Gary and I recently returned from a conference with other affiliated financial advisors. One of the sessions I participated in examined our investors' behaviors vs. the industry averages and the results of those behaviors. It helped solidify the importance of the advice and guidance we provide to you. It appears that having unbiased, strategic advice has benefited you compared to the average investor.

For example, when the markets were declining during 2008 through March of 2009, the industry saw sizeable amounts of people selling their equity investments. If they had the foresight to do it at the beginning of the crash, then it would have been great. However, most of them were bailing in the later part of 2008 and early 2009; subsequently buying fixed income (with interest rates at historic lows) just before the market rebounded. Alternatively, stats show that our investors were putting money into equities during that time...mostly as part of systematic investing. Looking back, they bought them at bargain prices. For those in the "average investor" crowd who bailed on their equity investments...when did they get back in? The stats show that many still have not and as such have missed out on the subsequent rebound which included new all-time highs for the Russell 2000 (small cap asset class).

Our strategic tilt of the equity side of our portfolios toward small cap and value has benefited our investors during that time frame. Small cap growth, small cap value, and large cap value asset classes have outperformed the S&P 500 (large cap growth asset class) over that time period. That trend has been true over the long-term historically; and we expect it to remain true over the long-term in the future.

Thinking back over the last two + years since the market rebound, it hasn't ever "felt" like the right time to invest, and yet the Russell 2000 has increased approx. 120% from March of 2009 to June 2011. Approximately a year ago, the market's declined sharply causing people to ponder selling. In fact statistics show many investors did...the only problem was the year finished with healthy gains. This last quarter was a quarter marked by volatile markets and overall has resulted in marginal losses. I, like you, listen to news, news radio, etc. and hear on a daily basis things that don't make it "feel" right to be invested. Let me remind us of something to consider about past markets and help us with our expectations in the future.

Over long periods of time, on average, one out of every three to four quarters have and may in the future be negative quarters (a decline in the portfolio value). At times, these will run together resulting in consecutive negative quarters...sometimes even over a year at a time. We cannot predict when this will occur and successfully navigate actively buying and selling our investments to consistently "beat the market". Studies show that attempts to do that typically result in the direct opposite result. We encourage you to...

• Consistently invest during good markets and bad...especially the bad. That's what buying low means.
• Expect and embrace market volatility. Don't get over excited when the markets are going up or fearful when they are going down.
• While it may seem easy to lose faith in institutions and leaders due to inexcusable conduct of politicians, regulators, and individuals of power and influence in the business world; have faith that the great companies you invest in will, in time, come through tough periods stronger, leaner, more productive, more profitable, and more valuable than when they went into periods of crisis. This has in fact been the reality of the past.

If you'd like to watch a short video of the Chairman of DFA talk about investor behavior...click here.

Usually, my family and I go to our city's firework display on July 4th which is set to music and very enjoyable. This year we found ourselves at a different city's display that was not set to music and I found myself much more reflective. 

Maybe it was because there wasn't any music to compete with the sound of the explosions.  Maybe it was because we had spent some time helping in a booth where people were writing "Thank You" letters to active duty troops.  Whatever the reason, I was considering the fact that we were watching decorative displays of "bombs" bursting vs. the alternative of watching and hearing sounds of real bombs exploding over the city. During the display, I found myself internally expressing gratitude to the soldiers of the past and the present for defending the freedoms that God has graciously given to this country. 

What a blessing it is to live in America. 

I hope you all had a safe and enjoyable Independence Day.

We will continue to monitor your portfolios and rebalance as necessary. 

Please don't hesitate to call Gary or myself with any questions or to set an appointment to discuss any changes that have occurred in your life.