3R

D Q

UA

RT

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20

15

Building Ideal Futures Partnering With You To Make Your Ideal Future A Reality.

3rd QUARTER RETURNS

BondsBarclays U.S. Agg. Bond Index

U.S. Large StocksS&P 500 Index

U.S. Small StocksRussell 2000 Index

International StocksMSCI EAFE Index

Emerging Market StocksMSCI Emerging Markets Index

Real EstateS&P Global REIT Index

CommoditiesBloomberg Commodity Index

+1.2

-6.4

-11.9

-10.2

-17.9

-0.3

-14.5

Putting Volatility in Perspective

It’s that time of year again: tax planning and preparation.

As Benjamin Franklin proclaimed, “In this world nothing

can be said to be certain, except death and taxes.” As

certain as taxes are, there is often a rush at the end of

the year to take advantage of strategies to help minimize

taxes. Let’s stop rushing and get straight to it.

Your 2015 Guide to Year-EndTax Planning

Drawdown Threshold

20%

10%

5%

3%

2%

Historical Frequency

Once per Market Cycle

Once per Year

Once per Quarter

Once per Month

Often

Typical # Per Year

0

1

4

11

18

Typical Recovery Time

20 Months

8 Months

2 to 3 Months

2 to 6 Weeks

1 to 4 Weeks

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

-60% 1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

YTD

Average Largest Intra-Year Decline Since 1988: -11.9%

Calendar Year Return

Largest Intra-Year Decline

No one likes volatility, but it is an unavoidable part of investing in stocks. Unfortunately, investors witnessed increased stock market volatility during the third quarter of 2015. Many factors played a role in the heightened volatility, such as the Fed considering its first rate hike since 2006, China devaluing its currency and (attempting to) prop up

their stock market, and the plummeting price of oil. We must be able to endure these market bumps in the road in order to achieve portfolio growth over the long run. The best way to manage volatility is through properly diversifying and rebalancing a portfolio across various asset classes. Investors who can maintain perspective and discipline over time will likely be rewarded.

Figure 1 Frequency of Market Pullbacks

Figure 2 S&P 500 Calendar Year Returns vs. Largest Intra-Year Declines

Source: JP Morgan

Data: S&P 500 TR Index 1/1988-9/2015.

Putting VOLATIL

ITY in Perspective

Although it is easy to forget when stocks rise, volatility is normal. Figure 1 puts that into perspective.

On average, a decline of at least 10% happens once every year. Inexperienced investors may find these declines reason to panic, but the numbers show that this is typical market behavior.

As you can see in Figure 2, despite these drawdowns, many years have shown substantial intra-year declines (red squares) and were still able to post strong returns (green bars). The average intra-year decline since 1988 has been -11.9%.

Markets go through robust cycles of expansion and contraction due to many factors. Because these cycles are unpredictable, it is

inevitable that markets will have large declines that can last several years. But over the long run, these downswings smooth out. It is

important to remember that bear markets (>20% decline) are historically much shorter than bull markets. S&P 500 data back to 1926

shows the average bear market lasts just under 500 days, while the average bull market continues over nine years. It is human nature

for individuals to worry more about losses, but the pains of loss during bear markets have been overridden by extended periods of gains.

DON’T TRY TO TIME THE MARKETYou probably heard it before – trying to time the market is a

“fool’s game.” Since no one can consistently forecast when

markets will fall and when they will rebound, exiting the market

creates an unnecessary risk of missing out. Missing even just one

of the best returning days in the market can set your portfolio

back substantially (as demonstrated in Figure 3). Missing the

best 25 days would have resulted in losing 5.5% on average.

Still, people think they can time the market. It is human nature

to identify trends and patterns to try to make sense of the world,

even when a pattern doesn’t exist. Figure 4 shows how the

different asset classes stack up against each other year by year.

BEAR MARKETS WILL HAPPEN

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

10.6%S&P 500 (All 6,810 days)

Less Best 1 day

Less Best 5 days

Less Best 15 days

Less Best 25 days

10.2%

9.0%

6.8%

5.1%

Figure 3 Missing a Few Days Can Make a Big Difference

Figure 4 Asset Classes Ranked from Best to Worst

Data: Calendar year returns 2005-2014. See disclosure for index information.

Data: S&P 500 TR Index 1/1988-12/2014.

CAN YOU SPOT THE PATTERN? NEITHER CAN WE.

2011

14.1

7.8

4.5

2.1

1.7

-2.8

-12.1

-13.3

-14.4

-19.0

2012

23.7

20.4

18.9

18.2

17.3

16.0

7.3

5.3

4.2

-1.1

2014

22.8

13.7

9.9

6.1

6.0

4.5

-1.1

-3.1

-4.9

-17.0

U.S. Large Cap

U.S. Small Cap

Int’l Large Cap

Int’l Small Cap

Emerging Markets

U.S. Bonds

International Bonds

TIPS

REITs

Commodities

2005

35.2

22.1

21.4

13.5

10.4

7.5

5.6

4.9

2.8

2.4

2006

38.8

35.1

30.3

26.3

15.8

15.8

4.3

3.1

2.1

0.5

2007

40.3

16.2

11.6

11.2

7.0

6.1

5.5

5.1

1.2

-11.1

2008

8.0

5.2

-1.1

-35.6

-36.2

-37.0

-43.4

-45.0

-46.6

-53.7

2009

81.0

41.5

36.1

33.7

31.8

26.5

18.9

10.0

5.9

2.3

2010

27.8

23.4

20.6

19.4

16.8

15.1

7.8

6.5

6.3

3.4

2013

39.1

32.4

28.4

22.8

2.8

1.4

-0.6

-2.0

-9.4

-9.5

Increased market volatility can

cause emotions to soar. Your

advisor helps you sort through

the noise and focus on what is

most important. Keep these key

ideas in mind when markets and

media are in a frenzy:

• Market volatility is normal.

• Bear markets will happen.

• Don’t try to time the market.

• Focus on the long term.

• Focus on what you can control.

WHAT IS MOST IMPORTANT?

Data Source: Morningstar Direct. Indexes used in

Figure 4: US Bonds-Barclays Intermediate Govt/

Credit Bond Index; International Bonds- Treasury

Inflation-Linked Securities Index Hedged; TIPS-

Barclays U.S. Treasury Inflation-Linked Securities

Index; US Large Cap-S&P 500 Total Return Index;

US Small Cap-Russell 2000 Index; Int’l Large Cap-

MSCI EAFE Index; Int’l Small Cap-S&P EPAC Small

Index; Emerging Markets-MSCI Emerging Markets

Index, Global REITs-S&P Global REIT Index;

Commodities-Bloomberg Commodity Index.

1Globally diversified stock index portfolio (1/1973

– 6/2015) is comprised of the following indices:

S&P 500 Total Return Index; Fama-French Large

Value Index; CRSP Deciles 6-10 Stock Index;

Fama-French Small Value Index; MSCI EAFE Index;

MSCI EAFE Value Index (MSCI EAFE Index prior to

1/1975); Dimensional Int’l Small Company Index;

Dimensional Int’l Small Value Company Index(

Dimensional Int’l Small Index prior to 7/1981); MSCI

Emerging Markets Index (MSCI EAFE Index prior

to 1/1988); FTSE NAREIT All Equity REITs Index;

Savant Commodity Index. The Index Portfolio

does not represent live accounts and is designed

to provide investors with a reasonable estimate of

historical risk and return. Past performance is not

necessarily indicative of future performance and

future returns may be lower. Principal is subject to

loss and actual returns will be negative during some

time periods. The Index Portfolio is rebalanced

quarterly.

Keep a Long-Term Perspective on Markets The longer your time horizon, the more confident you can be that your portfolio may achieve its expected return. Take the first chart of monthly stock market returns in Figure 5 which makes the stock market look intimidating. On a short-term basis, returns tend to be all over the place. Returns can vary wildly from month to month. The next chart shows how annual returns expand the time horizon and illustrate that negative returns occur much less frequently than they do in the short term.

In addition to a longer time horizon, global diversification is another way in which volatility can be smoothed out over time. Monthly observations of historical ten-year returns for U.S. large cap stocks (S&P 500 Index) back to 1973 showed the returns were positive 94% of the time. That same review for a more diversified index portfolio1, comprised of both U.S. and international large and small stocks (see description in disclosure), had even better results with the ten-year returns being positive 100% of the time. Of course there is no guarantee, but diversifying beyond U.S. large cap stocks over long time periods can be beneficial to performance and help reduce volatility.

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

-20%

-25%

Figure 5 Time Smooths Out Returns: Monthly vs. Annual Stock Market Returns

ANNUAL RETURNSS&P 500 Index (1973-2014)

MONTHLY RETURNSS&P 500 Index (1973-2014)

Chicago, IL 60605312.225.0300

Freeport, IL 61032815.297.0400

Geneva, IL 60134630.208.0010

Hoffman Estates, IL 60192847.851.2100

Naperville, IL 60563 630.357.2224

Peoria, IL 61614 309.693.0300

Sterling, IL 61081815.622.0300

Wilmette, IL 60091847.441.0410

McLean, VA 22102 703.288.0500

Madison, WI 53717608.831.1300

Savant Capital Management190 Buckley DriveRockford, IL 61107815.227.0300Toll Free: 866.489.0500www.savantcapital.com

Savant Capital Management is a Registered Investment Advisor. This information is not intended as personalized investment advice. The index returns herein assume reinvestment of all dividends and interest and do not reflect fees or expenses. Index portfolios reflected in this publication are not representative of any actual client returns. Savant’s marketing material should not be construed by any existing or prospective client as a guarantee that they will experience a certain level of results if they engage the advisor’s services.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future per-formance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Savant Capital Management), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Savant Capital Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of their choosing. Please Note: “Ideal” is not intended to give assurance as to achieving successful results. Savant Capital Management is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. If you are a Savant Capital Management client, please remember to contact Savant Capital Management, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Savant Capital Management’s current written disclosure statement discussing our advisory services and fees is available upon request.

YEAR-END TAX PLANNING

For more information on locations and to register go towww.savantcapital.com/events or call 866.489.0500.

OCTOBER 2015 NOVEMBER 2015

In this interactive setting, you’ll learn how to minimize your tax bite through proper year-end planning. Savant’s professionals will provide a summary of tax law updates and other relevant topics.

Please join us!

Don’t miss this opportunity to prepare for your taxes and bring your questions!

Presentation Dates:Rockford, IL October 29, 2015Wilmette, IL November 3, 2015Madison, WI November 5, 2015Geneva, IL November 11, 2015Freeport, IL November 12, 2015Peoria, IL November 12, 2015McLean, VA November 17, 2015