Author Archives: Chris Costello

Tame The Bear Market Will Tank

The Stock Market Will Tank. And That Is OK!

It is true. The stock market will tank. It isn’t a matter of IF but WHEN and HOW MANY times in your lifetime.

The sooner you can accept this and not be surprised by it, you will have joined an elite investor club. Sadly, there are very few members. Even one of history’s most prominent figures couldn’t keep his emotions in check when it came to investing. Now let me be clear about something: I am not calling for or predicting WHEN the market will tank. I just know that it will at some point.

Since the beginning of when they started measuring the aggregate prices of company stock, the market has regularly and periodically reminded investors that when things go up, they always come back down. Fortunately — so far at least — the downs have been temporary.

The Market Will Tank – A Bear Market

In fact, since the conclusion of WWII, the stock market (as measured by the S&P 500 index) has declined by at least 20%, what is typically defined as a Bear Market, a total of 14 times! (Note: there were three periods that were “only” down 19%. Forgive me, but I am still going to include them in the Bear Market list.)

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Easy Keys to Building Wealth

The 4 Easy Keys to Building Wealth

It seems that there is a short list for everything these days. Top 10 things to never say on a first date. The 5 best foods for your toddler. Top 20 places to travel to in your lifetime. And my personal favorite – any list that has the top 10 fails!

I would like to offer yet another list. But unlike providing just the entertainment value of my favorite “Fails” list, this list will serve you in a much more life-altering way. If followed, I am confident it will change your financial future.

This list did not come out of the pages of academia but rather from my last 2 decades working in Financial Services. I have spent 20+ years sitting kneecap to kneecap with real human beings helping them shape and plan for their financial futures. I have seen the whites of my clients’ eyes amidst the dotcom bubble burst in the late 1990s and again, with many of those same clients, in the financial crisis of 2008-2009.

It often seems that the financial industry in general wants to make investing and building wealth seem more complicated than it needs to be, so I hope to simplify what you really need to know. There are many things with investing that are out of our control – the economy and the stock market to be specific.

The great thing about this list is that all 4 things are areas of your life that YOU CAN CONTROL.

I hope that by boiling the millions and millions of google search results down to just these 4 key points that maybe, just maybe, a number of people reading this article will see their lives changed for the better.

So … drumroll please for the 4 Easy Keys to Building Wealth …

#1: Spend Less Than You Make (i.e. Save Money)

This is the one I am most passionate about. I have seen first-hand countless numbers of my clients retire with more than $1 million in their portfolios – and they never made even close to six figures in their careers. They didn’t inherit it. They didn’t sell a business for millions of dollars.

The one constant was that whatever they made, they spent less than that. Simply, if their monthly take-home pay was $4,000, they only spent $3,000. They most certainly didn’t maintain balances on a credit card. And when they had to borrow money (for a home or car), they worked to pay it off as soon as possible.

I put the “spend less” attribute #1 on the list because it is the most difficult for many people.

The next 3 are much easier to follow, but the act of spending less than you make is probably the single trait that will have the most impact on your financial life – both now and in the future. Very few people have the discipline to spend less than they make. It is main reason why few people in this country are financially secure.

#2: Get Your Allocation in the Ballpark of Being Right (Stocks vs. Bonds)

Too many investors spend an inordinate amount of time stressing over the selection of individual mutual funds while simultaneously neglecting what may be the single most important decision in investment selection an investor can make in their lifetime – the balance of stock funds vs. bond funds.

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Technology Provides the Next Frontier in 401k plans

Did you know that of the 20,000+ individual 401(k) accounts that blooom has analyzed, over 80% were invested incorrectly? Yea, that’s right…over 16,000 people didn’t have the right investments in their account.

What that tells us is that the current system that employers have in place for plan participants is not working. Technology now has provided a solution to this problem through online investment management services, commonly referred to as Robo-Advisors, such as blooom.

Blooom is a low-cost, Registered Investment Advisory online service created to help improve the way average Americans manage their 401(k) retirement plans. In just five minutes, the blooom assesses a client’s 401(k), including hidden fees, from start to finish and provides ongoing professional management for as little as $5/month.

It is predicted that by 2020 the amount of money personal investors will invest through the use of technology will grow by 68%. In this Podcast blooom’s CEO, Chris Costello, talks about how technology is revolutionizing the 401(k) space and how important it is for employers to be at the forefront of providing this latest employee benefit to their participants.

Listen to the 401(k)Fridays podcast featuring blooom’s Chris Costello here.

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The Single Most Important Piece of Financial Advice

There is no shortage of advice on this topic. A quick google search on “ financial advice ” reveals roughly 65 million hits on the topic. I intend to share the one piece of financial advice that – if followed – will have the single largest impact on you becoming financially independent at some point down the road. This advice comes from my years of working with investors as they approached their own retirement.

Prior to blooom, I spent 20 years advising, planning, and managing investment portfolios primarily for baby boomers. Most of these clients were 55-65 years old and almost all of them had more than $1million in their portfolio. Often times I would meet these folks when they were within 5 years of the finish line and were looking for someone to help them plan out the financial transition from work-life to retirement. With just a few years (or months) left until retirement, there wasn’t a whole lot I could do to alter their ability to retire. Most of these folks had, for the most part, “won the race to financial independence.” Candidly, I was not their advisor when they were younger and working towards their retirement. Rather, I stepped in to help them make the transition into retirement and captain the management of their finances from that point forward.

But that begs the question…how did they amass this wealth? How did they arrive at the point in their life where they could stop earning an income and live on their accumulated savings? The answer is simple. They lived below their means during their working years. Translation – they spent less than they made. It wasn’t an inheritance, it wasn’t a big salary (as most of my millionaire clients NEVER made more than $100,000 per year) and it definitely wasn’t because they knew how to time the market. Rather, it was the simple in concept but hard to execute lifestyle of buying less “stuff” than their incomes allowed. These were the kind of people that would go to take out a mortgage in their early working years and buy a house that they could afford to buy, not the house that they could qualify to buy.

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Retirement or Student Loans?

Drowning in Student Loan Debt!

One of the frequently asked questions we get from our blooom clients is – “I am still paying on my student loans, how much should I contribute to my 401k, if anything?” Unfortunately, student loan debts are hindering retirement savings for a huge segment of millennials and Gen Xers. Paying your student loans instead of saving for retirement can translate into hundreds of thousands of dollars less in your 401k by the time you reach retirement. If anything, this problem has been getting worse. Average student loan balances have risen steadily over the past 20 years. In 1993, the average graduating student owed less than $10,000. This went up to $35,000 for the unfortunate class of 2015 (source Mark Kantrowitz, wsj.com). Personally, when I walked down the Hill at my college commencement in 1995, I was also dragging along $29,000 in student loans. My point is: you are definitely not alone with this burden.

Student loans or retirement savings? A simple answer.

For those of you in the workforce with access to participate in your employer sponsored retirement account (such as a 401k or 403b), you are likely juggling your student loan re-payment and retirement contributions. Maybe you’re wondering what balance should be struck between these two. Fortunately, the advice is fairly straightforward. IF your employer offers a match on contributions that you make into your 401k, PLEASE, PLEASE DO NOT miss out on this free money! So even if you are saddled with student loan payments, I still strongly encourage you to contribute to your 401k. But: ONLY enough to get the maximum employer match.

What does the employer match get you?

The employer match can take on many different shapes and sizes. Oftentimes it looks like this: For the first 6% that you contribute to your 401k, your employer will match $0.50 on the dollar. In other words – if you contribute 6% of your paycheck, they will match another 3%. Put in different terms, if you make $50,000 per year and you elect to put 6% into your 401k, you are saving $3,000 towards your retirement (6% of $50,000). On top of this, your employer is contributing another $1,500 into your account (3% of $50,000). Try this one on for size: your $3,000 contribution just received an automatic 50% return before any investment return!

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