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The September PastCast

September gets a bad rap.

Poor September. It’s known as the worst month to invest in stocks. But surprise! This year, it wasn’t. More on September’s reputation in a second…

This September, more strong economic news led to continued gains in US stocks, wrapping up the strongest quarter for US stocks since 2013. International stocks in developed countries continued to lag behind the US in large part due to continued concerns on international trade, but did see positive returns for the quarter. Emerging markets stocks continued to struggle and were mostly flat or slightly negative for September, which continues to provide long-term investors the opportunity to add to their positions.

So why the negative press, yo?

Every single year, TV pundits and prognosticators ramp up their bold predictions and warn investors that September has historically been a bad month for stocks. In fact, here are a few of the headlines you may have seen (but hopefully didn’t) in late August or early September this year:

Yes, it’s true that over the last century, the month of September has, on average, typically been the worst month of the year for US stocks, as measured by the Dow. You’ll hear all kinds of speculation as to why this is the case, but one common theory is that people tend to feel more pessimistic about their investments as they wrap up their summer vacations. Don’t get us wrong, summer ending can be a bummer, but this seems like a bit of a stretch. Regardless of the true reason, we won’t argue with the fact. But here’s what they don’t tell you: Over that same period, the Dow’s BEST month of the year has been…wait for it…October!

So what’s the point here? Although historical averages and ominous headlines might suggest that you should sell your stocks every August 31st and then buy back in on September 30th, don’t get caught in that trap. An average like this should not create an expectation. In the last ten years, September has actually seen gains in six of those years. And just two years ago, October was the second worst month of the year for the Dow, despite being the best month on average over the last 100. Using what’s realistically just a coincidental number to try to predict performance over any 30-day period is just one of the many market timing traps investors can be tempted into by scary headlines. Had you reacted to the above headlines in six of the last ten years, you would have been wrong. In fact, in two of those ten, the sell in September/buy in October strategy would have been a double-whammy for you, since stocks were up in September and down in October. And just last year, September was the second BEST month of the year.

An important note: Even if you wanted to, most work retirement plans like 401(k)s won’t even allow you to process more than one transaction into or out of an investment more often than once in a 30-90 day period, unless you pay a hefty fee or risk an excessive trading violation that could restrict access to trade on your account at all in the future.

The bottom line:

When you’re investing for a long-term goal that is over 25 years away and you’re making regular contributions to your retirement account, like a 401(k) or 403(b) at work, there is no point in getting caught up in this guessing game, or any other form of market timing. When you’re investing regularly over time, you’re able to take advantage of the market whether it moves up or down. Since September saw gains for US stocks, and blooom includes a significant allocation to US stocks for most clients, that portion of your account likely grew last month. If October happens to see a stock market pullback for some reason (not that we are predicting this!), it’s basically a market on sale and your money is able to purchase more shares of the funds in your plan at a discount from what they were just weeks ago! History has shown that when you stay consistent, tune out the noise, and ignore the temptation to time the market, it’s a win/win for the vast majority of long-term investors, regardless of what the market does in any snapshot of one month, or even one year!

And if you have less than 25 years until you plan to retire, blooom recommends exposure to more and more bonds as you approach retirement, so trying to guess what stocks may or may not do over any short-term period becomes even less relevant than it already should be to you.

Major props to the stock market for what it accomplished in September and the continuation of this 9+ year run that we’re on now. And hey, maybe this even continues into October and beyond, but remember that returns over 30 days have little impact at all on your returns over the next 30 years. Keep saving, stay invested, and stay focused on what’s important, instead of the click-bait headlines and ratings-hungry business news. And as always, feel free to reach out to our advisors if you ever have concerns.That’s what we’re here for!

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Our August PastCast

What’s going on in the market?

August has been full of mostly positive economic news for the US, but the noise is starting to build in the headlines. As mid-term elections approach, political contests around the country are heating up, and as expected, markets are unsure of what to make of the potential outcomes and ramifications this November. That said, stocks keep rolling. While we are nowhere near the returns investors experienced broadly in 2017, the market has now entered the longest bull market in history. Milestones like this tend to lead to a heyday for market “experts” and tv pundits beginning to predict the next huge crash, which quite honestly has been going on since this recovery began in 2009. Our view hasn’t changed: none of this matters for those investing for a long-term goal like retirement. All-time highs are a great thing, but our focus is on the long-term and the potential for a correction is always on the table. It is no reason to change your strategy.

 

Here’s the lowdown on all-time highs.

For some context, it’s important to remember just how easy it is to reach a new all-time high so we don’t get too carried away with return expectations. Over just the last five years alone, here are the number of times the Dow has hit record highs (source: the balance)

 

  • YTD 2018: 11 times
  • 2017: 70 times
  • 2016: 26 times
  • 2015: 6 times
  • 2014: 39 times
  • 2013: 52 times

 

Think about it for a second…it really only takes an increase of any amount, even 0.00000000000001% to reach a new all-time high, once you’re already sitting at an all-time high. Over the many years, if not decades most blooom clients have until they retire, they are likely to experience hundreds, if not thousands more record highs, so why worry about the potential for a crash? Why not instead keep your eyes on the prize? Stay focused on the end goal and remind yourself that along with the many new all-time highs you’re likely in for over the years ahead, your investments will also experience many many market dips. Historically, it has always benefited those with a disciplined approach, to view those pullbacks as opportunities and a market “on sale”, rather than a reason to run for the hills.

 

Enjoy the summer heat while it lasts, folks.

As we enter this last month of summer, remember that things could very well cool down soon in the market, BUT they could also very well continue to stay hot. And that’s the kind of forecast the most successful investors will pay attention to, because the only short-term prediction that can be made about the stock market with 100% certainty is this: nobody has a clue. But for those focused on the long-term forecast, we see no reason to believe that it won’t remain sunny for those that are patient, just as it historically always has.

 

To be clear, we are not recommending or even hinting that investors should attempt to sell high or time the market. Sure, It would be great to sell at the all time high and time it perfectly so that you don’t miss any potential gains, and then buy back in at the lowest point…but there are some hurdles to this: 1) you could be, but we doubt that you’re watching the market 24/7, 2) no one knows when the trends truly start to turn, 3) you have to be right twice for that to happen, 4) most 401k accounts have restrictions on trading within it like a brokerage account, and 5) you’re restricted to the funds that are available through your plan.

Consider this: you hear horror stories of the crash in late ’07 through ’08 – people losing everything, retirement’s being ruined…. those do happen, unfortunately. HOWEVER, short of positions going to $0, had those investors not sold, they would be considerably better off today than they were pre-recession.

Stay focused and please reach out if you’d like to discuss with our advisors.

 

 

This 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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5 Ways to Save for Retirement When You Have Student Loan Debt

Graduation caps have landed, tassels have been switched to the other side, and mom has all the pictures she could ever want. Graduation day is one of the most memorable occasions in a person’s lifetime, but as seventy percent of new grads know, it also starts the countdown to one of life’s most-dreaded evils: paying back student loans. Recent research suggests millennials are now spending one fifth of their annual salaries on student loans alone, and now expect to be making payments well into their forties. At the same time, most millennials know they need to start saving for retirement in their twenties – from their first day at their first job if possible – but when Sallie Mae comes knocking it can seem impossible to both pay back debt and save for retirement on an entry level salary.

 

So how can you manage your student loan debt and also make sure you have enough to retire comfortably?

 

Here are a few tips to get started:

1. Create a budget

Your first step should be to come up with a plan outlining your long-term financial priorities, including everything from paying off student loans and contributing to retirement to having immediate funds for an emergency. You can’t focus on realizing long term goals when you’re trapped lurching from one immediate crisis to the next. Take some time to breathe and focus on the future.

 

2. Manage your payment plans

While getting out of debt can seem like a more urgent priority, make sure you are on track to meet your retirement goals before accelerating your student loan debt payoff date. According to a Morningstar report, every dollar of student loan debt creates a 35 cent decrease in retirement savings. Try to put at least 10-20 percent of your income throughout your working years aside for retirement. This enables you to take advantage of compounding interest and the time value of money, so you’ll actually end up with more money by the time you retire. Automation makes managing this process easier, so you don’t need to think twice about it!

 

3. Take advantage of employer matching policies

Does your employer match contributions or participate in a pre-tax retirement saving plan? You could be earning a higher rate of return by making sure you’re participating in and capitalizing on those policies. New company, new plan? No problem! Look into rolling over your 401(k) to maximize your benefits. Sometimes money does grow on trees.

 

4. Refinance your existing debt

If you have good to excellent credit and a steady cash flow you’re a prime candidate for loan refinancing. Look for a new loan with a lower interest rate, and make sure you use all the money from the new loan to pay off the old one. Some banks and loan providers also offer loyalty and automation discounts, so you should also make sure you’re familiar with all the options available to you before you sign on the dotted line.

 

5. Keep an eye on pesky fees

Three in four Americans have no idea what they’re paying in 401(k) fees, and nearly 40 percent believe they’re not paying any fees at all. When’s the last time you checked what you’re paying in fees? It’s not enough to just save money if you end up losing thousands of dollars in fees you don’t even know you’re paying. Signing up for Blooom’s 401(k) robo-advisor to manage your 401(k) and minimize those pesky fees costs a flat fee of $10 per month, no matter how much you have saved. No small print, no tricks.

 

Still feel like you’re drowning in debt? Check out blooom’s free 401(k) checkup tool to see how you’re doing with your retirement savings plan.

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401k Q&A

Q: It seems like most people are saying this AT&T/Time Warner deal is going to get approved soon and I’m thinking their stocks are going to get a nice boost if it does. Is there a way I can invest in those companies in my 401k?

A: Awesome question! Sure feels like this dance has been going on for the last decade, right? Cost analysts seem to think the deal will go through, but then again, analysts are wrong all the time. And, even if it seems likely they’ll get this right, it still doesn’t guarantee a positive outcome for both stocks or either of them. Individual stocks are tricky and it’s nearly impossible to know how a stock is going to react to headlines like this, especially when the story has been drawn out for such a long time. When we talk about mergers, sometimes both stocks react positively, sometimes both react negatively, and sometimes one goes up and one goes down. Over time, things tend to get sorted out, but the bottom line is that investing in individual stocks is simply too risky/stressful for most people, in our opinion. And unless you work for either of them, odds are you won’t be able to invest solely in one or the other inside your 401k. Don’t fret, since it’s probably best for most folks in the long run anyways, regardless of what you think of these two companies and what the deal may or may not mean for their future.

Got a question for us? Ask away!


The information is provided for discussion purposes only and should not be considered as advice for your investments. The information does not represent a recommendation to buy or sell securities. Please consult an investment advisor before you invest.

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Pig playing soccer goalkeeper

Kick in More Now for Retirement: That’s the GOOOOOAAAALLLLL

Right now, in the thick of the FIFA World Cup, teams from across the globe are vying for the coveted gold trophy with the World Cup Final match taking place on July 15th. While these world-class soccer players aren’t likely focused on making any (ahem) BIG saves for retirement right now, they should be. According to the Telegraph, the average soccer career lasts only eight years with a standard retirement age of 35.

A More Offensive Game Plan

Considering the average World Cup player right now is in their mid-to-late 20s, according to Statista, these professional athletes need to be kicking in as much savings as they can to set themselves up for a successful financial life and a sustainable retirement. There’s only one Ronaldo, one Messi, one Beckham, so establishing the financial security needed to retire after a less-than-a-decade career can feel too far out of reach for most others.

Off the pitch, the savings a typical 35 year old should’ve netted at this point has received a lot of attention lately. A study published from Fidelity recommended having twice your annual salary saved for retirement by age 35. Considering the weight of student debt and the outsized cost of housing plaguing millennials, this number feels very out of reach for most of the population in or nearing their 30s.

While the amount you save is vital, what isn’t gameplanned enough is how you’re saving. You can argue that you can save all you want, but if you’re simply holding your savings in cash, it won’t be in the position to grow enough to enable you to retire. After you establish the habit of saving, you must maximize your ability to grow your investments.

More Coaching Required

Two big determinants of investment growth are derived from minimizing fees and maximizing returns, and Americans need help with both. Data from the Census Bureau suggests that 79 percent of Americans work for an employer that sponsors a 401k-style retirement plan, but only 27 percent know how much they’re paying in fees on their 401k accounts, according to a study by TD Ameritrade.

Fortunately, by hiring blooom as your trusted advisor, you can rest assured that we’re working on your behalf to reduce investment fees wherever we can. We make managing your 401k simple, smart and affordable by leveraging the right funds for your goals with lower fees to optimize your retirement savings, no matter what age you are. That’s our GOOOOAAAALLLLL.

Not a blooom member? Here’s your best shot … join now.

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