STRATEGIC ADVISERS, INC.

Dont Panic
By Bill Ebsworth, Chief Investment Ofcer, Strategic Advisers, Inc.

Standard & Poors downgrade of U.S. government debt became the nancial equivalent of a shark sighting at a beach over the weekend, but investors fears had already increased market volatility. The Chicago Board Options Exchanges Standard & Poors 500 Volatility Index known as the VIX and often referred to as the markets fear gauge rose a startling 35 percent to 31.66 the day before the downgrade was announced. It had not reached that height since the European debt crisis began to unfold last spring though it remains well below 2008 nancial crisis levels. The downgrade seemed to validate what many Americans felt after watching the debate over the federal debt ceiling a decline in their faith in government and the nancial system. Still, the downgrade is not the only factor inuencing investment decision making, and despite the anxious environment, many of those factors are positive for investors. Corporate earnings and balance sheets remain strong, jobs are being created more quickly than expected, stocks are reasonably priced and interest rates are likely to remain low for the foreseeable future. Still, nobody is immune to fear and uncertainty looms on a variety of fronts. Housing markets and consumer spending could remain weak. European leaders could prove unable to keep the sovereign debt crisis from spreading. Chinas economy could stumble. The two ratings agencies who have not yet done so could still downgrade U.S. debt. Despite these unknowns, we at Strategic Advisers, Inc. continue to believe that current economic conditions represent a mid-cycle slowdown, not the beginning of a slide into recession. We closely watch stock and bond markets and are moving ahead this week with a planned rebalancing of many Fidelitys Portfolio Advisory ServicesSM managed account portfolios. We will not run to cash. We will also look to take advantage of market moves to seek opportunities to potentially buy back stock at lower prices. Above all, the managers of our Portfolio Advisory ServiceSM managed accounts, Fidelity Private Private Portfolio Services, and Fidelity Personalized Portfolios tax-sensitive managed accounts will continue to follow a strategic and disciplined asset allocation approach. Trying to time nancial markets is difcult and often costly. Abrupt, short-term declines are often followed by rebounds that investors

who try to time the markets may miss out on. When U.S. stocks began rising in March 2009, many investors who had pulled their money from equities when the market plummeted sharply the previous September were still on the sidelines. They missed the start of a rally in which the S&P 500 would recover much though not all of what was lost in its descent from the 2007 market peak. In cases such as this, investors would have been better off remaining fully invested despite volatility, so as not to miss out on the subsequent recovery. This is why our managed accounts remain invested, regardless of market gyrations. We continue to invest across a wide variety of asset classes, sectors, regions, and countries and we gain additional diversication through the use of multiple managers who use a variety of investing styles. We also offer our clients the benets of a global research team that can look beneath and beyond macroeconomic and market turmoil to nd attractive opportunities worldwide. This research capability enables our managers to nd good stocks whose prices have been driven down along with the overall market. In volatile times, this can create opportunities that individual investors might otherwise miss. While our asset allocation philosophy doesnt change in response to market volatility, Strategic Advisers investment managers recognize that turbulent markets can also bring opportunities. For example, the investment managers for our tax-sensitive managed accounts actively harvest losses in order to attempt to reduce our clients tax obligations, and this strategy can be particularly effective in volatile markets. Regardless of market conditions, all investors should review their portfolios to ensure that they are consistent with their personal needs, tolerance for risk, and time horizon. Once youve done so, our investment managers can use volatile market conditions to rebalance your portfolio and seek to take advantage of asset price moves that are either unreasonably high or unreasonably low. We understand how uncertainty or abrupt movements in nancial markets can unnerve investors. But history shows that short- and medium-term events should not be allowed to drive long-term investment decisions. With this in mind, our investment managers will continue to use diversication, rebalancing and a long-term perspective to help you achieve your investment goals despite todays volatile markets.

Past performance is no guarantee of future results. Diversication/Asset Allocation does not ensure a prot or guarantee against loss. *Fidelity Personalized Portfolios applies tax-sensitive investment management techniques (including tax-loss harvesting) on a limited basis, at its discretion, primarily with respect to determining when assets in a clients account should be bought or sold. As a discretionary investment management service, any assets contributed to an investors account which Fidelity Personalized Portfolios does not elect to retain may be sold at any time after contribution. An investor may have a gain or loss when assets are sold. The information presented above reects the opinions of the author as of the August 8, 2011. These opinions do not necessarily represent the views of Fidelity or any other person in the Fidelity organization and are subject to change at any time based on market or other conditions. Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. Fidelity Portfolio Advisory Service is a service of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. Fidelity Private Portfolio Service and Fidelity Personalized Portfolios may be offered through the following Fidelity Investments companies: Strategic Advisers, Inc., Fidelity Personal Trust Company, FSB (FPT), a federal savings bank, or Fidelity Management Trust Company (FMTC). Non-deposit investment products and trust services offered through FPT and FMTC and their afliates are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, are not obligations of any bank, and are subject to risk, including possible loss of principal. These services provide discretionary money management for a fee. The CBOE Volatility Index (VIX) is a measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the worlds premier barometer of investor sentiment and market volatility. Standard & Poors 500 Index (S&P 500) is an unmanaged market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. Indexes are unmanaged and you cannot invest directly in an index. Brokerage services provided by Fidelity Brokerage Services LLC. Custody and other services provided by National Financial Services LLC. Both are Fidelity Investments companies and members of NYSE and SIPC. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street Smitheld, RI 02917 590474.2.0 1.931440.100