Author Archives: Kate Troske

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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Discounts for Essential Workers During COVID-19

Essential workers are busy keeping our country safe and running during this global pandemic. Many businesses are looking to do their part in supporting our people on the front lines. Here is a list of some deals and discounts we found for essential workers. If you are a business offering help to essential workers or have any other promos you’re aware of, please reach out! 

While some businesses like this one are equipped to tweak their day-to-day process and provide front-line workers with the masks and PPE that they really need, other businesses are offering promotions, deals, and discounts for essential workers where they can. The following are just a handful of many helping during the pandemic by staying at home and sending support from afar. 

Each business may be defining their deal and support slightly differently, but we thought we’d give a quick definition of what’s been identified as an essential worker. Essential workers include professions such as healthcare workers, scientists, security personnel, food and agriculture workers, energy and utilities, certain manufacturers, bank employees, news media, building cleaners and janitors, trash collectors, food bank workers, and shipping services.

 

Allbirds 

Free and Discounted Shoes
Healthcare workers can email together@allbirds.com to receive a free pair of the company’s best-selling Wool Runners. (While supplies last.) Or buy shoes at a donation discounted price. 


Blooom 

3 Months Free Service. (NOT LIVE)
This pandemic has caused plenty of market turmoil, but retirement savings should be the last thing our helpers on the front line are worried about. Blooom is offering it’s retirement account management services for free during this tough time to all essential workers. Blooom supports 401a and 403bs (as well as other retirement account types) for nonprofits and government employees. Evaluate your investment needs by taking our quick quiz & use code HERO3 for 3 free months of blooom managed service.


BP Gas & Amoco

50 Cent Discount on Fuel
BP is offering fuel at a 50 cent per gallon discount on your next fuel purchase at BP and Amoco for first responders, doctors, nurses or hospital workers. 

 

Crocs 

Free Pair of Shoes
The shoe company is donating a FREE pair of its iconic shoes to frontline health workers, in a show of support for their heroic efforts in these challenging times. A limited number of shoes is given away each day — but that number is 10,000 pairs a day.

 

Dollar General 

10% Discount on Qualifying Purchases
All medical personnel, first responders, and activated National Guardsmen will be given a 10% discount on qualifying purchases. Customers can present their employment badge or ID at more than 16,300 stores to receive the discount.

 

Hallmark

Free Cards to Share
Hallmark has already given away 2 million cards to help spread kindness during these tough times. They are offering free cards for you to send to those who need the encouragement. While supplies last.

 

Headspace

Free Headspace Plus Subscriptions
To help people deal with unprecedented levels of stress, Headspace is offering free Headspace Plus subscriptions to healthcare professionals working in public health settings in the US through 2020. They are also unlocking curated collections of mindfulness content for the public. 

 

Krispy Kreme

Free Dozen Doughnuts on Mondays
Every Monday through National Nurses Week (May 11th), Krispy Kreme will provide all healthcare workers free dozens of our iconic Original Glazed® Doughnuts. Just go to a Krispy Kreme drive-thru, tell us what you need and show us your employer badge. Up to 5 free dozen doughnuts per worker, as supplies last. 


Starbucks

Free Coffee
Police officers, firefighters, paramedics, doctors, nurses, hospital staff and researchers can get a free tall brewed beverage or iced coffee at Starbucks in stores until May 3.


Under Armour

40% off for Military and First Responders
Under Armour is offering discount for all purchases for Active Duty Service Members, Retirees, Veterans, Military Spouses, Military Family Members, as well as 40%* off for First Responders & Healthcare Workers and active Police, Fire, Nurses, Doctors, medical staff, and EMT customers. As well as teachers and educators. 

 

Other resources:
Perks and Freebies for COVID-19 Healthcare Workers 
Companies Offer Deals, Discounts and Freebies Amid Coronavirus Pandemic


Check Your Portfolio With Blooom

There is a lot of uncertainty in the world right now due to Covid-19. One thing you should be sure of is the health of your portfolio. Our complimentary analysis takes the guess-work out of investing during a down market. Blooom can help you build and stick to an investment strategy that helps position yourself for a better financial future. Check your risk for free. Or if you are in the essential workforce, please take advantage of our discount for essential workers. Do you have more questions regarding Covid-19 (Coronavirus) and your investments? Check out the following resources from our Blog or Contact us today:

 

Information from third parties is believed to be reliable; however, we cannot ensure the accuracy or completeness of the third party information and it is subject to change without prior notice.

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