Author Archives: Kate Troske

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.

 

Exposure

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.

 

Vaccination

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 Healthcare.gov 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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How Rebalancing Your Investments during a Bear Market Works for Your Retirement

If you ask me, rebalancing has to be one of the Wonders of the World.  Ok, well maybe at least one of the Wonders of the Investing World.  The term “rebalancing” (or “optimizing” as we call it at blooom) gets loosely tossed around and often even taken for granted, but I hope to explain its elegance and how rebalancing investments can go such a long way to improving an investor’s long term rate of return.  More specifically, by leveraging the power of optimizing, especially in down markets, it is entirely possible to build more wealth in your investment portfolio over time.  

Now that I have your attention, let’s look under the hood at how this whole optimizing thing really works!

 

Take Emotion Out of It 

By far, one of the biggest enemies of the average individual investor is their own emotions.  Generally speaking, mixing high levels of emotions into financial decision making will generally turn out disastrous, regardless of how good the underlying intentions might have been. Emotions will lead us astray whether it is greed commonly experienced in periods of very strong growth in the stock market, or fear often experienced in periods of steep declines in the stock market.

The most effective way to counter the potential damage that managing your investments based on emotion can cause, is to just simply have a plan. Then, once you have a plan, to the extent possible, you should try to implement a strategy that “automates” decision making so that you minimize the chances that emotions can creep into your decision making. In fact, some of the best laid plans when it comes to investing are ones in which you have to make as few decisions as possible!

Let me explain.

 

3 Things You Should Do With Your Investments Right Now

When it comes to your retirement savings – either inside of your employer sponsored retirement account (401k, 403b) or your IRA – you need to commit to a well thought out strategy that has been battle tested not over the course of just the past few years, but over the past many decades.  When it comes to your retirement savings, because of the inherent long term time horizon that you should have, there are really just a few key things to get right.

  1. Make sure you have an appropriate mix of stocks and bonds given your time horizon to retirement and your risk tolerance.  With this, there is no “one right answer” but it is definitely possible to get this dead wrong.  (Example: 30 year old who wants to retire at age 60 with 90% invested in bonds)
  2. Make sure this mix of stocks and bonds is routinely adjusted to move slightly more conservative as you move closer and closer to retirement.
  3. Make sure you have enough diversification across your stock and bond exposure.  In other words, make sure you don’t have “too many eggs in too few baskets!”


Then, Don’t Touch It

Once you have this established, I can tell you confidently that you shouldn’t be tinkering too much with this set up.  In other words – get this dialed in and there is virtually  no need to be fiddling with it based on the inevitable ups and downs of the stock market.  This is where investment rebalancing comes in and starts to really shine.

An Example Portfolio

For ease of explanation, let’s assume that based on your age, time horizon to retirement and risk tolerance, you have the following allocation in your retirement account:

$100,000 Portfolio

Stocks: 70% Target allocation = $70,000 

Bonds: 30% Target allocation = $30,000

Now let’s assume that the stock market gets absolutely clobbered, down roughly 30%.  Which by the way, is about the average decline the stock market has experienced in the past dozen or so Bear Markets since WWII.  Remember, Bear Markets are a totally normal and expected event that inevitably comes around from time to time either due to economic cycles, bubbles, or significant external events like what we are currently experiencing with the global pandemic.

In our example here, let’s also assume that while stocks were getting clobbered, the bond side of your portfolio largely held its value.  In this case, your allocation could then look like this:

Stocks: $50,000 – 62.5%

Bonds: $30,000 = 37.5%

Often times, investors are inclined to make emotional decisions out of fear (in this case) and might actually consider SELLING OUT of stocks after this big decline. BUT, this is where optimizing can swoop in and save the day.

If you are following a regular, recurring strategy of rebalancing your investments let me show you INSTEAD what would take place

Now that your portfolio has dropped in value to $80,000 and stocks now make up just 62.5% of the portfolio as opposed to the original target allocation of 70% that you originally established.  To then properly rebalance your account back to the original Target allocation into stocks you would need to SELL some of your bonds that had held their ground and BUY more stocks at these depressed levels.  PRECISELY WHAT INVESTORS SHOULD BE DOING!  It is amazing how in times where the stock market is chugging along making new highs, most investors jubilantly pour more and more money into their portfolios and then conversely, when the stock market goes “on sale” many investors’ emotions kick in and then all rational thought goes flying out the window and fear takes over.

But when you allow the power of an automated optimizing strategy to just do its thing, it prevents emotions from creeping in and taking over.  You are not having to make decisions at all during these times.  The automated optimizing process handles all the heavy lifting and by just doing math, it automates the process of proper decision making over and over and over, throughout the course of your investing career.  

Oh, and conversely – an automated optimizing strategy also works quite well in times of growth in the stock market.  As stocks and the stock market are making new highs, automated optimizing will trim some of the profits in stocks and add to bonds, or other kinds of stocks in your portfolio that have fallen a bit behind.  Again, just letting mathematics handle the decision making process in your portfolio.

 

See “Buy Low, Sell High” in Practice

What I love most about utilizing an automated optimizing strategy is that by default, it forces investors to follow that age-old practice of buying low and selling high.  Slowly and surely, over time, portions of your retirement portfolio are shifted from the investments or asset classes that have performed well over to the investments or asset classes that haven’t done as well.  Little by little over a long period of time this adds up to extra return in your account and most importantly, gets you out of your own way when it comes to emotional decision making.

 

Reap the Benefits of Rebalancing Your Investments with Blooom

Now that you have read why rebalancing your investments is important, consider optimizing your portfolio with blooom! Our goal is to give you a solid chance to improve the allocation of your account and maximize your portfolio. Sign up today for a free analysis and see how rebalancing your investments with blooom is a no brainer!

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Pam Krueger | CEO of Wealthramp

Welcome to our first installment of… (drumroll please)… Blooom Brain Pickers!  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. Pam Krueger

Pam Krueger is the creator of the award-winning MoneyTrack investor education television series that ran nationally on over 250 PBS stations.  She is the recipient of two Gracie Awards, educating the public about personal investing, and finding the right financial advice.  In 2017, Pam rolled out a one-hour special, MoneyTrack: Money for Life on PBS stations to explain what the fiduciary standard means to consumers.

Pam launched Wealthramp.com, the largest network of expertly vetted, fee-only fiduciary advisors to help consumers looking for qualified financial advisors who are independent and not commission-driven sales reps. Wealthramp is available to both individuals and employers who offer the service as a financial wellness benefit. Wealthramp uses an eHarmony style algorithm to match individual investors to the best-fit advisors and is available to consumers at no cost.

Pam has served on the board of directors of the California Jump$tart Coalition, an organization dedicated to increasing financial literacy among children and teens. She received the Financial Educator of the Year Award from the Financial Literacy Institute.

 

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

Without a doubt, the worst advice I ever got came from a very dear friend many years ago who really wanted me to invest in private mortgages ten minutes before the housing bubble burst. I never did take his advice but he did lose his shirt (or two). I just don’t consider myself wealthy enough to invest in alternative investments. I’m like a granny, I stay in my lane, and I stick to the boring basics. Best advice? Diversification wins all battles because… well… it does.

 

What are your thoughts on the future of financial advice and the direction of the industry in the coming decades?

I see the best possible combination is robo + human. The trick is finding the best available of both the robo-world and the human side. Let’s face it, we are emotional creatures and sometimes we really do need a living, breathing advisor to collaborate or to work through problems. Perhaps not now, but probably later. That’s the beauty of having robust online tools to help you manage on your own. I don’t see the future of advice as robo instead of human advisor, I see it as in addition to human advice. The older we get, the more complex our financial lives become and you may want someone to guide you one-on-one. But here’s the real challenge: human advisors are not created equal so the key is tapping the true talent, not settling for ‘just okay’ advice— especially if you’re about to retire!

The idea of combining technology + financial advisors also contributed to the creation of my company, Wealthramp. A viewer from our TV series, MoneyTrack on PBS. She was frustrated because after the financial crisis she felt she needed an advisor and she’d just fired her broker. She asked me point blank: why do I hate financial advisors? I told her I really don’t hate all of them. I love 5% of them. Given that so few are truly competent and put their clients’ interests first. That’s when the lightbulb went off and I had to ask myself why am I being so negative about the bad advisors when all I have to do is identify the excellent advisors and create a network of them across the country and let people come to me so I can match them to the best-fit advice that’s truly fiduciary. That’s how Wealthramp was born and it took me no less than four years to curate my network of fee-only advisors. I wanted to make sure that when a retiree worried about running out of money needs an experienced retirement income strategy, that person can turn to me. When someone comes to me and has a special needs family member to support, for example, I needed to make sure I’d be able to tap into my network and introduce that consumer to the best advisor possible for special needs planning. Or when a young software engineer at a late stage start up needs to understand his stock compensation and has only 90 days to make a life-changing decision, he knows I have the experts in private stock options and no one is going to sell them anything.

 

What is the one thing you wish more people knew about, given your experience in the industry?

As children we should have been taught the basics about how capitalism works, the economy, credit, practical money skills and an introduction to investing. These are life skills and if we’d gotten that baseline education, I probably would not be in business today. 🙂 All kidding aside, people deserve to feel more confident about their own personal finances, and too many feel embarrassed. That’s just wrong and it creates a lot of financial stress.

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