Mutual Funds

Navigating the Markets

Should you adjust your investment strategy to keep up with the bulls or bears?

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The markets have two distinct personalities: Historically a 'bull' market is one on the upswing, while a 'bear' is just the opposite—a market that has fallen 20 percent or more. Bull markets typically last five years1, interspersed with shorter bear markets averaging about 14 months2.

Can you adjust your investments to take advantage of such market trends? History has proven that is not likely. "Investors have great difficulty trying to time a bull or bear market," says Corey Schieler, director of investment management and research at State Farm® Mutual Funds.

In that case, it's important to build a portfolio with longevity in mind. "Markets change, and they can change quickly," Schieler says. "Diversification and dollar cost averaging are long-term strategies for any market." For effective diversification, your portfolio should have a twofold strategy: enough equities to help you realize gains when markets rise, and enough additional holdings such as bonds and cash to withstand stock market volatility.

Additionally, Schieler recommends a simple approach called dollar cost averaging—continuously adding small amounts to your investments by setting up an automatic investment plan (AIP). By investing small amounts, you purchase more securities when prices fall and less when they are high.

Learn more about setting up an AIP.

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1http://www.reuters.com/article/2014/01/06/us-column-wasik-idUSBREA050X820140106

2http://www.dividendgrowthinvestor.com/2008/07/average-durations-of-previous-bear.html

Asset allocation, diversification and automatic investment plans do not assure a profit or protect against loss.

Bonds are subject to interest rate risk and may decline in value due to an increase in interest rates.

Securities Issued by State Farm VP Management Corp. For more information, call 1-800-447-4930.

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

Neither State Farm nor its agents provide investment, tax, or legal advice.

AP2014/05/1008

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