If, Then

In college, I learned the if, then command while studying the BASIC computer language. BASIC is a conditional language that relied on the if command. If X is true, then Y is false, and so.

Financial planners rely on if, then statements regularly. It’s common for planners to include a statement like, “If you invested X amount in stock Y, then you’d have Z dollars today.” The examples show investors the advantage of long-term investing, despite the stock market’s gyrations. Some of the examples are outrageous, but we still use them anyway. For example, if you invested $100,000 in the stock market in 1926, you’d be worth more than $700 million today. This example is ridiculous on many levels. First, $100,000 in 1926 is equivalent to $1.5 million today. Second, would you have held on to your investment through the Great Depression? Doubtful. Third, it assumes you didn’t pay any taxes on your investment or spend any money for 93 years.

Despite the crazy claims, advisors use these examples religiously, including me.

Here are a few if, then statements.

If you invested $100,000 in Amazon in 1997, you’d have $92 million today.[1]

If you invested $92 million in Enron, you’d have zero dollars today.

If you sold stocks last December because the market was down 15%, you missed a 36% return in the S&P 500 this year.

If you sold bonds last year because you expected the Federal Reserve to raise interest rates this year, you missed a 13.7% return in long-term bonds through the iShares 20+ Year Treasury Bond ETF (TLT).

If you create a budget, it will help you with your spending.

If you spend less than you earn, you’ll save money.

If you save money, your assets will grow.

If you try to keep up with the Joneses, you’ll end up in the poor house.

If you make a Will or a Trust, you’ll protect your family.

If you own life insurance, you’ll also protect your family.

If you own long-term care insurance, you’ll protect your assets if you move into an assisted living facility.

If you participate in a high deductible health insurance program, consider opening a Health Savings Account to offset the cost of healthcare.

If you’re going to live in your city for five years or more, buy a home.

If you have a mortgage, add a few dollars to your monthly payment so you can pay it off early.

If you move often, rent a home.

If you have children, invest early and often so you can pay for some, if not all, of their college education.

If you work for a company that offers a retirement plan, contribute as much as possible so you can eventually enjoy your retirement.

If you have financial assets to meet your spending needs, defer your Social Security benefits until age 70 so you can qualify for the maximum benefit allowed.

If you have any assets, consider donating to a charity or causes you and your family support.

If you own an IRA or workplace retirement plan, check your beneficiaries to make sure they’re current.

If you complete a financial plan, you’ll have three times more assets than those people who do little or no planning.[2]

If you work with a Certified Financial Planner®, they will put your interest first.

If you finished reading this blog, thank you and Merry Christmas!

“First, solve the problem. Then, write the code.” – John Johnson

December 17, 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] Morningstar Office Hypothetical

[2] http://www.nber.org/papers/w17078