Tips for Surviving Market Corrections • Don’t Panic—Corrections happen all the time. Corrections happen at times because of confusion & panic-not always for logical reasoning-and upon panic all areas get hit. Bad investments will eventually take the blunt force, but the good investments will recover from the panic. • Look at the Risk Tolerance—Anytime is a good time to reevaluate your portfolio risk tolerance. Lifestyle changes, job, kids, unforeseen future expenses, etc. can all cause your risk tolerance to change. Unfortunately, we normally magnify the issue when a correction or extreme market volatility hits. However, this doesn’t mean every client should be changing from a aggressive portfolio to a conservative portfolio. Again, this will just lead to chasing returns. • Don’t sell everything when the market is down. From a reliable independent research company, DALBAR, the average investor returned 3.15% from 1984 to 2003 and the S&P Index returned 12.98%. Why? One reason is people panic and sell everything when it’s down and won’t buy back until it’s nearly fully recovered. Markets go up and down, thankfully nearly 70% of the time markets go up. • Don’t wait for a “turnaround” to start systematic investing again. Systematic investing is a great way over time to “average” buy investments. Buying now, when the market is down, is the perfect time to buy. • Don’t pull money out for frivolous expenditures during a correction. You’re only compounding the problem by having to sell investments and then buying “junk” that clutters our homes. Also, pulling RMD’s should be done at market highs. That’s why it was mentioned repeatedly in the early months newsletters. • Don’t beat yourself up on hindsight vision. No one can predict consistently when market declines will happen. And tougher yet, predicting when the correction is over. Market timing takes two near-perfect actions—selling and buying. Over the past 25 years, the the big gains were concentrated in just 215 of the 9100 days. • Historically, market corrections of 5% happen nearly 3 times a year and average 47 days. Last occurrence was in June of 2006. Market correction of 10% (where we hit inner day yesterday) happen on average 1 time a year and lasts 114 days and last occurred in October of 2002. A correction of 15% happens on average once every 2 years and lasts 216 days and finally a correction of 20% or more happens once every 3 1/2 years and lasts 332 days (all information form Capital Research and Management Company). We won’t know which correction we are in until our hindsight tells us. However, no one knows if these circumstances will subdue and then a recovery will happen. • Stay diversified and keep volatility lower. Enough said. Kregg Rooze Managed Accounts Director Creative Financial Designs, Inc