Many of you are justifiably nervous. Reasonable questions are raised about the value of portfolios and the ability to retire or stay retired comfortably. Please allow us to present to you several thoughts for your consideration.

While we cannot, nor can anyone, see into the future, there are some conclusions that can be drawn from today's fundamentals and, frankly, from reality. I say that because so much of what we hear today seems to come from emotionality rather than from reality.

Points to Consider

• Markets recover. Period. While no one can guarantee the future, we can say categorically that all downturns have resulted in an inevitable upturn. Clients justifiably worry about the length of time it may take for the upturn. Will you still be alive when it occurs is often the question.
  
  We've made a table showing previous recoveries. Click here to see this table. No one likes tables, but please pay particular attention to the highlighted items. In the table, we invested at the top of the market, suffered the decline, and then gauged how long it took to recover to original value. Notice that, even in much worse times like the 1930s, recovery occurred in a reasonable period of time. That was especially true of more balanced portfolios such as we are using for our clients.
• No one can predict the timing of market declines or recoveries. No one can, no matter how big his or her computer. There is not some secret enclave of more knowledgeable people making money while your portfolio is declining based on some special cache of information. Therefore, be assured that no one can know how to jump in and out of markets to avoid declines and participate only in market rallies. You must stay fully invested at all times to reap what the markets will inevitably present to you as your average return. And, historically, that has been a very good return.
  
  Most importantly, asset allocation has lessened the loss in portfolios vs. the unmanaged market indices. Consider the following indices courtesy of The Monthly Index Newsletter. For the first 9 months of 2002, the S&P 500 is down 28.3%. Small company growth stocks are down 35.1%.

Commentary

Robert Fragasso

The Europe and Far East (EAFE) index is down 22.3%. If you are a client of ours, you are privy to your performance numbers every quarter. We have documented that our clients' accounts have outperformed the indexes.

While there are some serious issues holding down the economy, such as accounting and corporate governance scandals and the pending war in Iraq, those are not long term, pervasive problems. They are being addressed, and we believe they will be corrected. That is far different than the problems that beset the economy in the early and late 1930s or during the middle 1970s. In addition to our protestations to that end, please read the thoughtful analyses, which is presented to you each day in mainstream business publications.

Summary

We have gone through a bad market. It's been one of the worst. Neither you nor we had any jurisdiction over that happening. We can't control the world, but we can control how we choose to live in it.

It may be that we'll suffer some additional decline, or we may not and begin slowly to rebuild value. The attached data gives indication as to the time frame within which the economy and markets have rebuilt value in the past.

You have suffered the decline, but you've suffered far less than you would have had you not been properly asset allocated and your portfolio watched over as we do on your behalf. Do not make the mistake of selling at or near a market bottom. While that may appear to be a way to stop the pain, we must consider that the pain becomes most intense at the bottom of a market downturn, just before the inevitable upturn we expect.

Talk to your financial advisor here. He or she is trained and prepared to guide you through this. They are on your side, as we all are here at Fragasso Financial Advisors. Your ultimate financial success is our goal. We know what it takes to help get you there, even during the darkest of times.