7 Things To Do Before the Election

The presidential election is less than forty days away, and investors are getting nervous.

Forty days before the 2016 election, the markets remained relatively quiet, and the S&P 500 barely budged – falling .54% from the end of September to election day. Volatility spiked fifteen days before the election, but it did not have any impact on the market.

Forty days after the 2016 election was over, the S&P 500 rose 5.54%, and volatility dropped significantly. If you remained invested through the election cycle, you probably made money. The market finished 2016 in positive territory, rising 9.54%.

Here are seven steps to take as we get closer to election day.

  1. Do nothing. Historically, elections have had little impact on the long-term direction of the market.
  2. Raise cash.  A cash reserve gives you flexibility if you want to buy stocks if they should fall.
  3. Identify stocks. Create a shopping list of five to ten companies you want to own. If they drop in price, add them to your account.
  4. Sell everything. If you’re worried about a market crash, sell your holdings and move your assets to cash. If you sell your stocks in a taxable account, you may incur a significant capital gains tax.
  5. Sell calls. Selling calls on stocks you own is an excellent strategy for generating income. It can also provide some downside protection.
  6. Buy puts. A put option provides downside protection for your portfolio. You can purchase a put option on a single stock like Apple or Tesla, or you can protect your entire portfolio. Buying put contracts is expensive, but it allows you to remain invested without selling your stocks.  
  7. Vote. Several states are open for early voting. Here is a link to a voter registration site: https://vote.gov/

Happy voting!

After forty days, Noah opened a window he had made in the ark and sent out a raven, and it kept flying back and forth until the water had dried up from the earth. ~ Genesis 6:6-7

September 28, 2020

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

And Down The Stretch They Come!

Dave Johnson is known for this call, “And down the stretch they come!” Mr. Johnson has been calling horse races since the early 1970s, including the Kentucky Derby, Preakness, and Belmont Stakes. There are few things more exciting in sports than watching horses make the final turn towards the finish line – the stretch run.

We’re entering the fourth quarter, and 2021 is less than 100 days away – thankfully. We are in the stretch run. When horses enter the starting gate, the optimism is high; each horse has a chance to win. As the race progresses, the fastest horse separates itself from the field, and jockeys need to adjust their strategy to catch the leader. This year started with much hope, especially after a stellar 2019. The Dow Jones was up  3% through February before the world imploded with the Coronavirus. As the pandemic spread, the market fell 37%. For the past six months, we had to adapt to a new normal – masks, social distancing, self-quarantines, Zoom Calls, hand sanitizer, and a shortage of toilet paper. Hopefully, we finish the year on a positive note with strong momentum for 2021.

As we approach the end of the year, what can you do to enhance your investment portfolio for 2021 and beyond? Here are a few suggestions.

  • Let your winners run. A jockey who is riding a winning horse needs to hold on to finish the race as Ronney Turcotte did when he rode Secretariat during the home stretch of the Belmont Stakes in 1973. If you’re sitting on winning stocks, hold them until next year before realizing your gains.
  • Sell your losers. If you own a stable of losing stocks, sell them to realize your losses for this year. You can offset your gains dollar for dollar, and if you don’t have any profits, you can carry your losses forward forever. Hall of Fame pitcher Don Drysdale sold his racehorses because he said the slow ones eat as much as the fast ones.
  • Diversify your holdings.  Owners and trainers race several horses during a season – some win, some lose. A globally diversified portfolio of stocks, bonds, and cash will allow you to finish in the money more often than not. Spread your bets across several sectors.
  • Review your accounts. What worked and what didn’t? Analyzing your results is vital for investment success. Are you still on pace to achieve your financial goals? If you’re not sure, give us a call. We can help.
  • Adjust. What changes do you need to make for 2021? Is your portfolio sturdy enough to weather all types of market conditions? What changes can you make today to better position your investments for a profitable run next year?
  • Look for long shots. The technology sector will likely lead wire to wire this year, but sectors like energy and financials were left stuck in the mud. Look for investments that may rebound next year.
  • Celebrate your success. Are your investments on pace to finish the year in positive territory? Will you be in the winner’s circle at the end of the year? If you were financially successful, consider sharing your winnings with those in need. Donating money to a non-profit will benefit others and help you reduce your taxes – a win, win.

This year has been brutal, and it can’t end fast enough. We are in the stretch run, so use these next few months to get your house (barn) in order. I know you can do it. I’m betting on you to win big next year.

Riders up.

Do you give the horse its strength or clothe its neck with a flowing mane? Do you make it leap like a locust, striking terror with its proud snorting? It paws fiercely, rejoicing in its strength, and charges into the fray. It laughs at fear, afraid of nothing;  it does not shy away from the sword. The quiver rattles against its side, along with the flashing spear and lance. In frenzied excitement it eats up the ground;  it cannot stand still when the trumpet sounds. At the blast of the trumpet it snorts, ‘Aha!’ It catches the scent of battle from afar, the shout of commanders and the battle cry. ~ Job 39:19-25

September 23, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management 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 Pendulum

The passing of Justice Ruth Bader Ginsburg is a tragic loss. I learned about her life from the movie On The Basis of Sex, and I’ve enjoyed reading the recent articles about her accomplishments. She opined on many issues, and one quote from a 2017 interview with the BBC particularly stood out to me.  Justice Ginsburg said, “I am optimistic in the long run. A great man once said that the true symbol of the United States is not the bald eagle. It is the pendulum. And when the pendulum swings too far in one direction, it will go back.”

As an investor, the pendulum analogy resonated with me because markets, all markets, have wide gyrating swings and rarely remain stagnant. Since 1926, the S&P 500 has generated an average annual return of 10%, but it has never closed a calendar year with a 10% gain. The range of returns has been far and wide. In 1931 the S&P 500 fell by 43%; in 1933, it rose 54%. Extreme market moves are not limited to stocks. US long-term interest rates rose from 6% to 15% from 1972 to 1982. They fell back to 6% in 1992. The spot price for West Texas Intermediate Crude climbed to $133 from $47 in three years. It would collapse back to $47 one year after reaching its peak price. Gold hit a high of $637 per ounce in 1980, and it did not breach this price again until 2007. Recently, gold climbed above $2,000 per ounce, passing the previous high set in 2011. It dropped 42% from 2011 to 2015. Markets are continuously moving, which is emotionally challenging for investors.

When a trend is in place, investors assume it will last forever, and forever is a long time. From January 1995 to March 2000, the NASDAQ rose 542%. Convinced it would continue, individuals were buyers of stocks. It peaked in March 2000 and then fell 75%. It would not eclipse its previous high for another fifteen years.

Growth stocks have outperformed value stocks for the past two decades, and investors are confident value is dead. A Google search for “Is value dead?” will produce thousands of articles. At some point, value will beat growth, but no one knows when this will occur.

A shifting market can be beneficial to investors. When the pendulum swings too far to the left and stocks become cheap, use it as an opportunity to buy great companies at lower prices. When it swings too far to the right and stocks become overvalued, sell some shares to lock in your profits. A market in motion is favorable to the enterprising investor.

What if you don’t want to own fluctuating investments? Can you altogether avoid risk? Yes, in the short term. The one-month US T-Bill has never lost money if held to maturity. It’s considered the safest investment in the world. Of course, you won’t make money either after taxes and inflation. The 94-year average annual return for the one-month T-Bill has been 3.3%, and inflation averaged 2.9%, so your net return, before taxes, was .4%. A $1 investment in 1926 was worth $22 in 2019. The same $1 invested in the S&P 500 increased to $9,237, or 41,886% more than the safe investment.[1]

Of course, no trend lasts forever. The Boston Red Sox and Chicago Cubs were cursed never to win another World Series until they did in 2004 and 2007, respectively. In 2016, the Cleveland Cavaliers won the NBA championship, the cities first major sports title since 1964.

If trends don’t last forever, how can you take advantage of an ever-changing market?

  • Plan. Set goals. A financial plan can help you prioritize and quantify your goals. It can also keep your emotions in check as you oscillate between greed and fear.
  • Diversify your assets. Diversification allows you to own several asset classes like stocks, bonds, and cash.  A diversified portfolio exposes you to a wide variety of investments, some of which should perform well.
  • Cash. Allocating a portion of your portfolio to cash gives you a chance to purchase stocks when they fall.
  • Take Profits. When stocks or bonds rise above your price target, sell some shares, and lock in your profits.
  • Rebalance. Rebalancing your portfolio once or twice per year will help you maintain your risk level and asset allocation. Automating this process will help you to buy low and sell high without emotion.

Markets fluctuate, it’s what they do, so don’t worry when the pendulum swings too far to the left or right. Rather than worrying about extreme cycles, focus on your plan and goals – and the facts of the case.

“So often in life, things that you regard as an impediment turn out to be great, good fortune.” ~ Justice Ruth Bader Ginsburg

September 23, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management 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] Dimensional Matrix Book 2020

Hope Is A Strategy

Hope is in short supply, and people are hurting. We’re battling a global pandemic, fires, floods, racial tension, economic uncertainty, and political turmoil – dark days, indeed. It’s hard to imagine it getting better, but it will. Try to find the good among the bad. Mr. Rogers once said, “When I was a boy, and I would see scary things in the news, my mother would say to me, ‘Look for the helpers. You will always find people who are helping.'” Great advice. There’s always a silver lining. It takes courage to rely on hope and faith, but it’s essential that you do if you want to succeed.

What is hope? Webster’s dictionary defines it as a desire with expectations of obtainment, and to expect with confidence.  Powerful words. In addition to confidence, it takes patience, humility, and wisdom to rely on hope because we can’t see it or touch it. It’s not tangible.

The investment community says hope is not a strategy, but I disagree. Financial planners and investment managers, including me, tell clients they must plan to achieve their goals. It’s true, a financial plan is needed, but you also need hope, especially when the stock market crashes as it did in March. As Mike Tyson said, “Everybody has a plan until they get punched in the mouth.” When your plan is not working and the days are dark, you need faith that things will be better tomorrow. Hope implies optimism.

I rely on financial planning software, Excel spreadsheets, and my faithful HP12c calculator to help clients obtain their goals. I also use these resources for my business. When I launched my firm five years ago, I was full of hope and faith. It’s all I had. I was confident my business would flourish, so I didn’t worry about not having clients. I pursued each day with optimism. And, day by day, I built my business.

In helping others reach their financial goals, I must have faith in the long-term trend of the stock market and the resilience of the American economy. I have centuries of data supporting my thesis when I talk to clients about their future, but the information is historical. It already happened. How do I know it will continue? How do I know the stock market will be higher 100 years from now? I don’t, nor does anyone else. It’s a guessing game. However, as history as our guide, I like our odds of success.

When times are tough, like now, it’s imperative to have faith in the future. I was talking to a client this week who is struggling.  We talked through a few issues, and I suggested focusing on the good things and to look at all the positive signs in his life. It’s hard to be upbeat, but it’s necessary to keep moving forward.

Here are a few suggestions to help you keep moving forward.

  • Serve others. Volunteer your time to help those in need. Serving people who can only repay you with a smile, hug, or handshake is time well spent.
  • Donate. If you have financial assets, consider donating money to your local food bank or soup kitchen. A Google search for non-profits in your neighborhood will produce several results. Pick one and send them a check.
  • Deliver. Do you know a neighbor who can use a helping hand? Cook them a meal. Mow their lawn. Wash their car. Buy them a cup of coffee. Listen to their story.
  • Sing. It’s hard to feel sorry for yourself when you’re singing, especially with others. For the record, I have a horrible voice, and I can’t sing, but I do it anyway.
  • Mentor. Kids need mentors and tutors now more than ever as schools shut down, and parents return to work. Do you have time to help someone with their studies?
  • Plant. Plant some trees, bushes, or flowers. Start a garden. Add some color to your backyard. Hang up a hummingbird feeder or install a birdbath.
  • Laugh. Watch a comedy or read the comics. My family has a collection of Far Side cartoons by Gary Larson. We flip through the pages occasionally to get a belly laugh.
  • Exercise. A walk or run can give you a quick reset. Play tennis or golf. Ride a bike. Go for a swim.
  • Watch. Wake up early to watch a sunrise or gather some friends to view a sunset. When I lived in Mission Beach (San Diego), hundreds of people would walk to the boardwalk to look at the sunset. I’ve never been disappointed by the beauty of nature.
  • Adopt. A dog or cat can bring joy to your household. Visit your local humane society to adopt an animal. If you don’t want to care for a pet, watch some Youtube videos about animals – it will put a smile on your face.
  • Pray. Plug into a higher power source.  

As a nation, we have endured worse. It’s a difficult time for all, but it will pass. Focus on the things you can control, don’t worry about tomorrow, and keep the faith.

Gotta have hope!

Now faith is confidence in what we hope for and assurance about what we do not see. ~ Hebrews 11:1

September 18, 2020

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

Do You Need To Beat The Market?

Investors want to crush the stock market, and rightfully so, but is it necessary? Must you beat the stock market to reach your goals? Since 1926, the S&P 500 has generated an average annual return of 10.1%. If you earn 10% per year, your money will double every seven years. Allocating all your assets to stocks may allow you to better the market’s returns, but it isn’t likely, especially over time. And, once you start to diversify your portfolio by adding bonds or real estate or international stocks or cash, you probably will only better the market in down years, and who wants to be the best loser? As Ricky Bobby said, “If you’re not first, your last.”

According to a recent Wall Street Journal article: “Members of the American Association of Individual Investors found that they overestimated their own investment returns by an average of 3.4 percentage points a year relative to their actual returns, and they overestimated their own returns relative to those of an appropriate benchmark by 5.1 percentage points.”[1]

However, all is not lost if you don’t outperform the S&P 500. In fact, you can do quite well by not posting above-average returns. What matters most to your financial future is saving and longevity. The more money you can save, and the longer you can do it,  the better your financial foundation will be. For example, my daughter opened a Roth IRA a few years ago. If she invests $6,000 per year for fifty years in a generic balanced fund, her account balance could be worth more than $6.5 million.

To dig into balanced funds deeper, let’s look at a few managed by Putnam, American Funds, Fidelity, Schwab, and Vanguard. The average allocation for these funds is 61% stocks, 34% bonds, and 5% cash – an allocation some financial experts consider a relic.

George Putnam Balanced Fund (PGEOX). Launched in 1937, this balanced fund has generated an average annual return of 8.91%. Investing $10,000 per year from inception is now worth $144 million! However, if you invested all your money in the S&P 500, it would be worth about $310 million today. You trailed the market by $166 million. By not investing in the market, you “lost” more than you made. If this fund was in your account today, would you be disappointed with a balance of $144 million? I doubt it.

American Funds American Balanced Fund (ABALX). Since 1975, this balanced fund produced an average annual return of 9.99%. Investing $10,000 per year from July 1975 to August 2020 is now worth $8.03 million. If you invested in the S&P 500 instead, you’d be worth $10.5 million. Would you be upset with $8 million in your bank account? Unlikely.

Fidelity Balanced Fund (FBALX). Since 1986, the Fidelity Balanced Fund has averaged 9.26%. A $10,000 annual investment, for 34 years, is now worth $2.25 million. It also underperformed the S&P 500. If you allocated 100% of your assets to the S&P 500, your balance would be $2.7 million. Are you offended with an investment account balance of “only” $2.25 million? Probably not.

Schwab Balanced Fund (SWOBX). Schwab’s balanced fund started in 1996, and it has generated an average annual return of 7.15%. Investing $10,000 per year for 24 years produced a gain of $629,000. A similar investment in the S&P 500 would be worth about $850,000. You underperformed the market by more than $200,000, but you still have $629,000.

Vanguard Balanced Fund (VBAIX). Vanguard’s fund is twenty years old. It opened for investing in 2000 at the top of the Tech Wreck and the start of the lost decade. Despite starting a fund at one of the worst times in history, the Vanguard Balance fund still produced an average annual gain of 8.29%. Investing $10,000 per year, for twenty years, is now worth $502,000. Like the other funds, it underperformed the market, but you still have a half-million dollars in your account, not too shabby.

Despite these five stellar funds underperforming the market, they produced phenomenal gains for shareholders. The average annual return for these funds has been 8.72%. Year-to-date, they’re up 7%, and for the past year, they’ve increased 13%.

If the S&P 500 offers such stellar returns, why not allocate 100% of your assets to stocks? You can, of course, if you have the temperament, but I’ve found most investors don’t have the fortitude to invest all their money in the market, especially when stocks fall by 30%, 40%, or 50% as they did in 2000, 2008, and 2020. Investors prefer a balanced portfolio of stocks, bonds, and cash based on their long-term goals. Rather than focusing on the market, pay attention to your goals, save your money, follow your plan, and pursue a balanced life.

“Be moderate in order to taste the joys of life in abundance.” Epicurus

September 10, 2020

Bill Parrott, CFP®, 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.

Fund data provided by YCharts and Morningstar.

Picture Credit: Orla, IStock Photos


[1] https://www.wsj.com/articles/investors-still-believe-they-can-beat-the-stock-market-11599491572?mod=searchresults&page=1&pos=1, By Meir Statman, September 7, 2020

Our Fifth Anniversary

It’s been five years since I started my investment firm, Parrott Wealth Management, and, so far, so good. At age 50, I was tired of working for others, so I acted on faith and started my own company. According to Entrepreneur, my odds of survival were 50/50.[1] The author of the article said companies fail because of a lack of focus and motivation or pride.[2] Thankfully, I was motivated to succeed, and I checked my ego at the door.

As a financial planner, I put my planning skills to the test before I started my company. I relied on Excel spreadsheets and my HP12C to crunch numbers to see if my head matched my heart.  I investigated numerous sites on starting a business, read several books, talked to a few people, and prayed always. Running also helped. I ran the San Diego marathon the year I started my business, so I had plenty of time to think through different scenarios on my long runs around Lady Bird Lake and the City of San Diego.

During the summer before my official launch date, I was vacationing at Wind River Ranch in Estes Park, Colorado.  At the entrance to the ranch, the words from Psalm 46:10 are written in stone: “Be still, and know that I am God.” Each morning my wife and I attended a bible study led by Pastor Chris. He spent the week talking about addressing our fears. He and I spoke about his sermons while fishing and hiking; His teachings and insights gave me the courage to act.

At home, I’m part of a men’s bible study. As I was contemplating starting my business, I looked at the other men in the room – all but two were self-employed. If God took care of them, he would do the same for me.  

As I review the past five years as a business owner, I was never afraid or fearful. I had trust in my analysis and my process. My plan was working.  I had faith that God would provide for my needs, and He has, and then some. Here are a few takeaways from our firm’s success.

  • Plan. Before starting my firm, I spent many nights crunching numbers for my family’s finances. I made sure I had enough money in the bank to pay for three year’s worth of expenses, including my daughter’s college tuition payments. I had the financial resources to proceed.
  • Exit. I created a stop-loss for my savings account. If my bank balance dropped below $50,000, I would shutter my business and rejoin corporate America.
  • Spend. I spent a lot of money on the necessities – office space, software, logos, websites, etc. I wanted to offer clients and prospects the same services they would find at larger firms. I also wanted to appear bigger than a one-person shop.
  • Hire. In 2017, I added Janet Jackson as the Director of Client Services. She has allowed me to pursue other activities to grow the firm while handling back-office operations.
  • Try. I tried numerous strategies and pursued many markets as I built the firm – some stuck, most didn’t.
  • Review. I’m continually reviewing strategies and data to make sure our firm is on the right path. I participate in several benchmarking studies, so I know where my firm ranks relative to the competition.
  • Listen. Soliciting feedback from clients, friends, partners, etc. has been vital. Based on their input, I’m able to adjust the firm’s direction.
  • Boundaries. I receive several calls from wholesalers, phone companies, lead providers, advertising specialists, and so on, all wanting a few minutes of my time so they can better understand my business model. I say no, a lot. I don’t clog my calendar with activities that will not benefit my firm or our clients.
  • Thanksgiving. I feel blessed to work for myself. I’m thankful I had the opportunity to start my own company, work with fantastic clients, and hire a great employee.

The Entrepreneur article I referenced earlier gives a business a 30% chance of survival after ten years. Who knows what the future holds, but I like our odds.

“Being self-employed means you work 12 hours a day for yourself, so you don’t have to work 8 hours a day for someone else.” ~ Oliver Markus Malloy,

September 8, 2020

Bill Parrott, CFP®, 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.entrepreneur.com/article/288769#:~:text=In%20a%20study%20by%20Statistic,70%20percent%20after%2010%20years., Patrick Henry, February 18, 2017.

[2] Ibid