Author Archives: Kate Troske

3 Reasons to Manage Your Finances Online

As our world becomes increasingly digital, it’s only natural that financial management follows suit. With the world seemingly grinding to a halt during the last several months, many people were left reconsidering their traditional banking and investment institutions. Due to the growth of technology and its many benefits, online financial management has never been easier. Keep reading to learn how online options set themselves apart from traditional financial management, and the many benefits of making the switch.

Ease of Accessibility

 Perhaps the most stark contrast between traditional and online financial services is the ease of accessibility. No longer is there a need to meet with a banker or financial advisor in person in order to service your needs. Many traditional offerings have tried to keep up with the push for greater technology, but in some cases they still lag behind.

In fact, many Americans live in geographic areas that don’t even have reasonable access to traditional financial services. A banking desert is an area that doesn’t have a single bank location with 10 miles—and they’re only becoming more common year after year in America, especially in rural areas. Yet, with access to the internet through a smartphone or computer, people can now access online banking, retirement, and investment services from anywhere.

Rather than having to set up appointments to meet in person and deal with long waiting periods for financial moves to take effect, digital services allow you to make investment decisions and move money around in a matter of minutes. For example, just by answering a few questions about your finances, you can get retirement plan recommendations without even meeting an advisor.


Save Money

For a multitude of reasons, online financial management can be much cheaper than traditional offerings. And when it comes to managing your money, the last thing you want to do is spend more of it than you need to.

Take, for example, the rise of challenger banking in the United States. Because completely online financial institutions don’t have to pay for the associated costs of brick and mortar locations, they can usually offer banking with no hidden fees or better interest rates. Unfortunately, Americans are charged hundreds of dollars every year in banking fees such as overdrafts, monthly service charges, and foreign transaction fees by traditional options.

Investment and retirement plans, on the other hand, work in a similar way. Financial advisors can charge for their services in several ways—sometimes as an hourly rate or as a percentage of the total investment cost. Another way they make money is by a commission on your investment. Either way, it can put serious doubt into the decision-making progress and whether or not you’re getting advised on truly the best options.

Online investment services could offer you better pricing. By choosing an option (like blooom) that charges a low flat fee and is held to a fiduciary standard you can be sure that your recommendations are in your best interest. You won’t be pushed to make choices that will benefit an advisor and you won’t be gouged for more money down the line. Those that are not fiduciaries are not legally required to act in the user’s best interest.


Personalized Options

Finally, one of the best benefits of online financial management is that you can customize your experience to be extremely personal. Many softwares allow you to create a custom view of your finances, which lets you get a broad overview of your portfolio, as well as access to chat with a financial advisor.

And with all of this personalization, it’s important to make sure that your personal information is kept safe and secured. Many online financial services offer the same amount of protection as traditional services, but some even go above and beyond. Some digital banks and retirement services offer instant notifications for unusual activity. Whereas you may not notice fraudulent activity until you receive a traditional statement in the mail, online institutions can send you a text message right away when something seems wrong.

In closing, there’s a multitude of reasons why you may opt for online financial management. The ease of accessibility for your online accounts, the ability to save more money, and a completely personalized plan are just three reasons out of many. Make sure to take a hard look at your current financial situation, and then consider these options when looking for room to improve.

DISCLAIMER: The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.

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Sheila Bair | FDIC Chair, Author, Professor

Welcome back to our Blooom Brain Pickers series!  We’re picking the brains of the best in the biz to inform, entertain, and most of all, educate you when it comes to making personal finance decisions. Today we are honored to feature former FDIC Chair, Sheila Bair.

Sheila Bair has had a long and distinguished career in government, academia, and finance.   Twice named by Forbes Magazine as the second most powerful woman in the world, she is perhaps best known as Chair of the Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011, when she steered the agency through the worst financial crisis since the Great Depression.  For her efforts to protect bank depositors and homeowners during the crisis, she received the Kennedy Library’s Profiles in Courage Award, and was named “the little guy’s protector in chief” by Time Magazine. A former finance professor and college president, Ms. Bair has been nationally recognized for her innovative initiatives to make college more accessible and affordable. She is a frequent commentator and op-ed contributor on financial regulation and the student debt crisis, as well as author of the NY Times Best Seller, Bull by the Horns, her 2012 memoir of the financial crisis.

Ms. Bair currently serves on a number of corporate governing boards, including Host Hotels, Bunge Ltd., and Fannie Mae, and on the International Advisory Board to the Santander Group. She also serves on the board of Paxos, a blockchain technology trust company, and as an advisor to several fintech startups.  She is a founding director of the Volcker Alliance, established by Former Federal Reserve Board Chair Paul Volcker to build trust in government and is the founding chair of the Systemic Risk Council, which advocates for financial stability. In addition, she is a Senior Advisor to the Peter G. Peterson Foundation on financial issues confronting young people.

Are there lessons from the Financial Crisis that could help us in our current situation? 

Get the help to Main Street. We didn’t do that with the bailouts of 2008/2009. Government support was highly concentrated on the financial sector. It didn’t trickle down. Even while Wall Street was reaping profits– and paying bonuses– by the end of 2009, it took about 10 years for most working families to recover.  This time around, the Fed is making yeoman’s efforts to reach the real economy but their current monetary tools are just not well equipped to do so. Their programs are still primarily helping big banks and big corporates. On the fiscal side, the small business programs and cash payments to households, including EIP payments are helping. EIP has boosted the consumer spending which underpins our economy. But the process of getting those payments to households has been slow and arduous.  Digital currency technology provides part of the answer. Giving all families a digital wallet where they could receive Fed-backed digital currency would be much faster and much more secure against fraud than our current system. The technology is there and could be in place within the next few years if we have the will to do it.


What is the best and/or worst financial advice you have ever received personally? 

Worst Advice: getting a credit card fresh out of college to “build my credit history”. I didn’t have the knowledge or skills to manage credit card debt, and quickly became addicted, eagerly accepting all those credit card offers banks were sending me.
Best Advice:  stick to one credit card.


What do you think should be done to improve financial literacy in our country?  

Start at an early age. Embed it in elementary and secondary core curricula like math.  Be serious about it, with quality content written by un-conflicted sources (unlike the industry literature that advised me to get a credit card.)  And don’t use it as an excuse for anti-consumer practices. One thing that really sends me up the wall is to hear industry officials trying to defend irresponsible financial products by saying we just need more financial education. 

You have paved the way for a lot of women in the banking/finance industry, what advice would you give to young women interested in banking/finance? 

It can be a great career choice. Financial services done right can be of huge benefit to families and Main Street businesses. Don’t forget that there are human beings on the other side of those services you are providing.  Treat them right. Research shows women tend to be more compassionate and a bit more risk averse when it comes to finance. We should be proud of those traits and use them to improve banking culture. 

As a children’s book author, what would your advice be to parents when it comes to teaching financial literacy? 

You need to be financially literate before you can help your children. So educate yourself and don’t be afraid to ask questions or “look dumb”. I hate to say it, but I think a lot of the esoteric terminology and complexity in financial services today are meant to intimidate consumers into not asking questions.  One of the reasons I write picture books for kids is in the hope that parents will read them with their children and learn something themselves.

In your time as FDIC Chair, what was the most challenging aspect of your role?  

Trying to get more help for homeowners. We had some success with mortgage relief, but the government should have done so much more.

In your time as FDIC Chair, what was the most rewarding aspect of your role? 

Giving people peace of mind about the safety of their FDIC-insured bank deposits. During the depths of the crisis, the late Bill Keane drew a Family Circus cartoon showing Bill peacefully asleep in his bed, with his piggy bank next to him, on which he had drawn “FDIC”. I had that cartoon framed, and it still hangs prominently in our home. 

Twitter: @SheilaBair2013

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Vaccinate your investments

Invisible enemies

For billions of years, virtually all living things have been fighting a war against constantly adapting and evolving, invisible enemies – viruses. Viruses are nothing new to humanity. Some of the greatest civilizations in the world have attempted to fight back, but only within the last century have we truly been able to develop and safely use effective weapons like vaccines, thanks to science. 

And yet, we know that every time scientists develop a new vaccine targeting one bad microbe or another, the next potential contagion will always be waiting for us, just around the corner. We don’t know where it will come from, what it will look like, or how harmful it may be, but we know it WILL come at some point.

We’re currently dealing with a global economic crisis while simultaneously fighting a global health crisis, both of which were sparked by a new invisible enemy – COVID-19. While the world’s greatest scientific minds race to create a vaccine to resolve our public health crisis, it is our job at blooom to help inoculate our clients and their investments from the invisible enemies of the investing world, knowing that the next new threat is always lurking right around the corner. No needles necessary!

“The reward for work well done is the opportunity to do more.”
– Jonas Salk, creator of the inactivated polio vaccine


Basic instincts drive investing behavior

As humans, our survival instincts are fueled primarily by two competing emotional forces within us all: fear and greed. Fear keeps us from doing overly risky things (or at least makes us think twice) that may cause harm to ourselves. Greed feeds our hunger to achieve, thrive, and generally seek more of what makes us happy, selfishly or not. 

Ideally, we would strive to live our lives each day with an appropriate balance between these two internal forces. But when it comes to investing, human beings are simply not wired for success. We’re actually wired to make terrible decisions when it comes to our investments. And yet, just as there are many ways to prevent contracting and spreading a contagious virus, there are also several ways investors can build immunity and help fight back against the battles our own biology will inevitably wage against us when markets get rocky.

“Be greedy when others are fearful and fearful when others are greedy.”
– Warren Buffett    


Prevention – Don’t touch!

Various studies have shown that, on average, most of us touch our own face around 16 times every hour. In the last several months we’ve all become far too familiar with just how bad this is for us when it comes to contracting contagious viruses, like COVID-19. 

Just as infectious disease experts have warned us all to minimize face touching as much as we possibly can, blooom advisors have been saying the same thing to our clients when it comes to long-term investment accounts, like their 401ks or IRAs. 

There’s no denying that a global economic catastrophe feels like the worst possible time to ignore what’s going on with your hard earned money, but that very simple “hands off” approach has proven beneficial time and again throughout the entire history of the stock market. 

If you have an appropriate long-term investment strategy in place for your retirement accounts, remember that our instinct of fear that tempts us to sell stock investments and wait out the storm is exactly what causes so many investors to consistently lock in losses and miss out on the robust recoveries that have followed EVERY single US stock market crash in history. That’s right, 100% of them.

This most recent stock market crash proves the point even better than most others. An initial 30% crash in a matter of just weeks has since been followed by a nearly 30% market recovery. Yet, who could’ve possibly predicted that some of the worst unemployment numbers in history would have the stock market sitting less than 10% away from all-time highs? Here is another friendly reminder that the stock market is not the economy and its short-term movements rarely make much sense in the moment. 

Unfortunately, we know for a fact that far too many ended up logging into their retirement accounts to sell out of their investments at the worst possible time, only to miss this quick, unanticipated rebound. 

Making adjustments to your long-term strategy based on short-term feelings of fear and panic is a temptation we all feel in times of crisis, but it tends to be a recipe for disaster when it comes to your investing goals. Taking emotions out of the equation by sticking to a proven strategy gives you the best chance of reaching your goals over time. While you may find your hands reaching for that keyboard, fight the urge to touch your retirement accounts by making these emotional decisions. Your future self will thank you.



One way to develop future immunity from a virus is through exposure, whether intentional or not (this is not medical advice!). When exposed to a new virus, our bodies produce an immune response to fight back. While the battle can go on for weeks, those that were relatively healthy before exposure are often likely to recover without long-term consequences, or even death. For most viruses, those that survive and recover from the infection end up building antibodies that are designed to detect and prevent future infection from that same virus, at least for a certain period of time, typically several years.

When it comes to investing, sometimes the best way to protect yourself in the long-run is by learning the hard way in the short-run. In the last several months, industry data has shown a significant increase in brokerage transaction volume for many individual investment accounts, particularly among younger investors with IRAs and taxable brokerage accounts. This gives a strong indication that a lot of small balance accounts have been involved in frequent buys and sells of individual stocks and ETFs. Generally speaking, we don’t advise day trading individual stocks or ETFs due to the risk involved, but the temptation to do so is completely understandable, especially after a significant decline in the overall market.

That said, painful but important investing lessons tend to result from times of crisis like this. After all, we are all human and sometimes we simply have to experience the pain of letting our emotions win out in order to understand the bigger picture and have a better perspective next time around. This particular crisis has likely taught far too many the valuable lessons of the difficulty of trying to time the market by selling after a steep decline only to miss an unexpected and robust recovery.

Nearly every successful investor has had to learn a hard lesson along the way, which likely involved them succumbing to their own emotions a time or two. Learning these lessons early can provide a lifetime of immunity that can not only help protect you and your own future, but those around you as well. 

As cliche as it may sound, when it comes to investing, if you are humble enough to admit you don’t have a crystal ball that can predict market movements, what doesn’t kill you will very likely make you a much stronger investor over time. Yet, just as a doctor would be unlikely to recommend intentional exposure to a deadly virus, we are not about to suggest that you intentionally try to teach yourselves these lessons the hard way. That’s what we’re here for. But if you happen to make a mistake, as we all have, make sure that mistake becomes the antibodies you need the next time around.



Science has shown that the single best way to prevent infection and spread of a virus is by development of, and widespread vaccination against, that virus. Some vaccines are developed for seasonal viruses, like the flu, which mutate and evolve each year. These vaccines aren’t guaranteed to prevent infection from all flu strains, but they have been shown to at least help reduce recovery time and contain the spread to a more limited population.

With investing, there is no magic potion or vaccine to protect you from your natural instincts or the constant noise of stock market media hype. But that doesn’t mean you can’t greatly reduce your risk of making mistakes that could take years or decades for your portfolio to recover from. 

The greatest threats investors face are probably most comparable to the seasonal flu. Each year different strains of the flu evolve which require new vaccines to protect against. Likewise, investors can expect a brand new, often unanticipated threat to attack their investments year in and year out. The best thing you can do as an investor is to understand that the threats against you are always evolving and that there are time-tested methods to protect yourself, or at least help mitigate our risks. Ask your advisor questions (if you have one). Stay focused on the long-term. And tune out the distractions of the financial media. 


Seek the best primary care

Finding a doctor you can trust can be difficult, but those that do tend to live healthier, happier lives. Knowing that you have someone in your corner is essential when it comes to opening up about your own health issues, as they arise. While many of us try to avoid going to the doctor until we absolutely must, we know that in most cases they will be able to give us the best medical advice or treatments for whatever is ailing us.

Inoculating your investment portfolio means taking emotion out of the equation using technology and automation, implementing a proven long-term investment strategy that’s appropriate for your age and risk tolerance, and finding an ally you can trust in the fight to keep you on track when times get tough, at an affordable price. Each of these are the very reasons blooom was created in the first place. 

While humanity races to defeat this Pandemic, know that you and your investments don’t have to succumb to internal forces inside of us all that often work against our financial well-being in times of crisis. Uncertainty is the greatest certainty there is when it comes to investing. And it’s actually that uncertainty that tends to reward those that fight through their natural instincts to guess the market’s next move. Sometimes all it takes is the comfort of a conversation or knowing that you have a plan in the first place. 

If you feel lost when it comes to your retirement investments, have been stressed by the recent ups and downs of the stock market, are unsure if you’re investing appropriately right now, or just need to talk to someone about a better strategy going forward, don’t hesitate to reach out to our advisors. We’re here to help you!


The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.

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You lost your job… now what?!

You’re not alone. 2020 has taken us from one of the LOWEST rates of unemployment in history to the HIGHEST since the Great Depression, in a matter of only three months. With about 15% of eligible workers jobless at the moment (a rate that will likely continue to increase for a short time), know that you are one of nearly 40 million Americans that find themselves suddenly without work, and therefore without a paycheck, to no fault of your own. 

If you are someone that has recently lost your job due to this crisis, expect that you may soon, or you know someone that has, we’ve put together some important things to consider as you sort through this difficult time. 


Don’t panic. You will get through this!

Losing your job can have an awful stigma around it, but the truth is that job loss is something most people will experience at some point in their life, and it can be particularly painful when it is unexpected and of no fault to you whatsoever. Everything may feel uncertain right now and you may feel a sense of defeat, but take a deep breath and understand that there are a few things you can do immediately to get your finances and career back on track, or even on a new track altogether!


File for unemployment

There’s no shame in it. This is what unemployment insurance was created for. If you have lost your job due to no fault of your own, you are likely going to be eligible for unemployment benefits, which have temporarily been extended and increased in most cases, thanks to the CARES Act. 

In most states today, unemployment filing can be done online or over the phone. Many states have also added their own new rules, in addition to those in the CARES Act, to provide additional relief. To get started online, you can learn more about your state’s benefits on the Department of Labor website or by searching here.


Health Insurance

By far one of the most important benefits of employment is employer-sponsored health insurance. Losing your job, even if temporary, means you will have some big decisions to make if you want to continue to have coverage. And a global Pandemic is certainly one of the worst times to take the risk of you or your family going without health coverage for any amount of time.

If you were covered by your employer’s health insurance plan, you will likely be able to continue that same coverage through COBRA. However, while COBRA lets you stay on the same plan, the portion of the premium paid by your employer will become your responsibility, and you may be much better off finding a short-term alternative.

Visit the website for more information on health coverage available for the recently unemployed.


Revisit your spending

Budgeting is hard. And there are many schools of thought on how to approach a proper budget. Set all of that aside for a moment and keep this simple. Regardless of how you have been handling your monthly expenses prior to today, now is the time to simply revisit your spending habits and cut out the fat. Look through the last three months of bank and credit card statements or use an online personal finance app, like Mint, to evaluate trends and areas you can easily find some extra cash each month. 

You’ll be shocked at how quickly several small, harmless purchases can add up. Just being more aware of this can not only save you some extra money, but also give you a better sense of control at a time when things may feel like they’ve never been more out of your control. 


Retirement accounts

Along with health insurance, many people’s only source of retirement savings comes through their access to an employer-sponsored retirement plan, like a 401(k) or 403(b) at work. While a job loss means you are no longer eligible to contribute to the plan, in most cases, you can keep that money right where it is if you want to. 

It can be VERY tempting to dip into your retirement account(s) in a time of crisis, especially with all the uncertainty surrounding the crisis we happen to be in at the moment. But taking money out of retirement accounts early should be your very last resort, in most cases. 

While the government has temporarily waived penalties on withdrawals up to $100k from retirement accounts like 401(k)s, we would strongly discourage doing so in most circumstances, unless you truly have no other alternative. Taxes will still be owed on any withdrawals and taking money out of the market in the middle of an historic decline will lock in losses and ensure you won’t be able to participate in any eventual recovery. In short, the long-term cost of an early distribution is likely to be much higher than any short-term financial benefits. 

Another option is to rollover that money to an IRA account, where you can avoid costly administrative fees, and you can generally find better investment options. Not sure how to set up an IRA, looking for help picking and managing the investments in an IRA, or prefer to just leave the money alone for now and have someone make sure it’s invested appropriately? Give us a shout. That’s what we’re here for!


Keep your head up

It’s a bit cliche, but these challenging moments can actually end up being the most pivotal in your life and certainly your career. Losing your job unexpectedly can be devastating in the moment, but when you finally have a chance to gather your thoughts, let the dust settle, and you get a plan in place to weather the storm, you may just find that this is the nudge you needed to reevaluate your passions, rediscover your talents, and maybe even get started on a new career path altogether. 

You WILL get through this. And we’re here to help if you need us. Don’t hesitate to reach out.


Disclaimer: The information is provided for discussion purposes only and should not be considered as advice for your investments. Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

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Recessions Happen, What do I do Now?

This global pandemic has one question on a lot of people’s minds: how often do recessions happen? Since the Great Depression ended in the late 1930s, the U.S. economy has experienced a recession about every four years.

Because the last recession ended in 2009, people have been chattering for years about the country being well overdue for another. But even though history can help us recognize overall patterns in the economy, no one can predict exactly when recessions will happen or how long they will last. Bottom line? Recessions are simply an inevitable part of the economic cycle, and their frequency and duration vary.

Recession Definition

Before we go much further, let’s first define what exactly the word “recession” means. A recession is officially defined as two or more consecutive quarters of negative economic growth. So in theory, a recession could last as little as six months—or it could go on for years, as with the Great Depression and the Great Recession of 2007-2009.

Are We Overdue for a Recession?

As mentioned earlier, financial modeling is influenced by previous events. As history has shown us, recessions usually occur about every 4-5 years. Fortunately,  history can also tell us a lot about economic expansions, too!

Here are the facts: The average economic expansion in the U.S. usually lasts about 39 months, followed by a recession that lasts an average of 11 months. But the most recent expansion lasted from 2009 to February 2020, for a total of 127 months—the longest expansion in our country’s history. Clearly, the economy isn’t worried about following anyone’s watch.

The Benefits of a Recession

There’s no doubt about it; recessions can cause a lot of problems. People fear them for good reason. They often lead to higher rates of unemployment and the sinking value of assets. But the good news is that recessions have always improved, and they actually come along with some benefits. Yes–we really did say benefits!

The silver lining of recessions is they can help get rid of excess, balance economic growth, expand buying opportunities, and change the consumer mindset. Though it may be hard to accept, recessions aren’t 100% bad.

So Why Do Recessions Happen?

Though recessions don’t really happen because we’re “overdue” for one, it’s natural to think that a recession is more likely to happen the longer an economic expansion goes on.

In fact, in some ways, a recession is a self-fulfilling prophecy: The more Americans and their employers worry about the chance of a recession, the more likely it is to happen. Because when people are worried about a recession, they may sell their stocks, take money out of banks, spend less disposable income, and other behaviors that cause the economy to crumble.

The recession of 2007-2009 occurred in part because of a housing bubble, bad lending practices, and corporate greed. Other recessions have occurred because of the economic cycle, asset bubbles, and economic shocks. When the business environment changes rapidly and uncertainty sets in, companies must scramble to reallocate resources and limit production—and those actions can lead to a recession.

How Long Do Recessions Last?

As we mentioned before, it’s impossible to predict exactly when a recession will happen and how long it will last, but we can look to the past to make an informed estimate. Since the end of World War II, the average recession lasted an average of 11 months but could range from 6 to 16 months, or longer.

However, there are certainly exceptions to the rule. Our country’s most recent recession lasted longer than the historic average, dragging on from 2007 to 2009—a full 18 months. The Great Depression of 1929 to 1933 spanned more than twice as long, causing an economic depression that lasted for 10 years.

Difference Between a Downturn & a Recession

Sometimes we hear the terms “downturn” and “recession” used interchangeably, but in reality, they define two different states of the economy.

Downturn Definition

A downturn can happen any time major market indexes like the S&P 500 or Dow Jones Industrial Average drop. But a market drop doesn’t always mean economic activity has declined—a downturn might occur because news or politics cause fear and worry in the market. Once the bad news blows over, the value of the index may go back up quickly. 

When more serious downturns happen and indexes drop more than 20 percent, this is known as a bear market. This type of downturn could be caused by changing interest rates or other factors, and it can take longer to bounce back from.

Recession Definition

A recession happens when the economy has at least two consecutive quarters of negative growth. Though index values usually do go down during a recession, they aren’t the main factor in determining whether or not the economy is in a recession. It’s even possible to have index values going up while in the midst of a recession since the stock market is forward-looking and economic data is backward-looking.

Can a Downturn Cause a Recession?

Market downturns don’t always mean that there will be a recession, but some do. In these situations, the market downturn leads to a shortage of capital, which forces companies to lay off workers. Those workers have less money to spend or invest (i.e. restricting purchases to the necessities!), which in turn contributes to a possible recession.

What Industries Thrive During Recessions and Why

We already discussed some of the benefits of a recession. Here’s another silver lining: Even when economic growth is shrinking, some industries are still likely to thrive. It makes sense, if you think about. Recessions change consumer behavior, so there are naturally some industries that get an uptick when people are worried about money or trying to save.

Only time can tell which industries will thrive in any given recession, but we can make predictions based on the last recession.

In 2008, only a handful of stocks in the S&P 500 came out with positive returns. Some of those stocks included Dollar Tree, Vertex Pharmaceuticals, H&R Block, Walmart, and Ross Stores Inc. Most of the stocks on the list were discount stores or healthcare-related.

What Does the Government Do to Help During a Recession?

The government always steps in to lessen the blow of a recession, either by creating stimulus packages, sending checks to Americans, cutting payroll taxes, or creating government jobs. This is all known as fiscal stimulus. 

They also can coordinate policy with the Federal Reserve (the Fed), a central bank that was set up to keep unemployment rates low and stabilize prices.

There are many things the Fed can do to help the economy, such as lowering interest rates and capital requirements. The Fed can also create new money and use it to purchase securities such as government bonds, which slows deflation and lowers interest rates. Each of these actions fall under what is known as monetary policy, or monetary stimulus.

How a Recession Affects My Stocks

When the country is in the middle of a recession, stockholders get worried. But it’s important to remember that stock market performance is not the same thing as the economy. Stocks can gain positive returns during a recession, so it’s best to play it cool when the economy starts to look dicey. Instead, here’s what you should do! Use this as an opportunity to take advantage of a sale and follow the 3 “O”s of market uncertainty:

  1. Own your Emotions: You (should) have a long-term strategy in place. Stick with it. Whether you’re nearing retirement, or have years to go, you likely don’t need to be accessing all this money today.
  2. Obey your strategy: It’s not a loss until you sell. You’re at a fork in the road–you can sell and trigger a loss, or hold on and ride it out to recovery. 
  3. Operate like an expert: Facts: stick to ‘em. As history suggests, this too shall pass. 100% of past market declines have been followed by a full recovery and eventually new highs.

Diversify Your Portfolio

A recession is also a great opportunity to re-evaluate your portfolio and make sure it’s diverse enough to survive and thrive. If you’re decades away from retirement, your portfolio should be more heavily invested in stocks. Though there will be dips in the market, remember that you’re not actually losing any money unless you sell, and all market declines throughout history have only been temporary.

If you’re nearing retirement, you should have enough bond and cash exposure in your portfolio to help preserve the income portion of your account even in the midst of a recession. Think of your portfolio as one bucket for growth (stocks), and one for income and preservation (bonds and cash).

Do Recessions Always Turn Around?

Recessions have always turned around, since the beginning of U.S. history. The average recession lasts about four years, so try to be patient and focus on sticking to your strategy. Deep breaths!

Wondering If You’re Properly Invested for a Recession?

We’ve covered all the basics of recessions: We can’t predict exactly when they’ll happen, but we do know it’s not a matter of IF, but WHEN the next one will occur. 

They’re an inevitable part of the economic cycle, and smart investors are also prepared for when they happen. So don’t run from a good sale when you see one, and stay focused on your long-term investments. Sign up for Blooom today to stay prepared and afloat during a recession. Sticking to time-tested methods, we use a savvy market philosophy to ensure you’re making the most of your IRA or 401k. We’ve got your back!

Disclaimer: The information is provided for discussion purposes only and should not be considered as advice for your investments. Investing involves risk. Your investments are subject to loss of principal and are not guaranteed.

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