Market Volatility and Your Investment Goals

No one can predict the up and down fluctuation of the market. However, focusing on your original long-term investment objective can help ease your mind while investing. Large price movements that create uncertainty characterize a volatile market. Investors may begin to focus on the fluctuations of the daily closing price, becoming temporarily distracted from their long-term investment objective.

State Farm Investment Management Corp. (SFIMC) remains focused on the long-term goal. SFIMC is the investment advisor for State Farm Mutual Funds®. Paul Eckley, Senior Vice-President of Investments-Common Stock at State Farm®, said "We focus on determining the longer-term value and growth potential of companies and relative safety of bonds. We are not short-term traders of securities."

As an investor, there are three important investment principles to remember during a period of market volatility.

• Invest For the Long-Term--Focus on the long-term investment goals you have established and not on how to avoid a short-term loss. The market will fluctuate up and down over time. Remembering to focus on the long term will help to minimize your concerns about daily fluctuations.

• Diversify Your Investment Portfolio--Investing in a mixture of stocks and bonds or by maintaining a stock portfolio with stocks of several companies can help you reduce the risk associated with putting all of your eggs in one basket.

It is important to note that diversification does not assure a profit or protect against loss in a declining market.

• Invest Regularly--Regular investing through an automatic investment plan allows you to buy more shares when the price is low and less shares when the price is high. This process of regular investing, when used regardless of fluctuating price levels, is called dollar cost averaging. It helps to reduce the average cost of fund shares over a long period of time. Dollar cost averaging will not assure a profit or protect you from a loss. It is simply a way to average out the cost of fund shares as the market fluctuates when investing for the long-term. You should also consider your ability to continue making regular investments through periods of low price levels.

Dollar cost averaging does not assure a profit and does not protect against loss in declining markets.  Dollar cost averaging involves continuous investment in securities regardless of fluctuating prices.  You should consider your financial ability to continue purchases through periods of high or low price levels.

Working with your Registered State Farm Agent to understand how to invest for the long-term, diversify your portfolio, and invest regularly can help ease the uncertainty created by a volatile market.

State Farm VP Management Corp Risk/Important Disclosures. State Farm Mutual Funds Prospectus. The State Farm College Savings Plan Enrollment Handbook (PDF 260 KB) .

State Farm Agents do not provide tax, legal or investment advice.

It is important to note that there is market risk involved when investing in mutual funds, including possible loss of principal.

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AP2008/01/9821