The Pandemic and your Retirement Savings – A Blooom Webinar

We’re all in this together

Let me begin by saying – we are in this with all of you.  Although each and every one of us has our own unique situation and challenges we are, no doubt, all bonded by a shared desire to protect ourselves, our families, and our communities from the spread of this virus. Additionally, It goes without saying that all of us at blooom share in the fears and frustrations with the steep declines we are all seeing in our retirement accounts.  I don’t care who you are – seeing your nest egg decline in value is never easy to tolerate.  

That being said, my hope is that the communications that blooom has put out and will continue to put out will at least help to soften some of your concerns.  At the end of the day, none of us know the extent of the market decline or when we will turn the corner on the fight against this virus. BUT… we feel supremely confident that we will get through this and the values in our accounts will eventually begin to recover.

 

Some perspective

I have had the privilege of advising clients and managing retirement accounts for almost 25 years.  I still have scar tissue from the stock market crash that followed the dot.com bubble that burst in the early 2000s, and even more so as a result of the financial crisis of 2008-09.  During both of those times – well before blooom was even a glint in my co-founders eyes – I can remember vividly having face to face conversations with clients – often looking into the whites of their eyes, seeing and hearing about how worried they were about those declines.  The stock market decline that followed 9/11 and the stock market decline during the financial crisis – although a totally different set of reasons than the virus today – it was, in many ways, just as scary as it feels today. Having made it through those past market shocks – I sincerely hope I can share some of this experience with all of you so that you have a fighting chance of enduring this significant market decline and maybe – help you become a smarter, more informed investor with knowledge and perspective that will continue to serve you well for the rest of your investing lifetime.

 

Ok, so let’s begin…

To start off, I think it must be acknowledged what has taken place in the stock market PRIOR to this very recent and rapid decline.  To do this, let me walk you back to March 6, 2009. As we now know, that day turned out to be the absolute lowest point that the stock market dropped to during the Financial Crisis.  On that day the Dow Jones Average briefly fell below 6,500. Since that point, and all the way up until literally just last month, the stock market has been on an absolute terror, and I mean that in the good sense.  We joke that you have had to try really hard to miss out on all these gains in the stock market during this period. In fact, my guess is that a very large portion of investors in this country have been so spoiled with good returns this past decade that until very recently, you were likely lulled into a false sense of security.  Some of you may have even started to believe that investing was easy. Some of you, I dare say, may have even started to believe that investing was a sure thing. I think it is also worth pointing out that for those of you listening to this that were born after 1986 you have likely never been a stock market investor in a true bear market.  Granted, we had a near 20% drop in late 2018 due to trade concerns but that was over before most people even knew about it. All you had to do these past 10 years was stay invested. period.

I mention this because it is important to acknowledge the fact that if you are still in your 20s or 30s, you are likely experiencing something as an investor that you have never ever had to deal with.  Those of us in our 40s, 50s and older have seen significant shocks to the market before. And although the reason for the decline in the market today is totally unique, the drop itself has played out countless times over the history of the stock market.  

No pain, no gain

In fact, as we can see on this chart, since the 1930s we have had 8 different time periods where the stock market dropped by at least 20%.  I also show this chart to illustrate just how powerful the growth has been for the vast majority of history. You can ignore the numbers on this chart and just take in the massive difference between the green and red sections.

So if the good times in the stock market have so clearly out-weighed the brief, temporary downturns in the market – why do so many investors left to their own devices fail so miserably with their investments?  I encourage you to stay tuned for that answer.

So not only are big drops in the stock market normal….I want to also make the point that they are NECESSARY.  Yes, let me repeat that….significant and scary drops in the stock market are indeed NECESSARY. I say this because one of the great reasons why the stock market has been such a wonderful tool to build wealth over long periods of time (as we saw in the previous chart) is precisely because of the risk that being an investor comes with.  Surely everyone has heard the old saying “there is no such thing as a free lunch” well this certainly applies to life as a long term investor in the stock market.  You see, if there were never any rough times, if there were no gut wrenching, shockingly steep drops in the market, then there wouldn’t be much risk.  And without that risk, the returns would be a fraction of what they historically have been. Think of it this way. You may know some of your friends who have no appetite for risk and have historically kept much if not all of their savings in things that come with guarantees.  Those would be things like Bank CDs, savings accounts, money markets or government bonds. It is true that they have no risk of loss and yes it is true that they are feeling very good about themselves in times like we are in right now. BUT, while the rest of us have been making big returns over the past 10 years and over the past 70 years by investing in the stock market, they have historically earned a tiny fraction in their risk free investments.  You see – if you don’t take any risk you shouldnt be expected to make much return. So I say again – there is no such thing as a free lunch.  

 

Blooom’s approach

Often, in times like this many investors feel compelled to question everything when it comes to their important retirement savings.  Given that, let me remind you what blooom has and IS doing for your accounts.

  1. Appropriate mix of stocks vs bonds given your age, time horizon to retirement and risk tolerance
  2. Proper diversification – as the old saying goes: making sure you don’t have too many eggs in any one basket
  3. Lowest fee funds available within your 401k or IRA.

Now don’t get me wrong – these 3 things are extremely important.  And for many people, before they signed up for blooom – their retirement accounts had none of the above key factors.  BUT BY FAR, THE MOST IMPORTANT FEATURE of your blooom subscription …you have access to a human advisor at blooom. Wealthy clients have had advisors for decades.  Most average Americans on the other hand, have been forced to go it all alone. This go-it-alone strategy might have worked well in the decade leading up to this Virus when the perception of investing was “easy” but now, more than ever – having a trusted advisor to lean on with questions and concerns is priceless in my opinion.  As the co-founder of this company and someone who has spent their entire adult life advising clients – I don’t feel that I am over-stating just how important having an advisor really is.  

 

The average investor

Earlier I told you I would explain why so many investors on their own so miserably under-perform the long term returns in the market and often the long term returns of wealthy clients.  But before we get to the answer….let’s have a look at how bad the problem really is….

So I posit…why does the average HUMAN investor so miserably UNDER-perform the stock market and most variations of it?

 

If you have the right strategy, doing nothing can mean everything

For more perspective on this, let’s have a look at the complete picture.  This is a graph of the Dow Jones Average all the way back to 1950. When you put the stock market into this kind of context it should further boggle the mind as to how many people haven’t been able to grow more wealth in something that looks like this. 

The absolute wealth destroying actions that have plagued investors for decades have not been the declines in the stock markets themselves but rather how investors in those declines have behaved.  You see, each time there were dips in the market there were investors bailing out. And often times when the market had recovered and things looked great again, those same investors would buy back in at higher levels.  Wash, rinse, repeat a few times of buying high and selling low…well, you catch my drift.  

So here is the secret…In order to reap the wonderful rewards of being a long term stock investor, all you had to do was sit still.  In other words you had to do nothing during the temporary declines to make sure you were around to benefit from what has been the permanent uptrend. That is it folks.  And here we are again today. Another steep decline in the long and storied history of the stock market. I ask you to think about how you will behave during yet another temporary decline like we are having today.  

The bottom line

Finally, Please listen carefully.  At the end of the day – this is YOUR money.  Our job at blooom is to give you our best advice at all times.  But, you may ultimately not always agree with us and that is OK.  If you look to us for advice you will always get the advice we think is best for you and tell you what we think you should do.  BUT… You will always get the last word. PERIOD. If at any point you feel strongly that you must do something that goes against what we are recommending – that is absolutely your prerogative.  If you decide to take actions different than what blooom recommends You will be able to maintain your blooom membership but we will turn off our permission to actively make changes in your account for you.  I repeat…If you decide to make changes in your account that we feel goes against our advice – those changes would need to be made by you.  

Regardless, please always remember we are just a click away if you want to chat or have concerns about your account.  Just log into your blooom account and initiate a conversation. We look forward to helping you navigate these exceptionally difficult waters.

Thank you for taking the time to listen and I hope you know that we started this company to serve people just like you.  So I have just one request….right now, at this very moment, you have friends, family members and co-workers who are all alone when it comes to their retirement savings.  Unless they are also a blooom client or they have a big net worth and have their own advisor – they are trying to navigate these rough waters themselves. Very wealthy clients have had access to advisors over the course of history – especially in times of great panic in the markets.  Now, companies like blooom have made it our mission to reach a new audience of under-served investors. In times like this – having an advisor to lean on can make such a huge difference in your future financial security. So please, if you have found this helpful and enlightening, I encourage you to take a minute and pass on the link to this webinar to them, I am sure the people you care about will appreciate this as well. 

 

Thank you and stay safe. 

 

The information is provided for discussion purposes only and should not be considered as advice for your investments. Please consult an investment advisor before you invest.

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