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January 1, 2015

Dear Client: Happy New Year! We hope 2015 will be a healthy, fulfilling and prosperous year for you and your family. Since most of our clients have at least a portion of their investments in equities, now is a good time to review how the past year compares to the S&P 500 over the decade: 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 +4.91% +15.79% +5.49% -37.00% +26.46% +15.06% +2.11% +16.00% +32.39% +13.68% The long-term historical return for large company stocks, similar to those in the S&P 500, is around 10%, so 2014 was an above average return year. However, as those who follow the markets day-to-day know, 2014 was a year of volatility where both significant market gains and losses came over short periods of time, sometimes in just a matter of a few days. This reminded us of two closely related market idioms: Time in the market is more valuable than timing the market. While this is a very old market theme, it served those who practiced it in 2014 well, where volatile markets at times were giving up year-to-date returns of more than 5%, only to quickly gain them back, and significantly more. Market pullbacks are a healthy part of market growth. Broad markets historically average two 5% pullbacks and one correction of at least 10% each year. A focus on just 5% pullbacks shows only 1 out of 3 develops into a 10% correction and only 1 in 10 becomes a correction of 20% or more. We offer this data as a way of saying that market pullbacks, even in healthy, advancing economic...