because it falls.

Rule Breaker investors need to keep this in mind more than your average bear. Breakers are like kites in a gale. When things are good, they fly upward with no end in sight. When things are bad, they get tossed to the ground. We've seen it repeatedly in this portfolio. It may seem in retrospect a no-brainer to have held America Online (NYSE: AOL) from 1994 till the present, but there were lots of periods of reevaluation along the way. It dropped 25% in May and again in November of 1995. Then there was the sustained drop from May to November 1996, when AOL lost 65% of its value. Oh, and the current price is 45% below its 52-week high.

Breakers rise. Breakers fall. You have to be ready for a roller-coaster ride when you board the Breaker train. You have to be ready to look in the mirror and ask, "Did I make the right decision?" You have to be ready to endure a lot of pain to get the pleasure of a wildly appreciating stock.

Let us know how you feel by responding to this poll:

How does the falling stock market change your investing strategy?
  1. Not at all
  2. I rethink my positions, at least.
  3. I may sell a little or I spend less money in general.
  4. I buy more.
  5. I think this is the Big One. I'm getting into gold.