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Coronavirus and your investments: Is your retirement savings properly invested?

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A note from Chris Costello the co-founder of blooom, a digital advisor for your retirement savings: 

A bit of perspective.

With the recent news of the coronavirus and its effects on the market, people may be wondering, “Are my investments properly invested?” To answer that question, we first must recognize that these past 11 years (post financial crisis of 2008-2009) have been unusually stable. But not just stable, down-right easy money in terms of the stock market investments within your retirement account. For reference, the Dow Jones average was near 6,500 in March 2009 and even after the sharp recent stock market sell-off it is around 25,000 these days. That is almost a 400% increase in just 11 short years. I say again, that is anything but typical! It is precisely this extended Bull Market that we have enjoyed that makes this recent stock market drop so darn painful. We just aren’t used to it!

With the exception of a very short lived “blip” in the market in late 2018, so short lived in fact that if you took a long nap you might have missed it, investors have not seen a Bear Market in 11+ years. By definition, a Bear Market is defined by a drop in the market of at least 20% and although late 2018 came close, it didn’t quite drop by 20% and it was over before most people knew it. This extended period without a true Bear Market is incredibly unusual given that, on average, we see a 20%+ drop about once every 6 years. 

 

Investing has been “easy” recently… too easy. 

My point is that it has been so dang easy to make money in your retirement accounts these past 11 years. In fact, you had to really “mess things up” (trying to time the market or have been investing way too conservatively) if your retirement account isn’t up substantially this past decade. This protracted Bull Market has led many investors to feel overly confident about their abilities to manage their own accounts and merely set it and forget it. And therein lies the problem. I am super worried that the majority of investors have been “lulled to sleep” with how incredibly easy it has been to make money in your investments this past decade. I am worried that a growing majority has lost perspective on historical market declines and become too complacent.

My concern is exacerbated for investors age 33 and younger. For this demographic – this past week might be the first time (as an adult investor) that you have logged into your retirement account and seen it noticeably lower than the last time you peaked at it. 

 

Market declines are a part of life.

It also needs mentioning that not only are declines of AT LEAST 20% a normal, recurring part of life as a stock market investor – in a very real sense – they are necessary! If you have ever heard the phrase “there’s no such thing as a free lunch” that is very much applicable here. The entire reason that investors are compensated over long periods (decades) with superior returns from their stock market investments is because they have to “pay the price” of periodic, temporary kicks in the pants like we are experiencing today. If the market never dropped precipitously like this, the risk would be minimal and, in turn, so would the returns. For a certain segment of the population that simply cannot tolerate the short term temporary drops in the market, they are generally left to invest in very secure, safe but VERY low returning investment like Government Treasury Bonds and CDs. The price these folks pay over time is substantial when it comes to wealth accumulation. It is true, they feel very good once every few years when the market declines, but the other 80+% of the time, I am guessing they have a tremendous nagging sense of being left out.

At blooom, we now manage over $4 billion for our clients all across this country. From age 22 to age 70, each and every one of them concerned that their critical retirement savings is working just as hard as they are working to fund those accounts. 

 

Find a smart strategy and stick with it.

Given the recent (justified) concerns with the Coronavirus, I can’t stress enough the importance of taking a moment to make sure your account is invested appropriately given your individual situation. In times of great market anxiety like this, it can often lead to a “lack of control” feeling. Here is one big, important step you can take to grab back some control over your retirement savings when the market tanks

 

Ways to identify your long-term investment strategy.

If you’re finding yourself nervous this week, specifically regarding your long-term investments (like your retirement accounts), now may be a good time to evaluate the level of risk you’re taking and whether or not what your doing both aligns with your goals and your sanity. If you’re not sure where to begin, it’s important to find someone that truly has your best interests in mind. In the world of advising, we would call this a fiduciary.

Blooom can help.

In under 5 minutes, by going to blooom.com, you can get a totally free assessment of your retirement accounts. This assessment will perform a check on these 3 key things:

 

  1. Blooom will make sure you have an appropriate mix of stocks and bonds in your account that makes sense for your specific age, time horizon to retirement and risk tolerance? 
  2. Blooom will make sure you have enough diversification in your account? (Not too many eggs in any one basket)
  3. Blooom will analyze if you are currently paying unnecessarily high hidden fund fees within your account?

 

IF, after this complementary analysis – you decide to sign up for blooom you will also have the ability to chat with a financial advisor at blooom (yes, a real human). So before you go do anything rash, like panicking out of your investments – please, please take advantage of this incredible service. Our Advisors and Client Service folks are truly exceptional people with YOUR best interests at heart. Wealthy folks across this country have access to qualified financial professionals at this very moment, helping them navigating these scary waters. Blooom was built specifically with the desire to bring this kind of badly needed help and counsel to all the folks out there that have been trying to handle their retirement savings all alone.

 

Final word…It is entirely OK and normal to feel scared during market declines like these. But, I do not think it is OK to make financial decisions in moments of fear.

 

 

 

The information is provided for discussion purposes only and should not be considered as advice for your investments. Your investments will go up and down in value based on what happens in the markets.