Category : press

Perception vs. Reality: 2008 to Today

Last month marked the ten year anniversary of the beginning of what ultimately became one of the most significant financial collapses and recessions in our history. Investors closer to retirement saw decades worth of retirement savings seemingly disappear from their 401(k) balances and many young investors were scared out of stocks for good. And yet, just six months following the beginning of the crisis (March 2009), the stock market began what just recently became the longest uninterrupted period of growth EVER.

 

Perception of the stock market since 2008

It turns out that nearly half the country has a negative view of the stock market and how it has performed in the time since the crisis. In fact, a recent study showed that 48% of those surveyed thought that the US Stock market had not gone up at all in the last ten years. 18% actually thought it had gone down. The number of people that own any stock at all has never recovered from prior the the crash either. In 2007, 65% of Americans owned stock in some form or another, but today, that number remains much lower at 55%. So what has actually happened to stocks these last ten years, and what valuable lessons should all investors be reminded of in all of this?

 

The Brutal Truth

It turns out that not only have US stocks increased since the bottom in March of 2009, but the S&P 500, an index representing 500 of the largest publicly-traded American companies, is up over 350%. That is a market that has more than quadrupled it’s value in just 10 years! In other words, looking back, the crash of ‘08-’09 was an historic investment opportunity for those that were able to stay calm and focused on their long-term goals. What many view as the perfect example of why NOT to risk your money in the stock market, has actually become one of the best examples in a lifetime of why it’s so important to invest in stocks when you have a long-term goal like retirement. And for those that don’t have as much time on their side, the crisis proved the importance of including other assets like bonds and cash in their portfolios, in order to help preserve any money they may need for income in the short-term.

 

Today and Beyond…

As we continue to extend what is now the longest period of uninterrupted stock market growth in US history, let’s not forget what happened just ten years ago, and the important lessons we all can learn from all the chaos that became known as the Great Recession. There is absolutely no way to know when we’ll experience another event of that magnitude, but we should expect many many corrections of 10% or more in the coming decades, just as we’ve seen at least once nearly every year over the last century. For those with a long term goal like retirement, remember how important it is to be the one staying calm while the world around you panics. Stay focused. Keep investing. Become the investor most wish they would’ve been a decade ago. We can help you get there. It’s what we’re here for.

 

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The fees are falling! The fees are falling!

You might say our tried-and-true way to a healthier 401k is starting to catch on – partly through the leveraging of lower fund fees. According to a recent report from the Center for Retirement Research at Boston College, a growing number of lawsuits against plan sponsors (employers) are starting to put the spotlight on hidden fees hitched to high-cost funds.

This is obviously a good thing, but just remember: Although this is leading some companies to tweak their fund offerings with lower fees, they still may not have their employees’ best interests in mind, but rather to avoid getting hit with further litigation. What’s more, because of the lack of specific guidance from the Labor Department, employers may not even know of their rules violations until the agency comes after them or they’re greeted with a lawsuit.
Of course, the fallout from increased litigation could lead to lower fund fees for many employees, but it could eventually leave an opposite impact on those with a 401k plan who work at smaller companies.

That’s because the largest plans with the most assets are usually the ones more able to negotiate lower fees, with small employers least equipped to handle the complexities of fund fees. Plus, as the threat of litigation escalates, so too could the potential threat of a discontinuation of smaller 401k plans altogether.

Fortunately, with blooom as your trusted advisor, you can rest easy knowing we’re making the most of what’s available to you by reducing fees wherever we can. We make managing your 401k simple, smart and affordable by leveraging the right funds with lower fees to optimize your retirement savings.

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CEO passes the torch

CEO Chris Costello Passes The Baton

Five years ago, Kevin Conard, Randy AufDerHeide and I started meeting to talk about our big idea: A company that could change the way average Americans without huge retirement accounts saved for retirement. We would put our kids to bed and then work into the wee hours of the morning in Randy’s basement. Never did the three of us imagine that five years later, we would have built the company that exists today. We have 30 employees who manage more than $2 billion for almost 20,000 clients all across the country, using a totally disruptive technology model.

In the beginning, we just sought to build something to help average Americans get access to professional financial help. Especially the vast majority of folks who don’t have huge retirement accounts – folks just like my own mom and dad.

A Growing Company

Once blooom launched, I had in the back of my mind the thought that we might reach a point at which the company’s size and complexity would require someone with a much more expansive “executive tool kit” and experience to take the company to the next level.

In 2016, we hired Matt Burgener as our chief marketing officer. I know a few of us thought that if I was to get hit by the proverbial bus, Matt would be a great candidate to take the CEO spot. He has an impressive background and was so committed to blooom’s mission that he relocated his family from Dallas to Kansas City to join the company.

Well, I am relieved to tell you that I did not get hit by that bus. But after working closely with Matt over the past 15 months, it has become abundantly clear to me and those around me that Matt is the right person to take over as CEO to lead blooom into the future. I’m thrilled to report that Matt’s experience and counsel played a huge role in blooom’s rapid growth over the past year and a half.

What’s Changing Now

After much discussion with Kevin, Randy and my wife, and with the support of the blooom Board of Directors, I am transitioning the role of CEO to Matt.

I will stay on as chairman of the blooom Board of Directors, and I will remain deeply involved at the company level. I will continue to do what I love – help people secure their futures by saving and investing wisely. To that end, I’ll happily continue to be the face of blooom externally, doing media appearances and speaking engagements, acting as chief evangelist and leading client education, among other things.

This was not an easy decision, but I have always felt I would do what is in blooom’s best interest. Truthfully, I now believe this is a situation in which blooom gets to have its cake and eat it, too, because we’re both playing to our individual strengths. Matt is a seasoned executive with deep experience in scaling companies, and I get to focus on the things I do best: speaking externally about our mission to change average Americans’ financial lot in life.

Looking Forward

I’m excited to see how blooom will grow in this next phase under Matt’s leadership, and I look forward to continuing to build on our goal of bringing simplified financial advice and services to millions of Americans.

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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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Thanks 1 Billion Clients

Blooom Reaches $1 Billion in Assets Under Management

“Wall Street has made a habit of running in the opposite direction of investors with small accounts…maybe we should build something and run towards them.”

This was written in email from Kevin Conard, my co-founder to me late one night back in January 2013. Four-and-a-half years later that idea has evolved into a company – blooom – and we are proud to announce that we have grown faster than virtually any other robo-advisor. Blooom now manages more than $1 billion of retirement accounts for our clients.

Specifically, thousands of people from all across this country have trusted blooom with what is likely their most important and potentially most valuable financial asset – their employer-sponsored retirement account, or 401ks/403bs, as they are so strangely named.

If you’re a blooom client, I want to thank you for believing in us and starting this journey of bettering your retirement and financial situation together. The entire blooom team works hard every day to help you reach your financial goals.

Every time we receive a message of gratitude from one of our clients, we share it with the team and … everyone gets to work the next day with a sense of pride that they are truly helping people and striving to achieve greatness. Thanks to everyone once again. We will continue to provide our helpful service to all of you — in good times and bad.

Speaking of pride. We also take pride that this Kansas-based company reached the milestone faster than both Betterment or Weathfront – while doing so on a fraction of the capital. They’re peers not so much from a comparable service offering but in that they’re a benchmark for other robo-advisors. In other words, out of the gates, we have grown faster on fewer resources, as one should expect from someone managing their money.

Blooom was started in 2013 to help the traditionally un-helped.

We felt – and continue to feel — that it isn’t fair that the people who needed the help from the financial services industry the most were the least likely segment of the population get it.

You’ve done the hard part: You started saving for you retirement. Thanks for letting us do the rest.

If you haven’t already read blooom’s manifesto — here’s WHY this is all so important to us:

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