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OCTOBER 2015 Great-West Capital Management, LLC (GWCM) Research Note Market Corrections and the Long-Term Investor With the current market volatility, investors might find themselves on edge when it comes to their portfolios, leaving them unsure of what measures they should take to avoid enduring losses. The recent 10% decline in the S&P 500® Index during the month of August may have increased concerns, especially when considering the fact that we haven’t experience a correction of 10% or more since October 2011. Although a 10% drop can certainly be seen as significant, these drops actually occur more often than one might think. Since 1946, there have been 31 drops in the market that were 10% or more. S&P 500® Index Growth of $1,000 from 1965-2015 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: Morningstar® DirectSM GWCM Analysis. Past performance is not a guarantee of and may not be indicative of future results. The above chart shows the S&P 500® Index over the past 50 years. Despite a total of 41 market corrections of 10% or more during this period, this chart illustrates how an initial investment of $1,000 increased more than 100 times to $106,829. Furthermore, if we look at the most significant market corrections that have taken place over the past 50 years, we notice the following periods: January 1973-October 1974 (crash of 1973), March 2000-October 2002 (dot-com bubble), and October 2007-March 2009 (financial crisis). These periods represent bear markets, with an overall market decline of 20% or greater. The following graph shows each of these periods and the returns an investor would have received had they invested $1,000 at the peak of each of these declines through September of 2015. These three scenarios generally represent the three worst case scenarios for investors over the past 50 years. 1 Source Market Watch; accessed 10/5/2015; http://www.marketwatch.com/story/5-things-you-need-to-knowabout-this-stock-market-selloff-2015-08-25 2 CNNMoney; accessed 10/5/2015; http://money.cnn.com/2015/07/28/investing/stocks-correction/ S&P 500® Index Growth of $1,000 During Crash of 1973: Year 1973-1974 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 1973 1978 1983 1988 1993 1998 2003 2008 2013 Source: Morningstar® DirectSM; GWCM Analysis. Past performance is not a guarantee of and may not be indicative of future results. This first example shows the S&P 500® Index down 48% from January of 1973 through October of 1974. Investors would have recovered their losses by March of 1976, just 17 months following the low of the market correction, and would have experienced a 10-year return of more than 6% had they remained invested. By September 30, 2015, the value of the initial investment would have grown to $60,256. S&P 500® Index Growth of $1,000 During Dot-com Bubble: Year 2000-2002 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: Morningstar® DirectSM; GWCM Analysis. Past performance is not a guarantee of and may not be indicative of future results. The second example depicts the dot-com bubble, with the market peak in March of 2000 and the low in October of 2002—a loss of nearly 49%. As you can see, investors who invested during the peak and waited out the correction would have recovered their losses by October of 2006 and experienced a nearly 73% return through September of 2015. S&P 500® Index Growth of $1,000 During Financial Crisis: Year 2007-2009 1,800 1,600 $1,473 1,400 1,200 1,000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 Source: Morningstar® DirectSM; GWCM Analysis. Past performance is not a guarantee of and may not be indicative of future results. The third example depicts the financial crisis that occurred from 2007-09. Here, the market peaked in October of 2007 and bottomed out in March of 2009 for a total loss of 47%. Investors who got in during the peak of the market and remained invested throughout the recovery would have recovered their losses by March of 2012—only three years later—and experienced a 47% return through September of 2015. These three worst-case scenarios help illustrate how individuals who were able to remain invested throughout market corrections were able to recover their losses. Although the time it takes for markets to rebound varies, the longest it took for an investor to recover their losses due to a correction over the past 50 years was four years. In every case, investors had recovered losses from a correction within four years. While market corrections still remain a concern for most investors, those following a disciplined approach may be best positioned to achieve their long-term retirement goals. The opinions expressed in this material represent the current, good faith views of GWCM and its portfolio managers, analysts, traders and other investment personnel at the time of publication and are provided for limited purposes, are not definitive investment advice, and should not be relied on as such. The information presented in this report was developed internally and/or obtained from sources believed to be reliable; however, GWCM does not guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions and other information contained in this report are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Any forward-looking statements speak only as of the date they are made, and GWCM assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking statements. Past performance, where discussed in this report, is not a guarantee of future results. As with any investment, there is a potential for profit as well as the possibility of loss. This material is not an endorsement of any index or sector and not a solicitation to offer investment advice or sell products or services offered by GWCM or its affiliates. A benchmark index is not actively managed, does not have a defined investment objective, and does not incur fees or expenses. Therefore, performance of a fund will generally be less than its benchmark index. You cannot invest directly in a benchmark index. Where information obtained from Morningstar: ©2015 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/ or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. S&P 500® is a registered trademark of Standard & Poor’s Financial Services LLC and has been licensed for use by Great-West Life & Annuity Insurance Company. Morningstar® and Morningstar® DirectSM are owned by Morningstar, Inc. S&P 500® is a registered trademark of Standard & Poor’s Financial Services LLC and has been licensed for use by Great-West Life & Annuity Insurance Company. Great-West Financial® refers to products and services provided by Great-West Life & Annuity Insurance Company (GWL&A), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York (GWL&A of NY), Home Office: White Plains, NY; and their subsidiaries and affiliates, including GWCM. The trademarks, logos, service marks, and design elements used are owned by their respective owners and are used by permission. ©2015 Great- West Life & Annuity Insurance Company. All rights reserved. PT# 246643 (11/2015) Unless otherwise noted: Not a Deposit / Not FDIC Insured / Not Bank Guaranteed / Funds May Lose Value / Not Insured by Any Federal Government Agency