Category : uncategorized

It’s now free to freeze your credit.

Did you know that it’s now free to freeze and protect your credit at all the major credit bureaus? Equifax, Experian and TransUnion allow you to take the precautionary measure to freeze your credit to prevent fraudulent activity. So if you don’t plan on opening any new lines of credit in the near future, you may want to put yours on lockdown!

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Why does rocking the vote rock the markets?

Politics…not exactly a “safe” subject to be writing about in this polarized atmosphere we currently live in, but with the 2018 midterm election just about behind us, now is as good of a time as any to discuss a very common question/concern we’ve been hearing from clients on both sides of the political spectrum. Clients often ask:

“With the election coming up, how will the results impact my returns?”

 

First and foremost, a quick and very important reminder that blooom manages retirement accounts. The investments in which are determined based on your age and how far away you are from retirement. The closer to retirement you are, the less a stock market reaction to an election will impact your retirement account balance. But for the vast majority of blooom clients that are decades away from retiring and have significant exposure to U.S. stocks – no matter the results, markets movements in either direction will likely be reflected in your retirement account balance, for better or worse.

 

That being said, let’s talk about that question because it’s an important one and it’s what is on nearly every investor’s mind right now.

 

Neither party knows how the elections will affect returns.

October was bad one for stocks, with the S&P 500 dropping over 10% from all-time highs set in September. A lot of this can be attributed to the uncertainty of the midterm election and what it could mean for the economy and the stock market going forward. The stock market does not like uncertainty, but this is not something new by any means. The lead up to any election is often accompanied by increased stock market swings, both up and down. Historically, we’ve seen that the period following elections has, on average, been a positive one for stocks. But remember, that is an average. What actually happens this time is truly anyone’s guess.  

 

Why worry this time?

The truth is we tend to always think that this next election is different or more important than any other and we very easily seem to forget that political uncertainty and polarization are nothing new to the stock market. Wars, political scandals, terrorist attacks, you name it. We still don’t have a single example in our entire history of a market downturn that was not followed by a recovery, and often a robust one. So why worry this time? There is very little this market hasn’t experienced already at some point in the past and we know that no matter which party is in power, the impact on the stock market is not measurably different in a way that should influence any change in a long-term investment strategy.

 

You know what happens when you assume…  

Elections often provide us with fantastic examples of the reasons why attempting to guess or make short-term return assumptions (market timing) is one of the worst things you can do to yourself and your future when it comes to your investments. No matter what the market does in the month or months following this election, a simple chart dating back all the way to 1896 can show us why it truly doesn’t matter one bit. We often tell clients that it’s not a matter of timING the market, but instead time IN the market that makes the biggest difference in the end.

 

Source: https://www.oppenheimerfunds.com/investors/article/mid-terms

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The October PastCast

Riding out the storms.

As is the case in nearly all election years, this October was a stormy one for stocks. U.S. stocks were down about 7% for the month and at one point even crossed the dreaded 10% down threshold that officially marks what is often referred to as a “correction.” And remember that in September we had just seen brand new all-time highs for major U.S. stock indexes.

 

Corrections are normal.

We remind clients often that corrections are normal and should be expected fairly often between now and your retirement. In fact, historically they tend to happen on average at least once per year. BUT, they have also always been temporary, 100% of the time! You read that correctly. There is not a single example in history of a stock market decline that was not followed by a recovery. This is somewhat comforting evidence that can help put things in perspective a bit. It’s also the reason we continue to hammer home the importance of staying calm during these events, as annoying as that may seem. It can be frustrating for many to hear their advisor tell them the best thing they can do right now is absolutely nothing, but that simple advice is the time-tested approach that repeatedly proves itself the most beneficial over and over again every time we go through these turbulent and stormy periods.

 

This is not the first time…

Many forget that this isn’t the first time just this year that we’ve seen stormy weather in the markets. February and March saw some big dips as well, but the reason we forget is that those dips were quickly followed by full recoveries that sent the market to new all-time high after new all-time high. Remember that long-term growth in the stock market and your 401(k) does not happen in a straight line and despite many positive economic headlines, good news for the overall economy can often blur the reality of how the stock market is performing. Just look at a chart of the S&P 500 so far this year:

 

Chart source: https://money.cnn.com/data/markets/sandp/

 

The bottom line:

October was a dreary, stormy mess of a month in the stock market with a major election on the horizon (check out our blog!), but we have no reason to believe the sun won’t eventually come back out. As always, stay focused on the long-term and don’t let these moments get the best of your emotions as an investor. For better or worse, the decisions you make as an investor during months like October can provide valuable, if not very costly lessons to us all. Per usual, the great Warren Buffett often says it best:

 

“The stock market is a device for transferring money from the impatient to the patient”

 

Be the patient investor.

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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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