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Protecting Your Portfolio

People are generally inclined to believe that negative outcomes are more likely than positive ones. This psychological pitfall, known as negativity bias, causes many investors to assume the worst: that when a market is rising, it will come crashing down, or that when a market is falling, it won’t ever bounce back.

Of course, sometimes a negative outlook is justified, which is why it may be wise to diversify with defensive assets, including cash investments (such as certificates of deposit and money market funds), U.S. Treasuries and even precious metals. Such investments may not appreciate as rapidly as stocks during a bull market, but they have historically outperformed during a bear market.

Defensive assets can also help your portfolio recover faster. Indeed, the Schwab Center for Financial Research found that a diversified portfolio recovered from the Great Recession 17 months faster than did an all-stock portfolio.1

Regardless of what the market is doing, the most important thing is to stick to an asset allocation that’s appropriate for your goals and time horizon. And remember: If you need help reassessing your portfolio, we’re always just an online message (log in to schwab.com/chat) or phone call away.

Sincerely,

Walt Bettinger

President & CEO

1The diversified portfolio, composed of 60% stocks and 40% bonds, was rebalanced annually. Stocks are represented by the S&P 500® Index, and bonds are represented by the Bloomberg Barclays U.S. Aggregate Bond Index. Returns assume reinvestment of dividends and interest. Fees and expenses would lower returns.

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Important Disclosures

Past performance is no guarantee of future results.

Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers are obtained from what are considered reliable sources. However, their accuracy, completeness and reliability cannot be guaranteed.

An investment in a money market fund is not a bank deposit and is neither insured nor guaranteed by the FDIC or any other governmental agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds. Investment value and return will fluctuate such that shares, when redeemed, may be worth more or less than original cost.

Certificates of deposit are issued by various FDIC-insured institutions, and are subject to change and system access. Unlike mutual funds, certificates of deposit offer a fixed rate of return and are FDIC-insured. There may be costs associated with early redemption and possible market value adjustment.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.

Commodity-related products carry a high level of risk and are not suitable for all investors. Commodity-related products may be extremely volatile, illiquid and can be significantly affected by underlying commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions, regardless of the length of time shares are held.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.

The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.

The S&P 500 Index is a market-capitalization-weighted index comprising 500 widely traded stocks chosen for market size, liquidity and industry group representation.

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