Category : investing behavior

Women Investors

3 Reasons Why Women are the Better Investors

A Wells Fargo Investment Institute study found that women perform better than men as investors. We can probably blame testosterone, which makes men quicker to make judgments and less likely to examine facts that might prove them wrong.

So what can you do if you don’t happen to be a woman? Try to emulate the traits that give them the advantage:

1. Women are more patient

Since they tend to trade less frequently than men, they often earn higher returns for the risks they do decide to take. Men on the other hand tend to be overconfident about their investment ability. Additionally, their frequent trading carries both direct and indirect costs, which can eat away at returns. (See also: Leaving your 401k the heck alone)

2. Women are more disciplined

Women tend to stick to their investment plan, which can to lead to better results. However, male investors were six times more likely to make major changes in asset allocation, such as switching from 100 percent stocks to 100 percent bonds, or vice versa.

3. Women are more willing to learn

They are more likely to seek education and advice from investment professionals. Also, twice as many women as men said that what they need most from a financial advisor is education about investing principles and concepts.


Room for improvement

The one area where women lag behind is investing confidence. While this might help them make prudent decisions, it also dampens their chances at higher returns in some cases. Become a more confident investor with these tips:


Visit investment websites, take an investment class, or meet with an investment professional. Learn what your employer offers. Explore individual retirement accounts, or, if applicable, your partner’s retirement benefits.


Create a budget for saving and investing. Set goals with a time horizon and risk level you’re comfortable with.


Choose the asset allocation that works best for your personal financial situation. Regularly monitor and rebalance your portfolio as necessary.


A great place for financial advice is blooom, where members have free access to registered Financial Advisors. Send them your questions and you’re on your way to becoming the best investor you can be!

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The Stock Market Sell-Off

Every investor needs to know that market sell-offs are both inevitable and, in fact, business as usual.

This is not our first rodeo… more like 350th

Since 1900, the market has averaged three declines of at least 5% per calendar year (source: Capital Research and Management Company). In other words: The market has dropped by at least 5% about 350 times since 1900! The mistake so many investors make is that they see their account value declining, and hear doom and gloom from the media and friends. They then assume they should sell and “wait for things to get better.” This is not an advisable course of action: The market has recovered and reached new all-time highs not 90% of the time… but 100% of the time.


Hindsight is always 20/20

Sometimes, we know why the market is selling off. Other times, it is a complete surprise. History has also shown that the reasons for market sell-offs are rarely what the talking heads were predicting. What we know or fear today will rarely be the actual reason for a future market decline.


What should investors do after a big market sell-off?

Know that the recent market decline has nothing to do with what the market will do today, tomorrow, or next month. Many times after steep sell-offs in the market, it goes on to rebound even higher than where it was before.


Your not-to-do-list

If you are investing for the long term (like inside your 401k for retirement), the best course of action when you feel scared about the markets is do nothing. Do not panic, do not do something radical like selling out of your investments.


Learn to love a good sale

If your budget allows, a market decline is the best time to INCREASE your contributions to your 401k. Think about it: The market has effectively gone on sale. We know as consumers to look for sales and bargains when we are shopping. Americans would be wealthier if they learned to treat market declines as sales and, if possible, bought a bit more.


Avoid FOMO

Considering that today, the Dow Jones is around 25,000, wouldn’t you want to travel back in time to 2008/2009 and buy a ton of stocks? During the financial crisis, the Dow went below 7,000! Sadly, very few investors were buying when it was at those low levels. Many were even doing exactly the opposite–the worst possible thing: They were selling at those insanely low levels. Doing this likely locked in losses that many investors may have never recovered from. Most other long-term investors who stayed put and ignored the panic were rewarded by their portfolio values, if they were well-diversified. They climbed up to new all-time highs within just a few years.


When in doubt, ask blooom

At blooom, we do our best to communicate these kinds of messages. We worry that there is an entire generation of investors (roughly age 32 and younger) that were likely not investing during the last significant market decline. They have thus only seen the market since 2009 on a fairly robust growth trajectory. We remind our clients that markets never go straight up and that periodic declines are not only inevitable, but actually needed from a risk/reward standpoint.


Since blooom specializes in 401k accounts, it is easy for us to help our clients maintain a long term focus, since their investments are generally for long term goals like retirement. We also remind our clients that included in their monthly subscription fee, they always have access to a blooom advisor if they are feeling scared or considering selling out of their investment portfolio.


Help us help you

Blooom will put together a beautiful, well-diversified portfolio for all clients using the lowest cost funds available within their 401k plan. However, if a client does something rash and sells out when the markets declines, all of the work that blooom has done goes right out the window – and might never return. We suspect that a lot of wealth is squandered by individual investors not from poor investment selection, or high fee funds, but squarely due to bad decisions and bad investor behavior in moments of emotional exuberance or fear. Be careful not to chase over-priced “hot” funds in good markets, and be sure not to bail out of so-called poorly performing funds in bad markets. The old “buy high, sell low” problem – don’t fall for it!


If you would like more information or perspective on this topic – visit blooom’s FAQs regarding market declines.



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What Kind of 401k Lover Are You?

Valentine’s Day puts a lot of focus on being in a relationship. If you’re reading this blog it probably means that you ARE in a relationship with your 401k, which is great! But just because you’re in a relationship doesn’t mean everything is perfect.

Odds are you fall into one of these six kinds of relationships with your 401k. Let’s put them under the microscope and see what’s going well and what flaws might exist.

The Giver

You are constantly contributing to your 401k. 10%, 15%, or 20%―it doesn’t matter. Anything to keep your 401k by your side all the way to retirement. You don’t care what funds you’re in or whether you get an employer match.

Pros: Contributing is numero uno when it comes to a happy relationship with your 401k, and giving all you’ve got to your 401k can cure a lot of ills.

Cons: The $$$ you put in your 401k should be working for you and not the other way around. Throwing your hard earned cash into a money market account or a high fee investment that doesn’t do anything for you can lead to heartbreak.

Things you might say to your 401k: Oh, you only had a 2% rate of return this year? It’s not your fault. Let me just up my contribution level to make you feel better.

The Taker

You set up your 401k… isn’t that enough? Why do you need to check in on it? It should just be grateful that you contribute a few bucks every paycheck.

Pros: Not looking at your 401k and over thinking it can be a virtue.

Cons: If the foundation of the relationship isn’t there, or if you’re not properly invested, this relationship could be going nowhere.

Things you might say to your 401k: Stop complaining, I could be spending my money elsewhere.

The Controller

One look at you and anyone can tell you care about your 401k. You are very attentive, but somewhere in all that effort you’re putting towards your 401k, you may start to suffocate it with your demands and restrictions.

Pros: You care, you really REALLY do. Attention is important after all, it’s your retirement we’re talking about.

Cons: Too much attention can lead to irrational reactions.

Things you might say to your 401k: What do you mean, your balance is less this statement than last statement? This relationship is OVER!

The Enthusiast/Thrill Seeker

You are always looking for something new. Investing in the same funds just doesn’t do it for you. You’re willing to be a little reckless if it means your portfolio is different from others.

Pros: You live on the edge and are likely to take on more risk in your investments, which can net out.

Cons: 401ks are a long term deal, so changing it up constantly and seeking out the new can lead to betting it all on a potentially bad choice – see bitcoin.

Things you might say to your 401k: Bonds? What are those? Hey baby, let’s time the market.

The Overlooker

You know your relationship with your 401k has problems. Maybe you’re under-diversified or have a high expense ratio, but it’s not “that bad”.

Pros: You’re aware. As they say: knowledge is half the battle.

Cons: Close only counts in hand grenades and horseshoes. This is your retirement and every dollar counts. Every opportunity you miss to fix what you know is wrong is money left on the table.

Things you might say to your 401k: I’ve been with my financial advisor for years. Who cares if he charges me too much to rebalance you?

The Jealous One

You are constantly looking at other people’s 401ks and seeing what they have that you don’t – better funds line ups, more money, rate of return, etc.

Pros: You want your 401k to be the best. That’s why you’re always looking around.

Cons: Not all 401ks are the same and neither are individual financial situations. Measuring your 401k against someone else’s is a fool’s errand and can get you off track or distracted.

Things you might say to your 401k: Bob’s 401k grew 15% this year. Why did you only grow 12%?

Want to take your 401k relationship to the next level? Start with a free analysis with the experts at blooom.


Start Your 401k Analysis

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The Right Small Steps in the New Year Can Make a Big Impact

Have you ever noticed how a lot of financial blog headlines read like they’re introducing the latest diet trend?

“Ditch the Starbucks and Retire Ten Years Earlier!”

The premise of this kind of financial advice always boils down to the same basic principle: in order to grow your money, you need to spend the money you already have more wisely. Makes sense, right? Especially around this time of year, it may even sound like a pretty good New Year’s resolution. And yet,somehow, it is simultaneously unattainable.

“Abandon your morning latte fix and you’ll become rich”, they say.

“That’s easy! I can do that!”, we say. But for a lot of us, we can’t seem to make it work.

Starting in February, there might be an attainable way to save more without sacrificing anything. Some people will see their take home pay increase due to the new tax code. This could be money you can invest into your retirement and still keep drinking those lattes guilt-free.

Sidenote: Want to know how the tax rate will affect your paycheck? There are many options, but this is one we found that’s easy to use.

The problem with saving money, whether it’s on ditching lattes or getting a little more in your paycheck, is that unless you’re taking the money and putting it directly into your piggy bank, you’re likely just spending it on other things throughout your day or rest of your week, so none of it ever actually makes it back into your savings or retirement account. It’s all of the sacrifice with none of the reward.

How I learned to stop worrying and love automation

So what’s the solution? In today’s technologically-driven world, the trick may lie in automation. The old adage to ‘pay yourself first’ becomes surprisingly easy if you can set it up once and then forget it. There are a growing number of tools to help you do just that.

Many banks have round up programs to automatically save your change – i.e if you buy that latte for $3.81, your account rounds up to $4.00 and automatically saves $0.19 into your account. Or if you’d rather route your money to the market instead of bank account, you can sign up for a penny stock provider like Acorns. It may not seem like a lot, but think of how many purchases you make in a day, in a week, in a month. It adds up!

Let your paycheck do the work

Additionally, you might be surprised by the programs offered through your workplace. If you’re not already contributing to your employer-sponsored retirement plan (401k, 403b, or similar), start contributing a percentage of your paycheck. Most employers will match your contributions with some of their own. Some employers also offer other types of savings plans, or will allow you to split your paycheck among multiple accounts, so that a portion could be directly deposited into your savings account.

But maybe the most powerful automation you can make is the annual contribution increase in your retirement plan. The chart below illustrates the difference between steadily saving 5% of income, and starting at 5% but increasing contributions by 1% annually until the recommended goal of 15% of income. As you can see, the amount saved with small incremental savings is more than 2× that with no increase. While you may initially notice the difference in your wallet for the first couple of months (or if you’re lucky you won’t, depending on how the new tax code affects you), after that, it will just become the new normal.

So if your New Year’s resolution is for better financial health in the coming year, make sure you’re doing the things that will really make a difference. That way, you can buy your morning latte with a clear conscience (and maybe a little extra whipped cream), knowing you’ve already taken care of your savings goals.


Please note: Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

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Beware the Bull in Retirement Yellow Brick Road

How to Travel Safely Down Retirement Yellow Brick Road

The past few years, we’ve seen a lot of people happily talking about the gains they have been seeing in their 401k accounts. They’re sharing return numbers with others online and in the grocery store. It would seem like the kind of talk you’d want to hear.

Please don’t get me wrong. It’s great to see so many people happy that their retirement accounts are increasing in value. But there is a very important message to convey concerning these high returns.

Like the Lollipop Guild in the Wizard of Oz – IT AIN’T ALWAYS GONNA BE THIS GOOD!

The Facts About Returns Since blooom’s launch

Blooom launched its 401k management service in late-September of 2014. Since that time, the stock market (as measured by the S&P 500*) has had a cumulative return of roughly 28% and has averaged almost 10% per year.  In addition, the Vanguard Total World Stock ETF – a better proxy for blooom clients given its allocation to global equities – is up over 15% year-to-date! The point here is that these past three years have been a good time to be a stock market investor. Hell, it has been a GREAT time to be a stock market investor since the Great Recession (stock market collapse) of 2008-2009.

With all of these happy people, we want to make sure everyone understands that this is not always how things will go. In reality, the market will go down periodically.  In fact – It NEEDS to go down periodically. That is precisely why investing in the market carries risk and this same risk is exactly why investors who have stayed in the market for long periods of time and weathered this risk have been rewarded with much higher returns than “risk-free” investments like CDs, Government Bonds, and money market funds have produced.

4 Key Characteristics of a blooom-managed 401k

If you’re a blooom client, your managed 401k has four key characteristics that other 401k investors may not receive:

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