Unless you were cunning enough to avoid the news, the markets did not have a very happy holiday season. I am very proud of all my clients who, despite the news, refrained from making any harsh reactionary moves during the volatility. This past month was our first opportunity in almost a decade to practice what we preach regarding long term financial planning. Stay the course and don’t let the macro-environment affect your decision making for your micro-environment. We our now in the first ‘bear market’ since 2009. And while there will be an argument of whether we officially hit ‘bear market’ status (some indexes missed the 20% downturn many require by definition), I don’t think numbers are as important as the underlying lesson. This month's ‘For Your Consideration’ is about the lesson which is taught during a market downturn, but never truly understood until after the fact. The reason investors shouldn't do anything during market volatility is because the downturn isn’t truly recognized until we are already in deep. And once we get to a ‘point of recovery’ it’s already too late to take advantage of the event. December was a nasty month for the S&P 500 with the largest dip in the index for a single month since 2009. On top of a poor October, most indexes were near or beyond a 20% decline from their previous high. December was also the month I had the most communication with current clients. The discussion did not include ideas to alter portfolios or plans, just routine check-ins to calm nerves and revisit goals. What follows is an ‘in real time’ example of why reacting to a bear market with portfolio changes is futile. Let’s consider the timeline of the current market downturn. It will be a while before the parameters of this bear market are officially defined, both in the final low point, but also in its length. While December was the month the markets received the most attention and triggered the most conversations, the bear market began at least two months earlier if not eleven months earlier (depending on which index you use to judge). As the general public was beginning to react to a potential ‘crisis’ the crisis had already arrived. Now think about those people who did react and made changes in December, just as the market began reaching the 20% decline. Whether they moved to all cash or just a more conservative position, they would have missed at least part of the 12% increase the S and P 500 has recover in the last month. Now what?? Do they get back in, when the market could very well go back down, or continue to stay on the sidelines while the market could continue to climb? This market bounce happened in the blink of an eye, and I am very doubtful that the reactionaries got the best of it at either the high point or the low point. For you to successfully play the market timing game, you must be right twice, every single time. I never want to be those people making changes when it’s already too late and then standing on the sidelines at the wrong times. Portfolios go up and down, and sometimes they go can down beyond our comfort zone, but financial planning calculations factor in these market fluctuations, regardless of whether they are swift or gradual. The benefit of financial planning software is that computers factor in the potential of several down markets over the course of our financial lives. However, computers don’t have the ridiculous emotions us humans have, and they never make changes during those hypothetical down markets. Those number crunching machines don't flinch when the bad news arrives. They continue to spit out the same long-term results and recommendations as before. Us humans should act accordingly. I'm not sure we have seen the end of this downturn yet, and I am certain this is not the last time we will see a bear market in any of our lifetimes. But now that we are coming out of the first big downturn in almost ten years, and even though the downturn might not be over, we can already learn that the markets don’t wait for us, and reacting is usually futile and most likely counterproductive. If we assume beforehand that these events will occur eventually, and we factor them into our long term plan, then we should not fear their arrival, but rather celebrate our indifference.