Wow, what a month August has turned out to be!

After trading essentially sideways for the better part of 12 months, most major stock market indexes have crossed the threshold to be considered a correction.

Correction - a decline of at least 10% in the value of stocks

Really it's just a technical word our industry conjures up to make it appear like they're on top of things. Sounds important, I guess.

So what's next? By now, you've no doubt been exposed to countless articles, CNBC specials, and other media predicting what will come next.

...and more to the point...what YOU must do now that we've gone through a correction!

Thankfully, we keep a dusty crystal ball in a spare room for just such an occasion. Drum roll please...

Great new products! 

Although "this time" is almost never different, the financial services industry stands ready to roll out many shiny new products for you to buy!

Flashy marketing campaigns will be prepared just in time for NFL^TM opening weekend, designed to gear you into purchasing some product that will "mitigate the risk of further declines, the next decline, or which way the wind blows in China."

And listen, they'll all sound great. To date, our industry has rolled out a litany of products designed to put your mind at ease. Here are just a few:

• Products with a guarantee - wouldn't it be great to know you could participate in the upside of the stock market, with none of the downside? Of course! Can you? Sort of. There are no shortage of companies providing products that will provide insurance against your investments, but usually at a very steep price. Although your mileage will vary, we've seen several clients who have purchased annuities over the years with annual fees well above 3%. It doesn't take many years of fees in that neighborhood to potentially do more damage than a market decline.
• Smart Beta - a particular favorite of ours has been the reinvention of the index fund. It's too much for the industry that index funds do a great job of providing investors with access to various markets at a extremely low cost. They had to improve on things with the addition of "smart beta" and other similar strategies. Essentially the gist is this...as opposed to just buying the S&P 500 for example, a smart beta strategy will own the index, but come up with numerous ways to weight it to provide better returns. Another example of a strategy that sounds great (smart is in the name after all) but generally just costs you more money.
• Alternatives - this ladies and gentlemen, is the granddaddy of them all. Available as strategies to the uber elite for years, Wall Street rolled them out to the average investor in response to the 2008 financial crisis. Promising to mitigate a host of potential risks, "alternatives" promised to provide better upside than fixed income funds, while protecting on the downside. The problem is, these products tend to have higher than average expenses along the way. Now that we've seen a year or so of rocky markets, and a decline this summer, how have they fared? Not surprisingly, they haven't lived up to muster. At least if you trust the Wall Street Journal as a source. 

Unfortunately, our dusty crystal ball won't tell us which way the market will swing in the coming days or weeks, we hope it has provided you with a better warning of the things Wall Street will throw at you, and why to run the other way. 

Photo by Christian Schnettelker