Today the global financial markets dropped rather dramatically. The Dow Jones Industrial Average fell by 513 points. The Standard & Poor's 500 index was down 4.8%

I received the following email from another investment advisory firm:

"The financial markets have been experiencing considerable volatility in the last two weeks. We have made changes to our models because we believed this could happen. We are continuing to monitor your portfolios in light of the recent economic and political events and believe the strategy we put in place is appropriate. We will continue to provide you with updates as we study the information available to us."

They believed this could happen? Well, we all know this could happen. Moreover, it happens with some regularity over the long cycles of the stock market.

The strategy we put in place is appropriate? I'd love to know what that strategy is.

Let's not forget the following:

1. The financial markets are prone to volatility. This has been the case for 200 years in this country.
2. No one knows what will happen tomorrow, next week or next year in the stock market. If someone tells you they know what is going to occur in the stock market, run in the opposite direction.
3. The stock market generally prices securities in an efficient manner. This means that identify mispriced securities is very difficult.
4. Given that the stock market is an efficient marketplace, waste no time trying to find the underpriced or overpriced security. Instead build a well allocated and properly diversified portfolio.
5. In times of market volatility, manage your emotions and not your portfolio.