The past few years, we’ve seen a lot of people happily talking about the gains they have been seeing in their 401k accounts. They’re sharing return numbers with others online and in the grocery store. It would seem like the kind of talk you’d want to hear.
Please don’t get me wrong. It’s great to see so many people happy that their retirement accounts are increasing in value. But there is a very important message to convey concerning these high returns.
Like the Lollipop Guild in the Wizard of Oz – IT AIN’T ALWAYS GONNA BE THIS GOOD!
The Facts About Returns Since blooom’s launch
Blooom launched its 401k management service in late-September of 2014. Since that time, the stock market (as measured by the S&P 500*) has had a cumulative return of roughly 28% and has averaged almost 10% per year. In addition, the Vanguard Total World Stock ETF – a better proxy for blooom clients given its allocation to global equities – is up over 15% year-to-date! The point here is that these past three years have been a good time to be a stock market investor. Hell, it has been a GREAT time to be a stock market investor since the Great Recession (stock market collapse) of 2008-2009.
With all of these happy people, we want to make sure everyone understands that this is not always how things will go. In reality, the market will go down periodically. In fact – It NEEDS to go down periodically. That is precisely why investing in the market carries risk and this same risk is exactly why investors who have stayed in the market for long periods of time and weathered this risk have been rewarded with much higher returns than “risk-free” investments like CDs, Government Bonds, and money market funds have produced.
4 Key Characteristics of a blooom-managed 401k
If you’re a blooom client, your managed 401k has four key characteristics that other 401k investors may not receive: