Author Archives: Greg Smith

Politics and your retirement…

We at blooom wanted to write to you with some thoughts on the news you have likely seen that the Trump administration will be seeking to unwind many of the regulations put in place after the financial crisis (Dodd-Frank), as well as a more recent rule designed to protect retirement savers in this country from brokers trying to sell them high fee products, instead of always acting in their best interest (DOL Fiduciary Rule). Political administrations will come and go, lobbyists and elected officials might try to change the rules to serve special interests, but you can rest assured that we here at blooom have always — and will always — only follow one rule: acting in your best interest. In fact, blooom is already a fiduciary and has always upheld itself to the highest regulatory standard in the land. So, on our side, and for our clients – absolutely nothing will change, whether or not the rules get unwound in Washington.

We built blooom to insulate you from the predatory practices rife in the retirement space, by steering you TOWARDS low cost investments, steering you AWAY from alluring sounding investments hopelessly trying to “beat the market”, and by helping you decipher and distill the often hundreds of choices in your retirement account down to an appropriate and well diversified portfolio for your age. Straight forward, boring, non-flashy stuff that the majority of Americans get wrong.

Blooom was built to protect our clients from shenanigans that might happen in Washington or in the financial industry. The latest shenanigan will allow brokers to “sell” Americans retirement products, instead of give them the best possible advice. With blooom on your side, you don’t have to worry about this. We can only hope that fiduciary, simple, low-cost solutions like blooom can reach tens of millions of Americans. That’s the magic of technology. In these uncertain times, make sure you’re covered.

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Keep It Simple

The biggest trick in all of finance: simple is often the most sophisticated thing you can do.

It is counter intuitive, but we as humans are trained to believe that the more we pay for something the better it must be. We assume that there is a correlation between high prices and high quality. But when it comes to your personal finances, the opposite in fact usually turns out to be true. Researchers have shown over and over again, that the higher you pay for an investment, the worse-off you do, net of fees. So why do we pay for complicated and expensive financial products and strategies if they almost always do worse than simple, transparent ones? Large companies are spending billions of dollars on advertising to convince you that expensive and complicated must be better and more exclusive. Don’t buy the hype. Let’s dispel a few scarily common myths that an entire your-money-as-entertainment industry is trying to convince you of (Think of: every show on CNBC, every E-Trade commercial, new apps for your phone advertising free stock trading).

Here is the hard truth: 90% of professional money managers fail to beat the market over any sustained period. That’s right: those people who have spent their entire careers, and in fact get paid (by you and the investing public), get it wrong 90% of the time over sustained periods. Why would you even try to buy and sell stocks, and “time the market” if experts lose 90% of the time?

We have been trained as a culture to believe that stock trading is a skill, like being an engineer or a doctor. We know by now that it is not a skill. By all means, buy and sell stocks, but do it as a fun game with very small amounts of your money, recognizing that it is for fun. Do not do this with your nest egg. Anyone telling you that you or they can beat the market is selling you false hope, and perpetuating a myth that this is even possible over the long run. For the most part you would be way better off watching the History Channel than CNBC. You will certainly learn more.

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