Alternative Facts?

Facts, alternative and real, have been making worldwide headlines lately.   At the root of the facts in question are numbers from the Inauguration.  The numbers have been reported as too high or too low.  The White House and media have been battling over whose numbers are correct.  Wall Street appears immune to the squabbling as the stock market indices continue to trade at all-time highs.   Joe Friday said it best, “Jut the facts, ma’am.”

The stock market is full of facts and numbers.   Here are few facts that will help you become a better investor.

Fact 1.   Stocks outperform bonds.   The stock market is one of the best vessels for individuals to create long term, generational wealth.   From 1926 to 2015 the S&P 500 generated an average annual return of 10%.  A $10,000 investment in 1926 is worth $48 million dollars today!  Long term government bonds returned 5.6% during this same period.  A $10,000 investment in bonds is now worth $1.2 million.  Since 1926 stocks have outperformed bonds by a ratio of 38 to 1.[1]

Fact 2.  Small stocks outperform large stocks.  The Dimensional U.S. Small Cap Value Index returned 13.3% since 1926.  A $10,000 investment in this index is now worth $67 million or $18 million more than large company stocks.[2]

Fact 3.   Cash, after subtracting inflation, is a loser’s bet.   The one-month U.S. Treasury Bill, a proxy for cash, returned 3.4% from 1926 to 2015.  During this same time frame inflation averaged 2.9%.   The net return for T-Bills was .5%.   A $10,000 investment in cash, after inflation, is now worth a little more than $15,500.[3]

Fact 4.  The lower your investment fees, the higher your returns.  You can control the fees you pay on your investments.   A fee audit will help you identify investments in your account with high fees and expense ratios.

Fact 5.  The sooner you start saving money, the better.   If save $1,000 a month today, it will be worth $1.2 million in 30 years.   Waiting ten years to start saving a $1,000 a month will cost you $680 thousand!

As you construct your portfolio focus on facts.   Invest in stocks, save monthly and keep your expenses low.  If you follow this simple formula, your nest egg will grow over time.

That’s the fact Jack! ~ Bill Murray, Stripes.

Bill Parrott is the President and CEO of Parrott Wealth Management.

January 26, 2017

Note:  Your returns may be more or less than those posted in this blog.  The stock returns are gross and do not factor in taxes and inflation.   The rate of return used for fact 5 is 7%.

[1] Dimensional Fund Advisors 2016 Matrix Book.

[2] Ibid.

[3] Ibid.



A Market Runs Through It.

Fly fishing is addicting.  It’s more religion than a sport for many.   The attraction to fly fishing, in addition to catching the fish, is all the gear – rod, real, line, leaders, waders, snips and flies.

A River Runs Through It isn’t a fly fishing movie, per se, but it does show amazing scenes on the Blackfoot River.  If the fly fishing scenes in the movie don’t get you excited, nothing will.

The river I fish is nothing like the Blackfoot.  It’s a slow, meandering river. The water is dark and murky and I have no idea where the fish are hanging out.  I cast a lot and I’m forced to be patient.  I cast. I wait.  I cast. I wait.  On occasion I will pull a nice little fish out of the water.

What does fly fishing have to do with investing?   A lot.

My time on the water begins the evening before when I build my plan. Where to fish?  What rod to use?  What’s the best fly?  Planning is important.  It doesn’t matter if you’re fishing or investing a thoughtful plan will increase your chance of success.  Your plan will make both activities more enjoyable.

Investing, like fishing, requires persistence.  Persistence brings patience.  Patience gives you discipline.  Discipline will make you a better investor.  It would be nice to catch a 20-pound bass with every cast but I know it’s not likely to happen.  On most casts I come up with air and water.  It’s important to keep casting because the only way to catch a fish is if the fly is in the water.

The fly is half the fun in fly fishing.  Choosing the right fly is part of the challenge.  What fly to use –   popper, dragon fly, minnow, crawfish?  I’ve used them all at one point or another.  A diversified box of flies is a must because conditions change quickly.   The markets change quickly as well.  A diversified portfolio of stocks, bonds and cash will keep you ready for most market conditions.

A wind knot is not fun.  A tangled line is downtime.  When I’m confronted with a wind knot I have two choices.  I can untangle the knot or cut the line.  I’ve done both.   During my downtime I review my goals.  Should I keep fishing?  Am I in the right spot?  Do I need to add a heavier line?  When the market corrects and your portfolio is in a knot what do you do?  You can’t ignore a wind knot when fishing.  It has to be dealt with.  A market correction is the same.  It must not be ignored.  Use a correction to review your holdings and goals.

Hiking to the lake or river can be just as fun as fishing.   Investors seem to be in a hurry to arrive at their final destination.   Take time on your journey to enjoy the view.  Investing is a lifetime event.  It doesn’t start with your first job nor does it end with your last.  Investing is generational.

Planning, persistence and long term thinking are needed for fly fishing and investing.   If you practice these things, you’ll be hooked for life.

If fishing is a religion, fly fishing is the high church – Tom Brokaw

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.














Are You a Control Freak?

Do you like to be in control?  Do you need specifics?  Do you have a hard time with delegation? Do you always have to be right?  I’m not a control freak but I like to have a say in the outcome.  I prefer driving to flying because I feel I’m in control even though I know flying is safer than driving.   When I board an airplane, I surrender control to the pilot and the laws of physics.   The pilot is well trained and the plane is well built but I’m not in the cockpit and it makes me a tad nervous.

Investors try to control their stock purchases by doing their homework and research on companies to buy.  Investors feel entitled for their stock to rise because they have spent hours (minutes) crunching numbers and doing channel checks.

A few years ago, a neighbor’s son purchased a few shares in a company he frequented.  After his purchase the earnings report was announced and the stock went down.  He was upset because he had done his homework and the store was always crowded.  A stock doesn’t know you own it and it could care less how much research you did prior to your purchase.

Investors also try to control the market through market timing.  Shareholders will move money in and out of stocks trying to find the optimal time to buy or sell.   Market timing is a waste of time.   The S&P 500 returned 9.2% from 1994 to 2013.  An investor who missed the 50 best days during this run ended up with a return of negative 2.8 percent (-2.8%).[1]

What can you control?  You can control how much you spend and how much you save.   The more you save and the less you spend will mean more money in your pocket.

You can control your emotions.  To make money in the stock market you need to control your emotions on the upside and downside.   When stocks rise, don’t get overly excited.  When stocks drop, don’t get overly depressed.   The stock market has been fluctuating longer than we’ve been alive.

Is it possible for you to change your narrative when stocks fall?  Investors are more concerned about the market dropping than rising.  It’s not fun to ride stocks through a correction.  Loss aversion is the definition given to people who prefer to avoid losses rather than generate gains.[2]  Can you change your cues or triggers during a market correction?   During a market drop investors want to know what’s wrong?   Rather than focusing on the drop or loss of value change your narrative and start looking for stocks or funds to purchase.

The best way to get rich in the stock market and create generational wealth is to buy when everybody else is selling.   When the market is going down investors sell great companies at disastrous prices giving you the opportunity to add to your holdings at rock bottom prices.

It takes time to change the narrative in your mind.   You must give up control and let the long-term forces of the stock market take over.

Let it go! ~ Elsa

The mind of man plans his way, But the Lord directs his steps. ~ Proverbs 16:9

Bill Parrott is the President and CEO of Parrott Wealth Management.

Note:  Past performance is not a guarantee of future performance.  Your returns may be more or less than those posted in this blog.

[1], by Chris Meyer, June 15, 2015.

[2], website accessed 1/17/17.

Playing with Legos.

In the early 1970s I received my first Lego kit from my aunt and uncle.  It was a small kit with few pieces and I played with it for hours.   As I grew older my Lego collection expanded to thousands of pieces.   A Lego set was my standard gift on special occasions.   The nice thing about playing with Legos is the building combinations are limited only by your imagination.

To create a Lego masterpiece, it helps to have bricks of different shapes, sizes and colors.  The more pieces you own the more complex your structure can be. Or not.  Just because you have thousands of Lego pieces doesn’t mean you have to use them all.  A simple Lego structure can work just as well as one with a lot of moving parts, maybe better.

The design of your investment portfolio, similar to your Lego structure, is only limited by your imagination.  A well-diversified account is your best bet for long term investment success.

In building your portfolio focus on investments that will zig when the other zags.  The best indicator of how two or more investments will perform in your portfolio is the correlation coefficient.   Two investments with a correlation of positive one are going to move in the same direction.   Investments with a correlation of negative one are going to move in opposite directions.  If one is up, the other is down.

Lego sets have changed dramatically from the early 1970s.  With my limited choices I could only build so many houses and forts.  Lego sets today are mind boggling.   A youngster can now build the Eifel Tower, a Ferrari, Jurassic World, and a classic VW Bus.   Legos are robots.   And movies.

Investments have also changed from the ‘70s.  In the ‘70s investments were mostly limited to stocks and bonds.    Mutual funds were just starting to gain popularity and Exchange Traded Funds weren’t yet on the horizon.   Stock options became available for trading in 1974.   Investment fees have changed for the better and to the benefit of the investor.   To buy a thousand shares of IBM 45 years ago your commission would’ve cost you thousands of dollars.  Today you can buy a thousand shares of IBM without a commission.

Here are a few suggestions for construction your investment portfolio.

  1. Diversify your investment holdings across asset classes. A portfolio of large, small, U.S., and international stocks mixed in with bonds, real estate, gold, and cash will allow you to participate in most market moves while reducing risk.
  2. Focus on investments with low or negative correlations. A diversified account will have investments with high and low correlations so make sure they are spread out across different asset classes.
  3. Keep your fees low. In today’s world you can build a low cost investment portfolio with individual investments or index funds from Vanguard and Dimensional Funds.   The lower your fees, the higher your returns.  It’s in the math.
  4. If your happy with your portfolio masterpiece, stop building. A portfolio should be built for the long haul and designed to stand the test of time.
  5. Review your account occasionally. A quick look and review of your accounts is needed to make sure your investments are performing for your benefit is wise counsel.

Last, be patient when building your investment portfolio.  A Lego sculpture of quality takes time and thought but once completed is a thing of beauty.   So, too, with your investments!

Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. ~ Matthew 7:24

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.

August 4, 2016


What’s up, Doc?

Before school I would park myself in front of our family T.V. with a bowl of Fruit Loops or Honeycomb cereal and feast on a heavy dose of Looney Tunes cartoons.  I needed my fill of Bugs Bunny, Foghorn Leghorn, Daffy Duck and Yosemite Sam for my day to start off on the right foot.

Bugs Bunny is a smooth operator.  He is calm, cool and collected.   The only time I remember Buggs Bunny losing his temper was during the show Rebel Rabbit.  In Rebel Rabbit, Buggs Bunny was upset the bounty for a rabbit was only 2 cents and he went on a rampage.[1]   Despite this one episode he is wise beyond his ears.

In addition to Bugs Bunny, Tweety and Road Runner are composed and sensible.  These three characters would make great investors.    These three were under constant attack from Daffy Duck, Elmer Fudd, Yosemite Sam, Sylvester or Wile E. Coyote.   Regardless of these threats they thought rationally and never lost their composure.  As a result, they were able to outsmart their foes.

On the other hand, Daffy Duck, Tasmania Devil, Yosemite Sam and Wile E. Coyote were overly emotional.  Their emotions would get the better of them and usually in a dramatic way.    To give credit to Daffy, Yosemite and Wile they appeared to start with a pretty good game plan.  However, when the plan did not work they reacted with fits of rage and anger.

Sylvester and Foghorn Leghorn were over flowing with confidence and bravado.  These two were a little too optimistic in their abilities.  Foghorn Leghorn was probably the worst (best?) in his overconfidence.  He would constantly be outwitted by Barnyard Dawg and little Henerey Hawk.

What can we learn from these Looney Tunes?

  1. To be a successful investor think like Bugs, Tweety or the Road Runner. Their peaceful demeanor and silent confidence has treated them well.  These three do not get rattled by current events and continue to focus on the task at hand.  When you invest, it helps to remain calm despite external pressures.  The recent Presidential election is a great example of forces beyond our control.  The headline news, angry posts and flurry of tweets caused much worry for investors.  However, those who remained calm during the trials and tribulations were rewarded with higher stock prices.
  2. An investor who is overly emotional like Daffy Duck or Yosemite Sam will have trouble creating long-term wealth. If emotions get the better of you, it would be wise to hire an advisor who can help walk you through the valley during difficult markets.   Emotions are usually tied to stock market gyrations so one way to calm your nerves is lower your exposure to the stock market and diversify your holdings across different asset classes.
  3. Having an overabundance of confidence is normally good. Too much confidence, however, can be a bad thing when it comes to investing.   Overconfidence may block your ability to remain flexible during times of market upheaval.  It helps to by humble in the market and it’s okay to admit your wrong and cut your losses.  Sylvester and Foghorn Leghorn always had to be right and consequently, were usually wrong.

It has been said that life imitates art and watching the Looney Tunes cartoons proves this point.   

That’s All Folks! ~ Porky Pig 

Bill Parrott is the President and CEO of Parrott Wealth Management.

November 17, 2016





[1], Rebel Rabbit 1949, website accessed 11/13/16.

There’s Gold in Them Thar Hills!

The California gold rush of 1849 brought millions of speculators to the Golden State in search of wealth and riches.   A few of these individuals made money but most lost everything.  It appears there is another gold rush occurring today with the returns on gold turning in a stellar 2016.  In addition, silver is also having an epic performance this year.

According to a recent Morningstar report $4.1 billion was invested into precious metal funds last week – the most ever![1]  Investors continue to chase the precious returns for gold and silver.   With gold and silver trades shining this year does it make sense to make these investments a major holding in your portfolio?  The short answer is no.   If you need proof of mutual fund flows, please review the mutual fund flows into technology funds in March of 2000 just before the Nasdaq fell 65%.

Gold is soaring with the yellow metal up over 28% so far in 2016.  The 30-year average annual return for gold has been 1.98%.   A $10,000 investment in gold in 1986 is now worth $18,007.   The five-year average annual return has been a negative 4.27%.[2]

Silver usually plays second fiddle to gold but not this year.   Silver is up 42%.  The five-year average annual return for silver has been a negative 13.5% per year.  A $10,000 investment in silver five years ago is now worth $4,842.  The thirty-year return for silver has been similar to gold with a 2% average annual return.[3]   As a point of reference inflation has averaged 2.6% since 1986.[4]

Why are these investments doing so well?  A big factor is fear.  The world appears to be a little unsettled so when fear and uncertainty are high gold and silver perform well.   As investors focus on the headlines of Brexit, Dallas and the election money continues to pour into these investment categories.   Headline risk is a main driver for the performance of gold and silver this year.

If you still have the gold bug and want to add precious metals to your account, limit your exposure to 3% or 5% of your account balance.   If your investable assets are $1 million, then your allocation to gold or silver can fall in the range of $30,000 to $50,000.

Choose my instruction instead of silver, knowledge rather than choice gold ~ Proverbs 8:10.

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.

July 9, 2016




[1], Sara Sjolin, Marketwatch, 7/8/2016.

[2], accessed July 7, 2016.

[3], accessed July 8, 2016.

[4] US Inflation: Changes in US CPI Index 1926 – 2015, Dimensional Fund Advisors Matrix Book 2016.

Market Top. Now What?

The Dow Jones, S&P 500 and the Nasdaq all hit new all-time record highs yesterday.   The last time this occurred was in 1999.   I am thankful and nervous to hear this news because after the stock market peaked in 1999 it corrected in 2000.

With the markets at all-time highs what is an investor to do?   After all, if you climbed a mountain and reached the peak your next move is to turn around and descend.   Sir Edmund Hillary and Tenzing Norgay spent about 15 minutes atop Mount Everest before they headed for home.[1]

A climber who is descending is rewarded with vistas not afforded to them while ascending.  The descent allows the climber to reflect on their climb and focus on the next mountain to conquer.   When the next stock market correction arrives use it as an opportunity to identify new companies or sectors to add to your portfolio.   A market drop will allow you to buy quality companies at fabulous prices.

As the market crests let’s review previous market tops to see what happened to your investment returns had you purchased stocks at the top of the market cycle.[2]

August 1, 1987.   If you purchased stocks at this peak, your average annual return was 9.27%.

January 1, 1994.   This market top purchase averaged 9.16% per year.

December 1, 1999.  This investment produced an average annual return of 4.67%.

October 1, 2007.   A 6.2% average annual return is what you earned after buying at this market top.

February 1, 2015.   The purchase of stocks a year and a half ago rewarded you with an average annual return of 8.21%

An average of these averages is 7.5%.  A 7.5% average annual return for buying at the “worst” time is impressive.    Had you purchased bonds at these same peak levels you generated an average annual return of 5.11%.  If you kept your money in cash at these peak levels your return was .25% (point two five percent) per year.

A $100,000 investment earning 7.5% for the next twenty years will be worth $424,785.   At 5.11% it will grow to $270,944.  A twenty-year investment earning .25% will be worth $105,120.[3]

The urge to turnaround and come down from the stock market mountain is high for most investors.  I would encourage you to fight this impulse to dramatically reduce your stock holdings and move to cash.  Instead focus on your long term goals and investment plans in order for your financial dreams to come true.

Let the mountains bring peace to the people, And the hills, in righteousness.  Psalm 72:3

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.

[1], Jesse Greenspan, May 29, 2013, accessed August 12, 2016.

[2] Morningstar Office Hypothetical Tool.  The returns are calculated with an ending date of 7/31/2016.

[3] FV calculation for 20 years.

My Week at a Dude Ranch.

This past week my family and I spent a week at Wind River Ranch – a Christian dude ranch in Estes Park, Colorado.   Wind River Ranch rests in a valley nestled between Longs Peak and Twin Sisters.   It’s a magical place.

I spent my time riding, hiking and fishing while trying to act like a cowboy.   These activities can teach us a lot about investing.

While riding horses on their property and through the Rocky Mountain National Park it was easy to get lost in my thoughts as I meandered along the trails.  I had to remind myself I was sitting on a thousand-pound animal on a narrow trail and had to remain focused on where I was leading my trusted steed.   I had to keep looking forward so I wouldn’t run into a tree or fall of a ledge.  Riding a horse while looking over your shoulder doesn’t do much good.  Also, horses aren’t too fond of walking backwards.  So, too, with investing.  It is imperative to keep moving forward towards your short and long term financial goals.  Looking back and applying the coulda, shoulda, woulda strategy is a waste of time.

Hiking in the Rocky Mountain National Park is breath taking.  I hiked two trails.  The first hike was to Mills Lake.  A beautiful hike along Glacier Creek.  The lake looked like a giant swimming pool on a windless day.  The water was smooth as glass and clear as could be.   The second hike was to the top of Twin Sisters.   The elevation at the peak of this hike was 11,427.  It wasn’t a fourteener but challenging never the less especially coming from the low lands of Texas.  On both hikes I needed to plan my route and make sure I had all my supplies especially my bear bell.  When you invest it’s important to be prepared for all types of conditions.  A financial plan and investment strategy will help guide you to your financial goal.  An asset allocation policy will allow your account to weather a storm or two.  Like hiking, it’s important to stop every now and then to make sure you are on the right trail and you’re still marching towards your goal.

Fly fishing in the Rockies is about as good as it gets.  Fly fishing in rivers, streams and crystal clear lakes is part art and science.   I used four or five different fly patterns and all of them worked at one level or another, some more than others.   However, not every cast caught a trout.  I spent a fair amount of time casting and waiting.    Patience was needed.   Investing requires patience as well.

Whether hiking, riding or fishing all three require a solid plan, the right equipment, and constant monitoring to succeed.   Investing also requires these attributes.   The more you plan the better your investment results will be.

“Be still, and know that I am God; I will be exalted among the nations, I will be exalted in the earth.”  ~ Psalm 46:10

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.

July 4, 2016


Rates are rising! Buy bonds?

The Federal Reserve raised interest rates in December and they might do it again in 2016.  When interest rates rise bond prices fall.   The relationship is like a see-saw in a park when one side is up the other side is down.  If interest rates are going to rise, why would you want to buy bonds?

It’s true a rate rise will cause disruption in prices.  It’s in this disturbance where a bond buyer can find opportunity.

Let’s look at some numbers.  The thirty-year U.S. Treasury Bond is currently paying 2.64 percent.  A one percent rise in interest rates will mean an 18 percent loss in the value of this bond.  The bond price will fall from $100 to $81.92.   A buyer of this bond at $81.92 will have the opportunity to make 22 percent when it matures to $100.  In addition, the current income has jumped from 2.64 percent to 3.22 percent by buying this bond at $81.92.

Since 1926 the U.S. T-Bill has generated an average annual return of 3.4 percent while the long term government bond has averaged 5.6 percent.[1]

Bond funds are considered lousy investments when interest rates rise.   However, it’s assumed, incorrectly, that the fund manager is doing nothing with their portfolio during a rising rate environment.  In a rising rate scenario, the fund manager is buying bonds at lower prices while locking in higher rates.   Lower bond prices and higher coupons will benefit all shareholders at some point.

One of the oldest bond mutual funds is the Franklin U.S. Government Securities Fund (FKUSX).  This fund originated in May of 1970 and since inception it has delivered an average annual total return of 6.26 percent.  The best year was 1982 returning 33.04 percent to shareholders.  The worst year was 1980 generating a loss of 12.87 percent.  A $100,000 investment in May of 1970 is now worth $1,624,990.[2]

When rates rise the first reaction for bond holders is to sell.  When bond holders sell this creates a buying opportunity for individuals with a long term view.   A buyer can take advantage of panic sells by buying bonds at favorable prices.   Their pain will be your gain.

Why buy?

  • Lower Prices.
  • Higher Coupons.
  • Better Total Return.
  • More Choices.

Don’t fear the rate rise.  It will treat you well in the long run.

“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.”  John F. Kennedy.

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.  www.

May 26, 2016

[1] Dimensional Fund Matrix Book 2016, pages 42 & 44.

[2] Morningstar Office® Online Hypothetical Tool.

The Old Man and the Sea.

The Old Man and the Sea is one of Hemmingway’s best novels.  Santiago, the main character in the novel, is an aging fisherman who has gone for a long stretch without catching any fish.   It had been over eighty days since he was able to land a fish so he decided to try his luck far from the shores of Cuba.  He ventured out on his own and was rewarded with a catch of a lifetime by hooking a humongous marlin.  It was so big it took over two days for him to bring it in close enough for him to kill it with a harpoon.   The fish was too big to fit in the boat so he tied it to the side and headed back to shore.   On the journey home a number of sharks attacked his marlin.  He was successful in fending off a few sharks but not all.  By the time he returned home the marlin had been eaten to the bone.

Santiago was patient and goal oriented.  Even though he was in a fishing slump he had a plan to land his big fish.   He was going to fish alone far from the shores of his normal fishing spot.   He revised his old plan and took more risk to reach his goal.

What can you learn from Santiago?

Patience.  In buying stocks it pays to be patient.  It’s possible the stock you just purchased will not advance for some time.   It could be days, months or years before your stock holdings show promise.   It’s important to give your stocks time to flourish.

Goals. It’s paramount to have investment goals especially when buying stocks.   Do you want to retire early?  Buy a new home?  Travel the world?  Help others?   If you write your dreams down, they are more likely to come true.

Plan.  Santiago had a plan and so should you.  Your plan will guide you to where you need to be in order for you to reach your goals.  A thoughtful plan is the starting point for your future financial success.

Risk.  You can’t catch any fish on land.  Santiago had to take more risk in order for him to catch his fish.  You may need to take more risk as well.  It will be challenging to grow your wealth if you have most of your assets in cash, CD’s or short term bonds.  Stocks are needed for the long term growth of your wealth.

Perseverance.  It took Santiago two days to land the marlin.  He didn’t give up on his goal amidst his struggle.  At times, the stock market does not cooperate and you need to have fortitude to stay the course.   Your stocks will go down and be attacked by haters and naysayers but you have to hold on especially if you have conviction in your investment strategy.

Goals, planning and perseverance can help you be a successful investor.   When your stocks are in a holding pattern think about Santiago and his battle with the mighty marlin.

For he and all his companions were astonished at the catch of fish they had taken. ~ Luke 5:9.