Chaos

Yesterday was a dark day for our country. I watched in horror as an angry mob stormed the Capitol Building, besieging the capitol police. Certifying the Electoral College votes is typically a ceremonial event, administered without fanfare, but not yesterday as rioters forced Congress members to put on gas masks and flee the chamber. The last time unruly thugs stormed the Capitol Building was 1812, 209 years ago. Despite the chaos, the market snubbed the news and closed higher, and today it’s trading to all-time highs.

I talked with a few clients yesterday who were concerned about a market sell-off because of the domestic terrorist attack. They wanted to sell their holdings and wait for the storm to pass. I recommended they stay invested since the event would probably be short-lived. As I addressed their concerns, they were surprised the market was trading higher.

The market historically has overlooked political unrest and disruption. As Joe Kernen of CNBC said this morning, “The market has no conscience.” He’s right. It has no soul or moral compass. The stock market focuses on economic activity, earnings, and interest rates, to name a few. It looks forward, paying little attention to today’s news, especially if it does not impact America’s economic engine.

On September 11, 2001, foreign terrorists attacked our country. The Dow Jones fell 17.2% for about two weeks but quickly rebounded. By January 1, 2002, it recovered.

President Ronald Reagan’s assassination attempt was on March 30, 1981. I was in high school, sitting in a psychology class, and my teacher brought in a TV to let us watch the dreadful event. The Dow Jones dropped 2.25% after the shooting, but it regained the losses a few months later.

President Nixon resigned in disgrace on August 9, 1974, because of the Watergate Scandal. The Dow fell more than 20% over the next few months, but it had recuperated the losses by April 1, 1975.

President Kennedy was killed on November 22, 1963, in Dallas, Texas. The Dow dropped 5.6% on the shocking news, but by January 1, 1964, it was trading in positive territory.

If you’re concerned about chaos and uncertainty, here are a few suggestions to help you manage your investments.

  1. Do nothing. During the initial hours or days of an attack or unprecedented event, the market may fall, but it won’t stay down for long if the news isn’t impacting the economy.
  2. Buy more. If there is not a structural hit to our economy, the market will quickly recover. The best bargains for buying stocks are during the dark days of a decline.
  3. Follow your plan. Events like yesterday are short-lived, and your financial plan can last decades, so don’t sacrifice a few days of turmoil for years of growth and prosperity.

I was saddened and upset to watch the attack on our Capitol Building, and I couldn’t believe insurgents breached the security detail. Unfortunately, our country has been littered with horrible and unspeakable acts, like Abraham Lincoln’s assassination, the Pearl Harbor attack, and Bloody Sunday in Selma, Alabama. Our great nation is 245 years young with many great days ahead, and a few domestic terrorists will not derail our country’s ideals or beliefs.

May God continue to bless the United States of America.

America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves. ~ Abraham Lincoln

January 7, 2021

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.

FOMO

Tesla, Plug Power, Fiverr, Stitch Fix, Sunrun, Zillow, Chewy, Pinterest, and Peleton – the list goes on. Many stocks soared last year, rising more than 100%. Do you feel like you’re on the outside looking in as others get rich buying stocks highlighted by a few storybook names?

It would take hundreds of thousands of dollars to buy every company traded on the market. If you could, it would give you access to high-flyers – at all times. Yet, there is a way to buy the market with one fund. The Vanguard Total Stock Market Index Fund gives you access to nearly every publicly traded company.

The Vanguard Total Stock Market Index Fund owns micro -, small -, mid-, and large-cap stocks. A few of the top 25 holdings include Apple, Amazon, Tesla, NVIDIA, Home Depot, and Netflix, each of these companies turned in stellar performances last year. The fund itself earned 21% last year and 31% in 2019. The 15-year average annual return has been 9.88%, and since 1992 it has produced an average annual return of 10.29%, outperforming the S&P 500. A $10,000 investment from 1992 is now worth $166,250.[1]

If you’re worried about missing out on the party, consider a total stock market index fund.

January 7, 2021

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] YCharts. Vanguard Total Stock Market Index Fund (VTSAX), 4/27/1992 to 1/5/2021.