Month: November 2019

Fifteen Year-End Tips

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The end of the year is quickly approaching, and what a year it’s been. The S&P 500 is up more than 25%, and unemployment is near historic lows. It’s been a great year to make some money and do some good.

As we approach the end of the year, here are fifteen tips you can incorporate today.

  1. Contribute the maximum to your 401(k) or 403(b). You’re allowed to contribute $19,000 and if you’re 50 or older, you can add another $6,000.
  2. Contribute the maximum to your IRA. You’re allowed to contribute $6,000 and add another $1,000 if you’re 50 or older.
  3. Spend the money in your flexible spending account (FSA). The FSA is a “use it or lose it” plan, so make sure you spend it.
  4. The stock market has done well, but you may own a loser or two. If you are sitting on losses, sell them to offset your gains. The IRS will allow you to offset your gains dollar for dollar. If you have realized gains of $15,000, then you can realize losses of $15,000 to offset your gain. If you don’t have any realized gains, you can write off $3,000 per year until your loss is absorbed.
  5. If you have significant gains in a stock, consider gifting it to your favorite charity. You can send your shares in-kind directly to your charity to avoid capital gains. You’ll be able to deduct the fair market value of your gift. The charity can sell the shares, free of taxation, and use the proceeds for good.
  6. Review your asset allocation. With the increase in the stock market, your equity exposure might be too high relative to your risk level. If your alignment is off-kilter, consider rebalancing your account.
  7. Sell some of your investments to pay off your debt. Debt is a four-letter word, and the less debt you owe, the better off you’ll be.
  8. Take a trip. If you’ve done well this year, then reward yourself and take your family on a journey. It’s okay to spend money on experiences and enjoy the fruits of your labor.
  9. Update your beneficiaries. Review your beneficiaries on your retirement accounts and insurance policies. It only takes a few minutes to make the changes.
  10. Start, finish, or update your will. Have you been putting off contemplating your mortality? If so, use the holiday season to complete your will.
  11. Review your spending. Download your checking, savings, or credit card statements to Excel to review your spending habits.
  12. Start your budget to get ready for 2020. Apps like everydollar.com or mint.com can help you improve your budgeting.
  13. The IRS allows you to give away $15,000 per person. It’s a tax-free transfer, and there are no limits to how many people can benefit from your generosity.
  14. Donate cash to your favorite charity.
  15. Be an anonymous angel. Can you pay off someone’s debt? Do your local schools have children with student lunch debt? Are there families that need money for groceries or transportation? If you’re not sure, contact your local church or school because they usually have a list of people in need.

“His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’ ~ Matthew 25:21

November 29, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

Baylor Bears Football

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The Baylor Bears are enjoying an excellent football season. They currently rank 9th in the polls after trouncing The University of Texas. With a record of 10-1, they’re headed to the Big 12 Championship Game for the first time in school history for a rematch against Oklahoma. Hopefully, they’ll be able to avenge their gut-wrenching loss. If they win the rest of their games and get a little help from other teams, they may find themselves in the college football playoffs.

The turnaround is astonishing, considering the team only won one game in 2017. The 2017 season was Matt Rhule’s first at Baylor. His first job was to convince the young men on his team that they were winners despite the media saying otherwise. His goal is to develop young men and recruit new players to buy into his system.  At his introductory presser, he said, “If you come to Baylor and you come to play for me, that you’re going to get loved and you’re going to get developed each and every day because that’s hard. That’s not easy. Coaches say that but they don’t always want to do that. But that’s all that we did at Temple. That’s all we’re going to do at Baylor because that’s our purpose, to spend all of our time developing our players.”[1]

The Bears were on the brink of receiving the death penalty from the NCAA before Coach Rhule arrived. In addition to replacing their former coach, Baylor also hired a new university president and an athletic director.

When Coach Rhule took over the football program, he only had 45 scholarship players on his roster out of a possible 85, so he had some work to do to convince high school players to attend Baylor.[2] Coach Rhule had seen this picture before as the head coach for the Temple Owls. In 2013 his team won 2 games and lost 10. In 2015 the Owls won 10 games for the first time since 1979. The Owls aren’t known for football, but they ranked in the top 25 during Coach Rhule’s final two seasons with the team.

Coach Rhule has a vision, plan, and a process for turning around football programs in need. He trusts his process and so do the players.  “That’s what my whole message to our players is,” Matt Rhule said. “You’ve done this because of your process, this didn’t happen tonight, it happened every morning over the last two years.”[3]

Webster’s dictionary defines the process as “a natural phenomenon marked by gradual changes that lead toward a particular result.” Gradual changes. Success at any level takes time.

What can you learn from Coach Rhule’s turnaround?

You need a plan that captures your vision and gives you a process for investment success. If your investment process works, stay with it regardless of your short-term results.  When returns are lackluster, it’s easy to ditch your plan and start over. Investors who don’t have an investment plan usually chase returns and make irrational decisions. This strategy is not a good long-term solution for creating wealth. In December 2018, investors withdrew $183 billion in mutual fund assets as the S&P 500 fell 15.7%. In January 2019, they added $23 billion as the stock market rose by 15%. Investors were reacting, not investing. When adversity strikes, your plan and process will keep you in the game.

You need goals. A financial plan will help guide you towards your investment destination. It will be your playbook for financial success. Coach Rhule and other successful coaches have a plan for everything – practices, games, travel, meals, etc. He leaves nothing to chance, and he focuses on what he can control. He can’t control the outcome of the game, nor can you control the direction of the stock market. Focus on your plan and the things you can control, like savings and spending.

Coach Rhule is not alone. He has a team of coaches, assistants, and other personnel helping his team achieve their goals. Surrounding yourself with a group of advisors will pay dividends. Relying on a financial planner, investment professional, attorney, and CPA will help you fortify your foundation.

Last, celebrate your success. The Baylor Bears are having fun and enjoying their season. It’s been a long-time coming for the players and their fans; both are enjoying the ride. You must enjoy your success, as well. It’s okay to sell a few of your winners and spend the money on yourself or loved ones.

There is still much work for Coach Rhule and Baylor Bears to do, but so far, so good!

Sic ‘em Bears!

November 27, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

[1] https://sicem365.com/s/560/top-10-quotes-from-matt-rhules-introductory-presser, by Baylor Football, 12/2/2106

[2] https://www.espn.com/college-football/story/_/id/27969408/how-matt-rhule-charlie-brewer-rebuilt-baylor-back-big-12-contender, by Sam Khan, Jr., 10/31/2019

[3] https://www.fox44news.com/sports/matt-rhules-motto-trust-the-process-comes-to-fruition-for-baylor-football/, by Matt Roberts, 11/24/2019

My Uber Driver

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My Uber driver was from Afghanistan. He moved to the United States with his wife and two young children to escape the atrocities and horrors of his former country. He was an animated character.

On my drive from the airport to my hotel, I learned much about this gentleman. He is attending school to become an aeronautical engineer. His goal is to make $150 a day from driving in between his other job and his studies. He has a plan and he’s driven to succeed so he can provide a better life for his family.

To succeed as an investor, you need goals – specific goals. Your plan should be unique to your situation and reflect your intentions.

Here are a few suggestions to help you get started with your plan so you can move closer to your goals.

  1. Define your goals. What items are vital to you and your family? Do you need to save for college? Retirement? Write your goals down and commit them to paper. Be specific.
  2. Take an inventory of your assets. List your investments by account and type. How much money do you currently have in stocks, bonds, or cash? What percentage of your assets are in retirement accounts? Taxable accounts? How much money are you saving monthly?
  3. Take an inventory of your liabilities. Do you have a mortgage? Credit card debt? Auto loans? Student loans? List how much you owe for each item, including the rate and term.
  4. Identify your insurance coverage. Life, disability, and long-term care insurance policies will help protect you and your family from unfortunate events. Don’t forget to include your home and auto policies. Also, do you contribute to a Health Savings Account? Your HSA can play an essential role in both your health and retirement planning.
  5. Do you have children? Setting up a 529 plan as soon as possible helps offset the cost of college. Automate your monthly savings and invest for growth because the cost of college continues to rise – unchecked.
  6. Update your estate plan. A Will or trust is paramount to help your family honor your wishes once you’re gone. What will happen to your family and assets? A Will or trust will also provide guidance to your families and doctors on medical issues if you’re incapacitated.
  7. Review your corporate retirement plan benefits. Do you have a 401(k) or 403(b) plan? Does your company offer a pension or cash balance plan? These accounts will probably constitute most of your assets so it’s essential you manage them correctly.
  8. Identify your beneficiaries. Your retirement plans and insurance policies will transfer to your loved ones by beneficiary designations. It only requires a few minutes of your time to check the beneficiary designations on your accounts, so do it today!
  9. Prioritize your goals. Your financial plan will list several items, so it’s imperative to identify those goals that are most important to your family.
  10. Contact the Social Security Administration to review your future benefits. Review your annual income amounts to make sure the data is correct because your income will determine your benefits.

The financial side of your plan is easy to compute because it’s just math – you either have the assets to achieve your goals, or you don’t. The emotional side of your plan is more challenging. What will you do in retirement? What are your hopes, dreams, and fears? How will you spend your days?

Before you’re ready to retire or pursue a goal, spend time thinking about the emotional side of your plan. You’ll be prepared to move forward when your financial and emotional plans are in sync.

I’m confident my Uber driver will succeed because he’s committed to his plan. If you follow his lead, you’ll probably thrive as well.

A dream without ambition is like a car without gas…you’re not going anywhere. ~ Sean Hampton

November 20, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

Are You Earning 20 Percent?

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The stock market is soaring this year with index returns topping 20 percent. The NASDAQ, S&P 500, and Dow Jones have risen 27.3%, 23%, and 18.4%, respectively. It’s a good year to own stocks despite Brexit, The Trade War, and the Boeing disasters.

Are you earning 20 percent? If so, congratulations. A 20% return is twice the long-term historical average of 10% for the stock market.

NASDAQ, Dow Jones, & S&P 500:

^IXIC_^DJI_^SPX_chart

If your assets are diversified, you’re probably earning less than 20 percent. Most likely, you also own small-cap and international companies along with a few bonds. Your exposure to large-cap stocks might be less than 25% of your total portfolio. The more stock exposure you have, the higher your returns are for this year.

Various Asset Classes:

IJR_VWO_TLT_SHY_EFA_chart

How have the other asset categories performed this year? Small-cap stocks = 17.3%, international stocks = 16%, emerging market stocks = 12.6%, long-term bonds = 11.6%, and short-term bonds = 1.2%.  A balanced portfolio of these asset classes has risen 17.3% this year.

Balanced Portfolio: 60% stocks, 40% bonds:

P176514_chart

Investing all your assets in the S&P 500 this year would have been a wise decision if you knew in advance the market would rise substantially. Remember, the market was down 16% last December, and few people dared to buy the dip. Last year the S&P 500 lost 6.24%, and during the Great Recession from 2007 to 2009, it fell 56%. During the Tech Wreck from 2000 to 2003, the index dropped 49%.

The Great Recession:

^SPX_chart (2)

The Tech Wreck:

^SPX_chart (3)

The 1970s was also a tough time for stocks. From 1973 to 1979, the S&P 500 lost 8.6%.

The Seventies:

^SPX_chart (4)

Should you invest all your assets in the stock market? If you have a high tolerance for risk and you can handle the volatility, then go for it — however, a more prudent recommendation is to invest in a low-cost globally diversified portfolio of mutual funds.

How do you know if you can handle the heat of a single index? Here are a few suggestions.

Investing requires patience and prudence. Do not chase returns or get lured into risky investment strategies, because if it looks too good to be true, it probably is. Instead, focus on your goals, invest often, keep your fees low, and think long term.

The simple believes everything, but the prudent gives thought to his steps. ~ Proverbs 14:15

November 11, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

 

 

 

The Giving Season

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November is the beginning of the giving season. From now until the end of the year, charities and non-profits will receive much-needed dollars to help fund their mission. For several organizations, the money they receive in the next few weeks will subsidize most of their annual budget. Individuals typically wait until the end of the year before they give because they don’t have a giving or philanthropic plan.

For where your treasure is, there your heart will be also. ~ Matthew 6:21.

During my financial planning meetings, I ask people if they have a charitable giving strategy or if they donate money regularly; thankfully, most people are generous. I once worked with an individual who didn’t believe in giving money away while he was living. He was going to donate his money at his death through his estate. He was missing an opportunity to see his gifts bear fruit.  I didn’t tell him that people who don’t give today won’t give tomorrow.

Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver. ~ 2 Corinthians 9:7.

Most individuals don’t have a coordinated giving plan, and as a result, they wait until the last minute to make donations. Without a strategy, you may be missing valuable deductions, so here are a few ideas to help you with your charitable contributions.

Appreciated Securities.  The stock market has done well, so you probably have stocks with unrealized capital gains. When you donate appreciated securities to a charity, you get the deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased YETI Holdings in January at $14.84, and today it’s selling for $31.90 for an unrealized gain of $17.06 or 115%. You can gift your shares directly to your charity and avoid paying taxes on the appreciation. The charity will sell the shares on the open market to receive the cash, and they, too, will avoid a capital gains tax. You must donate your securities to a 501c3 organization to receive a deduction

Qualified Charitable Distribution.  The IRS allows you to satisfy your required minimum distribution by giving your money directly to a charity from your IRA. It’s called a qualified charitable distribution (QCD), and you’re allowed to donate up to $100,000 per year. The QCD will enable you to avoid paying taxes on the distribution, and it will satisfy your required minimum distribution.

Donor-Advised Fund (DAF). A Donor Advised Fund allows you to transfer appreciated shares to the fund. Once inside the DAF, you can sell your shares and purchase new investments without realizing a capital gain. You can deduct the contribution from your taxes, and it occurs in the year of your gift, not in the year of distribution. You don’t have to distribute the proceeds immediately, so if you’re not sure which charities to support, you can defer the payment until you identify the organizations. For example,  you can transfer $100,000 worth of ABC Inc. stock to your Donor Advised Fund, sell it, reinvest the proceeds, and then send a portion of the funds to your favorite charity. The funds that remain inside your DAF will grow tax-free.

Charitable Remainder Trust (CRT). This trust allows you to transfer your shares to a Charitable Remainder Trust, sell your holdings, diversify your assets, and receive income from the proceeds. At your death, your charity will receive the remainder of the trust assets. The stock, once transferred, can be sold free of taxation and the proceeds reinvested into a diversified portfolio of stocks, bonds or funds. Your contribution to the trust qualifies for a charitable deduction. The amount of income you can receive from the trust is between 5% and 8% of the portfolio value. You will pay ordinary income tax on the income you receive.

Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give away $15,000 per person per year without having to pay taxes. However, you won’t receive a tax deduction, but you’ll be able to help the next generation. For example, if you have four children and ten grandchildren, you can give away $210,000 this year. You can also give $15,000 to friends and strangers if you want.

The end of the year is a great time to give money to those in need, and it’s always the right time to help others.  However, an annual charitable giving strategy may be beneficial to your long-term planning and budgeting needs.  A philanthropic plan can pay huge dividends to you and those you support.

Do not withhold good from those to whom it is due, when it is in your power to do it. ~ Proverbs 3:37.

November 5, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

You’re Hired!

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While working at Morgan Stanley, I hired scores of individuals for the firm’s financial advisor training program. Directly or indirectly, I talked to hundreds of individuals about our firm. To hire hundreds, I reviewed thousands of resumes.

Finding individuals to work at Morgan Stanley was not hard, especially during the late ‘90s. The blue-blood, white-shoe firm attracted superior talent, and working for the firm was a status symbol, especially for recent college graduates.

I enjoyed the process, and I met some fantastic people. Of all the people I hired, a few of them stand out. Here are four individuals (not their real names) who made a strong impression.

Andy wanted an opportunity to improve the quality of life for his family. He worked for a big-box retailer at the time I hired him, and on his first day of work, Andy walked into our office dressed like Gordon Gekko. He traded his vest for a blazer. Andy looked the part. But, more importantly, he changed his mindset now that he worked for a prestigious Wall Street firm. He did well, and every few years, he calls to thank me for giving him a shot at a new career and a better life.

June graduated from Yale University and she was a native of South Korea. She was a quick study and eager to learn. She wanted to know how to succeed in the business, so I told her to meet with as many people as possible and open two new accounts per week. June followed the script, and she was one of my most successful hires.

Larry was a former professional tennis player who played at Wimbledon. He walked into my office unannounced and said he wanted to work for Morgan Stanley. We talked for some time, and I offered him a job. Like most professional athletes, he was focused and disciplined.

Bob was a former Marine, full of energy. After a few months on the job, I walked into his office, and he had numerous spreadsheets lining his wall. The categories included contacts, appointments, new accounts, and assets. I told him he would make it in the business, and he wanted to know how I knew. I told him his goal-setting and drive would take him to new heights. He’s still going strong, twenty-five years later.

Recruiting for a large Wall Street firm like Morgan Stanley is easy. Hiring for a small firm is challenging. My firm is growing, so I posted a job opening for a new advisor or financial planner. It was a three-month ordeal, a dreadful experience. It was so bad that I’m reluctant to go through the process again, despite the growth of my firm.

After a decade of hiring, I learned a few things. Here are a few suggestions to help you improve your recruiting process.

  1. If the person you’re interviewing arrives on-time for their first interview, don’t hire them. To arrive on time is to arrive late. Look for individuals who arrive early, and the earlier, the better. People who arrive on time for their initial interview will show up late to the office once they start working for your firm.
  2. Set up multiple interviews for your candidate, don’t rely on one person to make the hiring decision. After interviewing an applicant at Morgan Stanley, the receptionist told me he was rude and disrespectful. On paper, and in my interview, he was the ideal candidate. I didn’t hire him, and after the experience, I had candidates meet with several people in the office. We would then gather to review our notes before I made an offer.
  3. Invite your candidate to breakfast, lunch, or dinner. You’ll learn much by the way they eat their food and hold their utensils. Do they know the proper way to use a knife or fork? One candidate held his fork like a flare, and when he’d talk, he’d wave it around like he was trying to signal an aircraft. Do they wait for others to be served, or do they dive in without a care in the world? Walt Bettinger, the CEO of Charles Schwab, invites candidates to lunch and purposely messes up their order to see how they react.[1] Do they roll with the punches, or do they get upset?
  4. Saying ‘please’ and ‘thank you’ are paramount for a new hire. A candidate who’s not polite will not make a good employee.
  5. Did they send you a thank-you email after they completed the interview? An email is okay; a handwritten note is better. In a world of electronic communication, a thank you letter will allow the candidate to stand out from the crowd.
  6. Once hired, how do they set up their office? Do they personalize their space? Do they hang pictures? Do they have photos of their family? If not, they won’t stay at your firm long.

Once your new employee is on board, you owe them a duty of care. It’s your responsibility to make sure your new hire feels welcomed. Here are a few ideas to make them feel appreciated.

  1. The first 48 hours are crucial. Let them know you care about them by introducing them to your staff. If possible, walk them around your office so they can meet the others. Show them the entire office, including the restroom and breakroom. Check in with them often during the first few days to make sure they feel comfortable.
  2. Send a welcome email to your employees so they can get to know their new colleague. Include a bio, picture, job description, etc.
  3. Send a welcome gift to the individual’s family, so they know they’re also part of the team.
  4. Post an ad in your local paper or magazine so their friends, family, and neighbors can see they have a new job.
  5. Set up their office, so when they start on day one, it’s ready to go. Is the computer working? Is the printer connected? Do they have business cards? Is their office stocked with paper, paper clips, pens, pencils, folders, and sticky notes? Is it clean? When I left Morgan Stanley to join A.G. Edwards, my new office was a temporary storage closet. I had to clean it myself, and nothing worked. I was not impressed with their preparation and did not feel welcomed.
  6. Give them some swag – hats, shirts, pens, mugs, whatever you got. They now ride for the brand.
  7. Keep the employee busy. Have them work on special projects. Include them on calls and visits so they can meet the firm’s clients.
  8. Be flexible. Be patient. It will take them time to get up and running. Give them grace so that they know you care about their long-term success.

Hiring successful people takes time. Be firm in your commitment to finding the best candidates. Be authentic and humble, and most importantly, trust your instincts.

Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. ~ Warren Buffett 

November 7, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

 

 

 

 

 

[1] https://www.businessinsider.com/charles-schwab-ceo-takes-job-candidates-to-breakfast-messes-up-their-order-2016-2, Jacquelyn Smith, February 18, 2016

Can You Endure?

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Webster dictionary defines endurance as the “ability to withstand hardship or adversity, especially the ability to sustain a prolonged stressful effort or activity.” The ability to endure trials and tribulations is vital if you want to experience victory. We learn and grow through adversity.

Loyalty and vision are also critical components of endurance. Do you believe in your mission? Do you have goals? Do you have a plan? If your vision is clear, you will stay loyal to your calling.

Sir Ernest Shackleton led an expedition to the Antarctic on the ship Endurance. After it got stuck in ice, the men drifted on an ice floe for over a year before landing on Elephant Island. Sir Shackleton left the men on the island to find a rescue boat and returned three months later to rescue his crew. All the men survived.[1]

Abraham Lincoln lost several elections before being elected the 16th President of the United States in 1860.

Harriett Tubman escaped slavery and made 13 missions to rescue approximately 70 slaves through the Underground Railroad. She also helped John Brown recruit men for the raid on Harpers Ferry.[2]

Louis Zamperini was a World War II veteran and hero. His plane was shot down over the Pacific Ocean, captured as a prisoner, and held as a prisoner of war in Japan until the end of the war in 1945. His pain and suffering were detailed magnificently in Laura Hillenbrand’s book Unbroken: A World War II Story of Survival, Resilience, and Redemption.

J.K. Rowling battled poverty and depression to become the first billionaire author, the author of the Harry Potter series.[3]

Bethany Hamilton was attacked by a shark and lost her left arm. Her harrowing story of survival is portrayed beautifully in her book Soul Surfer: A True Story of Faith, Family, and Fighting to Get Back on the Board.

Helen Keller overcame blindness and deafness to achieve greatness.

It’s hard to imagine what it’s like to endure a prolonged bear market, especially when stocks are up more than 20%.  Not only is the market up significantly this year, but it has also risen 353% since March 2009. It’s now the longest-running bull market in history. It’s easy to stay the course when things are going well.

The significant returns we’re enjoying today were birthed from one of the worst bear markets in history. From 2007 to 2009, the S&P 500 fell 56%. The Great Recession is still raw for many investors.

During the Tech Wreck from 2000 to 2002, the S&P fell 46%. The market rebounded 95% from 2002 to 2007.

The Tech Wreck and Great Recession wreaked havoc on the S&P 500 as the index lost more than 14% from 2000 to 2010 – a lost decade for stocks.

If you invested $10,000 in the S&P 500 on April 1, 2000, and held on through November 1, 2019, it’s now worth $20,470, generating an average annual return of 4.4% per year. If you endured, you doubled your money.

A return below 5% doesn’t sound great, but it’s a positive number, and you doubled your money. What if you diversified your portfolio and added a few more asset classes? A balanced portfolio of large, small, and international companies mixed in with a few bonds and real estate holdings, rebalanced annually, produced an average annual return of 7.26% per year.[4]

If you’re not willing to endure the difficult times, you can play it safe and invest in short-term U.S. Treasuries. The iShares U.S. Treasury 1 – 3 Year Bond Fund (SHY) has returned 1.10% to shareholders for the past ten years. A $10,000 investment a decade ago is now worth $10,110 – safe and sorry.

In addition to your balanced portfolio, a financial plan will help you vanquish worry and fear. Your plan will help you endure and overcome difficult markets.

It’s impossible to predict when a bear market will arrive., so don’t try and time the market. Bear markets are part of investing, but if you dare to hold on to your investments during difficult times, you may reap the benefits when stocks recover.

Rejoice in hope, be patient in tribulation, be constant in prayer. ~ Romans 12:12

November 3, 2019

Bill Parrott, CFP®, CKA®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

 

 

 

[1] https://en.wikipedia.org/wiki/Endurance:_Shackleton%27s_Incredible_Voyage

[2] https://en.wikipedia.org/wiki/Harriet_Tubman, website accessed 11/2/19

[3] https://en.wikipedia.org/wiki/J._K._Rowling

[4] Morningstar Office Hypothetical, 4/1,2000 to 10/31/2019. The Dimensional Funds included were DFSTX, DFUSX, DFEMX, DFREX, DFIVX, DFISX, and DFIGX. 60% stocks, 40% bonds.