My mother shared some good advice: “Don’t put all your eggs in one basket.”

That’s what investors did who lost the most in Nortel Networks’ stroke-inducing share price drop last week. They put all their money on the leader in the Toronto Stock Exchange. They got greedy and followed the pied piper’s tune off the cliff and landed, share-shocked, at the bottom.

Contrary to what Michael Douglas’s Gordon Gekko character in the movie Wall Street proselytized, greed is not good.

Nortel sank faster than the Titanic. Its shares plunged 25 per cent or $24.55 in a matter of hours, to $71.55, stripping $75 billion from the networking equipment company’s Canadian market value. The drop obliterated almost nine months worth of stock market growth.

By the end of the week, Nortel’s share price stood, shakily, at $65.50.

I depend on my financial adviser for guidance in the stock market. But I did choose to hold telecom stocks in a diversified RRSP portfolio. Nortel isn’t among them, but I’ve learned a few lessons from its Great October Nosedive.

* Lesson No. 1: One egg does not make an omelet.

Analysts have been warning for several weeks that compared with other former tech superstars, Nortel’s share price had yet to undergo the kind of heart-thumping re-evaluation that many others have. True, a few diehard souls also viewed Nortel as high-growth heaven. But my mother shared another piece of advice: If it’s too good to be true, it probably isn’t.

Fortunately for Canadians counting on a pension, some investors were paying attention. John McNaughton, chief executive of the Canadian Pension Plan Investment Board, said Nortel’s weighting in Canada’s public pension holdings had been reduced earlier this fall, to 14 per cent from its TSE weighting of close to 30 per cent. The board reduced its Nortel losses by hundreds of millions of dollars.

The decision, McNaughton said, was based “on a core principle of prudent risk management, namely to limit portfolio exposure to any single stock.” Spread those eggs around, my mother would say.

* LESSON NO. 2: Fix the basket.

When Nortel dropped, it dragged Canada’s benchmark TSE 300-stock composite index down 8.1 per cent or 840.26 points to 9,511.84. That’s the biggest one-day percentage decline since an 11.3-per-cent drop in the “crash” of Oct. 19, 1987. By the end of the week, the TSE finished at 9,321.9.

The reason the TSE fell so hard and so fast, of course, is because Nortel accounted for 30 per cent of the index. That percentage had fallen to 22.7 per cent as of Friday. Nevertheless, the index is supposed to be a “balanced basket” (music to Mom’s ears!) of solid, diversified stocks that allow Canadians to reduce their investment risks by hedging investments against losses.

But the basket got shredded because the TSE 300 is less diverse than it should be. Securities regulators could make the weave a lot stronger by including a limit on how much of any one stock should be part of the TSE index.

* LESSON NO. 3: Greed causes pain. Analysts explained that investors were “punishing” Nortel because its optical equipment sales rose by only 90 per cent, when investors were counting on 150-per-cent growth.

The company had revenue growth of 42 per cent for the quarter and growth of 46 per cent for the nine months. Earnings (before one-time charges) were up 64 per cent over last year’s third quarter. Along with 90-per-cent revenue growth in optical equipment, revenue from wireless equipment grew 50 per cent. And the company projected overall revenue and earnings growth for the year at 40 per cent.

That stellar performance wasn’t sufficient for the Gekkos. “Investors have become incredibly impatient these days,” explained Andrew Martyn, a portfolio manager with Davis-Rea Ltd. in Toronto.

It’s not impatience. It’s avarice.

* LESSON NO. 4: Feed the TSE gerbils.

Heavy trading in Nortel crashed the TSE’s antiquated computer system twice last week. It’s the fifth time this year that the gerbils quit running on the wheel. More than 220 fed-up Canadian firms (including Nortel) have already listed in New York in addition to Toronto because they don’t want to depend on a system that needed replacing months ago. The New York Stock Exchange handled 123.8 million Nortel shares, compared with 11 million shares that overwhelmed the TSE.

The TSE bills itself as being a major exchange in North America. As my mother used to say: “If you want to play with the big boys . . .”