I work as an information technology integrator at a major utility in Pennsylvania. I turned 26 last month. My annual salary is $70,000. I have been contributing the maximum amount (15%) to my 401(k) at my current employer and at my previous employer. I have approximately $22,000 in the old 401(k), and I have accrued about $6,000 in my new 401(k). I have also maxed out my Roth IRA for the past two years. Technology is what I know and do, hence I've felt more secure about putting money into tech-related stocks (with the notable exception of Inkine Pharmaceutical( INKP)). Finally, I invested $3,000 in the ( MTFBX)Munder NetNet mutual fund and $2,000 in ( MTFBX)Munder Future Technology fund (both of which are down somewhat of late) and I contribute $100 monthly to each fund. I have class B shares, so I plan on holding these two funds until the deferred loads expire after 5 1/2 years. My concern is that I am invested exclusively in equities. Is this too risky? I consider myself a patient investor, so I can usually ride out the short-term fluctuations in the market, but should I be looking to put some of my money into a bond or other more stable investment device? -- L.M.

L.M.,

You're in your mid-20s, just starting a professional career that could span four more decades. Investing all your retirement money in stocks isn't a bad idea. The bad idea is your overemphasis on technology stocks. Tech stocks account for about two-thirds of your portfolio. The same holdings were worth almost $34,000 more 12 weeks ago. That's a loss in value of about 36%. Winter doesn't start until Dec. 21, but this portfolio has faced some tough sledding already this year. You feel that investing in what you know will improve your investment returns, but as you've discovered, there are few things worse than a false sense of security.

Three PC manufacturers plus

Unisys

(UIS) - Get Report

equals about 40% of your portfolio. That means that when you think technology, you think computers. You need to broaden your definition of technology. Your Munder funds give you breadth in technology -- with performance corresponding to the sector's woes. In fact, it's the performance on these funds that points out the need for diversification in the overall portfolio.

Waiting around for the sales load to sunset in the Munder funds doesn't really save you any money. Sure, the deferred load (an industry term for sales commission) declines over time and sunsets after six years, but you're paying 0.59% to 0.65% more than average in annual expenses for that category of fund. The class B shares convert to class A shares, which have lower annual expenses, about eight years after issuance. My point is that, regardless of what you do, you're effectively paying the sales load; so don't let that be a reason to keep you in the funds. I'd also encourage you to put your monthly investments elsewhere.

One of the portfolio's two winning positions this year is Inkine Pharmaceutical. What got you into the stock? What would cause you to sell the stock? Biotech has had a great run this year and the stock's returns have kept pace with the sector. Why not consider moving to a biotech fund and getting away from the risk of holding an individual biotech stock? You can offset your gains by taking loses in one of the computer stocks. The other winner is the

(FLPSX) - Get Report

Fidelity Low-Priced Stock fund -- a good example of why some small-cap value stocks can help balance the risk in your portfolio.

I can't find a reason for you to own the

( FRMUX)Dreyfus Founders Growth & Income fund. The fund has experienced a lot of changes in style and management over the past two years. With its new emphasis on blue-chip growth stocks, I'd much rather see you invest in an index fund with lower annual expenses. Whether you use a large-cap or mid-cap index depends a little bit on what you decide to do with your technology holdings. If you plan to keep on over-weighting technology, I'd recommend that you buy a large-cap index fund in replacing Dreyfus to balance out the portfolio. The limitations of your firm's 401(k) list should make it easy to choose.

I'll be the first to tell you I'm not a telecommunications expert.

WorldCom

( WCOM) as 5.3% of your portfolio isn't such a huge stake that you would have to consider selling it. It's just another one of your Confederate holdings. You hold on hoping that the stocks, like the South, shall rise again.

A sector's prospects will change over time. Holding a diversified portfolio allows you to participate when any sector outperforms. If you're not going to actively manage the portfolio to follow sector performance, the diversified approach will provide you with more stable returns and better long-term performance. Don't let over-weighting a sector mean, as it does with your current portfolio, virtually eliminating other market sectors. And when you buy a group of competitors, like

Apple

(AAPL) - Get Report

,

Compaq

( CPQ) and

Dell

(DELL) - Get Report

, you're either hoping that they'll all succeed, or that only one will, and you don't know which one. My recommendation would be to buy the industry.

Send In Your Portfolio

If you would like to submit your portfolio for a makeover, send it to portfoliorx@thestreet.com. Give us enough details -- dollar values or percentages -- so we can determine how your assets are allocated. Also tell us a little about yourself and your investing goals, and let us know how we can contact you if we have further questions. Though we'll only use your initials publicly, please include your full name so we can verify your identity. Unfortunately, we cannot guarantee your portfolio will be selected for a makeover, nor can we promise to respond individually to everyone who submits a portfolio.

Dr. Don Taylor has been an investment professional for nearly 15 years, most recently as the treasurer for a nonprofit organization where he managed more than $300 million in assets. He is a chartered financial analyst, holds a Ph.D. in finance and has taught investment and personal finance courses at the University of Wisconsin and at Florida Atlantic University. Dr. Don's Portfolio Rx aims to provide general investing information. Under no circumstances does the information in this column represent a recommendation to buy or sell. Dr. Don welcomes your inquiries and feedback at

portfoliorx@thestreet.com.