Black Sheep

I loved Brewster’s Millions starring Richard Pryor and John Candy. Richard Pryor’s character had to spend $30 million in thirty days to inherit $300 million. A nice problem to have, I guess.  

Estate planning is vital, especially if you want to efficiently pass your assets to the next generation, but what to do if a family member is a black sheep, a bad seed, a wayward child, a lost soul, or a spendthrift? The easy thing to do is eliminate them from your will, but it’s not the correct answer because it may cause permanent damage to your family.

If you’re concerned your child will recklessly spend their inheritance, there are several actions you can incorporate today to protect your nest egg and the relationship. Let’s look at a few.

  1. Establish a spendthrift trust. It’s an irrevocable trust that limits the beneficiary’s ability to access the principal.[1] Your trustee will pay out a percentage of the trust assets according to your wishes. The trust protects your principal, and your child receives the assets over time.
  2. Set milestones or incentives. You can include targets, limits, or restrictions into your will or trust. For example, your estate can pay a percentage of the assets every five or ten years. It can distribute more funds to your child as they grow older, so they receive more money at age 50 than they did when they were 30. Other targets may include marriage, a job, or a college degree. It’s your estate, so you can get as creative as you want.
  3. Give them money today. If you’re worried your child will implode when they inherit millions of dollars at once, give them a few thousand dollars now to see how they steward the assets. If you’re confident they can manage money prudently, amend your estate plan accordingly.
  4. Communicate your concerns. Discuss your estate plan with your children and voice your concerns. An open dialogue is a healthy way to manage a difficult situation. Don’t let your children try to figure out your wishes after you’re gone.

Eliminating a child from your will may cause more harm than good, especially if they have siblings. A sibling rivalry can last for decades. You might win the battle, but you will lose the war. Do you want to be remembered for removing your kids from your estate plan? Probably not. Rather than eradicating them from your will, create an estate plan that benefits all parties.

An attorney friend once told me he makes good money developing an estate plan, but he makes great money when he settles an estate without a will or trust. Don’t delay; create your plan today!

A good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous. ~ Proverbs 13:22

May 25, 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] https://www.nolo.com/legal-encyclopedia/spendthrift-trusts.html#:~:text=A%20spendthrift%20trust%20puts%20restrictions,can%20his%20or%20her%20creditors. Betsy Simmons Hannibal, website accessed 5/24/2021

The Best Investment Strategy Ever!

Investors want an edge, a shortcut to wealth. What strategy works best? Who has the hot hand? How can I make money? Today, there is no shortage of podcasts, videos, blogs, vlogs, newsletters, posts, or tweets offering investment guidance. A Google search for investment advice yielded about a billion results.  CNBC dedicates most of its programming to the stock market. Reddit and WallStreetBets are introducing a new generation of investors to the wonderful world of stock trading. Bitcoin speculators with laser beam eyes trumpet their financial success by buying and selling digital currencies. There are many ways to make money in the stock market, so how can you find the best one?

I’ve read hundreds of investment books about investing learning from the legends like Warren Buffett, Peter Lynch, William O’Neil, Bill Miller, John Rogers, and so on. They have different investment strategies, and all of them are successful. Regardless of their style, they’re profitable because they follow a disciplined process and think long-term.

However, the best investment strategy that yields the most fruit is saving money. If you can save your money, you can prosper financially. It’s not hard to save 5%, 10%, or 20% of your salary, but few people do it. Building your nest egg takes time and discipline.  By saving a few hundred dollars every month, your nest egg may be worth a few million dollars by the time you’re ready to retire. For example, saving $500 per month and investing it in the stock market could be worth more than $1 million in thirty years. In forty years, it climbs to more than $3 million![1]

What if you don’t want to wait thirty or forty years? Let’s say you want to buy a new car in five years or a home in ten? Well, saving money is still the best way for you to reach these goals. For example, if you save $500 monthly for five years, it will be worth close to $39,000, enough to buy a new car. After ten years, it will be worth $102,000, enough for a downpayment on a $500,000 home.

I work with a young couple who save regularly and are now able to buy a new home. They started looking for their dream home about a month ago. Another client has contributed the maximum to his 401(k) plan for his entire career, and he can retire early.

Saving money takes effort. It’s not easy, especially when life gets in the way, but you need to find a way to save as much as you can. Money in the bank gives you the freedom to choose your path and lessen your dependence on others.

I’ve talked to numerous individuals about investing, and some people are spendthrifts, and money burns a hole in their wallet -money in, money out. People who live for today are like the grasshopper in The Ants & the Grasshopper from Aesop’s Fables[2]. Here is the story:

One bright day in late autumn a family of Ants were bustling about in the warm sunshine, drying out the grain they had stored up during the summer, when a starving Grasshopper, his fiddle under his arm, came up and humbly begged for a bite to eat.

“What!” cried the Ants in surprise, “haven’t you stored anything away for the winter? What in the world were you doing all last summer?”

“I didn’t have time to store up any food,” whined the Grasshopper; “I was so busy making music that before I knew it the summer was gone.”

The Ants shrugged their shoulders in disgust.

“Making music, were you?” they cried. “Very well; now dance!” And they turned their backs on the Grasshopper and went on with their work.

Moral: There’s a time for work and a time for play.

The Bible also comments on the ant in Proverbs 6:6-11: Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest. How long will you lie there, you sluggard? When will you get up from your sleep? A little sleep, a little slumber, a little folding of the hands to rest— and poverty will come on you like a thief and scarcity like an armed man.

Did you notice the last verse? It read: poverty will come on you like a thief. Saving money provides provision and a financial future. On the other hand, if you don’t save your money, there can be dire consequences. Also, if you don’t save money, you can’t buy stocks, bonds, Bitcoin, or any other investment.

To increase your odds of investment success, automate your savings. Set up a monthly draft to your savings account, brokerage account, and company retirement plan. If you get a raise, increase your savings by the same percentage: a 2% raise, a 2% increase in savings.

Money compounds over time, so the sooner you start, the better. If you’re not sure how much to save, start small and increase it over time. Don’t delay; start today! I know you can do it!

Do not save what is left after spending, but spend what is left after savings. ~ Warren Buffett

May 22, 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] $500 monthly investment at 10% before taxes and fees.

[2] http://read.gov/aesop/052.html

A Day At The Races

I spent last Sunday at the races with my mom and daughter. We had a great time despite the cold and drizzly weather. We arrived early, stayed late, and bet often.

I grew up near the Santa Anita racetrack. My high school was across the street, so I was a frequent visitor. In addition, my daughter has been riding horses since she was five, so it’s a sport we bond over.  

After downloading the daily racing forum, we examined each horse’s sires and dams and spent the evening handicapping the horses. We reviewed their previous workouts, race performances, owners, and trainers. At the racetrack, we got the official daily racing program that includes some data on the horses and riders. We were ready.

On race day, we bet on our selected horses. Our strategy and system worked well as we finished in the money for seven of the nine races. We hit an exacta in the eighth race and missed another by a nose in the sixth.

We bet conservatively for most races, but when we felt convicted, we upped the ante and pressed our bets. We felt confident in our system because we spent time doing our homework. If we only relied on the official program, we would have performed poorly. It would have been a guessing game, picking horses based on the jockey’s colors or some other random item.

At times it appears people pick investments based on random facts or data points that won’t move a stock’s price. Rather than doing their research, they choose investments from a tweet, text, or tik-tok video. If you hear about a stock on CNBC, it must be a good investment. Right?

Don’t leave your financial future to chance. Instead, take time to learn something about your investments. Here are a few tips you can use to increase your odds of success.

  • If you’re buying a stock, review the company’s mission statement, financials, price charts, and competition. Yahoo! Finance is an excellent data source. Digging into a company’s financial history can give you an idea of its future.
  • If you’re buying a mutual fund or ETF, review the fund’s objectives, managers, expense ratios, holdings, and the other funds in the category.
  • How much can you invest? Do you want to own several stocks, or do you want to place your bets on a few long-shots? If you have buckets of money, you can own many companies. However, if your resources are limited, owning a mutual fund is more prudent.
  • What is your risk management strategy? Will you let your winners run? Will you sell your losers? Will you buy the dip? Create a plan and follow it. Don’t let your emotions ruin your portfolio.
  • Review your trades, especially if you lost money. Why did your investment fail? What happened? How can you improve your trading based on your experiences? For example, in the sixth race, we lost an exacta because our horse came in third, not second. After the race was over, I reviewed our process to see if we missed anything. We didn’t. Our horse was solid; it just got beat.
  • Celebrate your success. If you made money on a trade, take a few chips off the table and celebrate your win. It’s okay to spend your winnings on things you enjoy.

If you’re inclined to work harder than the next person, you can win at the races, in the markets, and life. Unfortunately, few people are willing to go the extra mile, but I know you can do it. I’m betting on you to win!

And away they go!

A good rider can hear her horse speak to her. A great rider can hear her horse whisper. ~ Anonymous.

“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

May 19, 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.

Financial Literacy

My wife and I were band volunteers during my daughter’s high school years. One summer, my wife worked at the payments table when a student approached her about paying for his items, but he didn’t know how to write a check. He never learned how to use a checkbook, and he was a senior!

Financial literacy is a concern since most kids are taught little about banking or finance. According to one study, college students carry an average loan balance of $37,000, and the Federal Reserve Bank of New York reports that the collective debt level is $1.6 trillion.[1] If students (and parents) had a basic understanding of finance, the student loan crisis would not be a crisis. The student-loan debacle is a result of poor financial literacy, and we’re all paying for it.

If you have children or grandchildren in elementary, junior high, or high school, here a few things you can do today to give them a boost, and the sooner you start, the better. As Yosemite Sam would say, “Time’s a wastin!”

  1. Open a checking and savings account so they can experience the banking system up close. Help them transfer 10% of all deposits from their checking account to their savings account. For example, if they deposit $100 to their checking account, transfer $10 to savings. Teach them how to use their bank’s online portal.
  2. Give them access to their debit card and encourage them to use it while shopping. When you dine at a restaurant, make them pay the bill with their debit card. Show them how to use the ATM.
  3. When they’re old enough, open a credit card in their name so they can start to build their credit history. If you’re concerned about excessive spending, put a spending limit on the card. I recommend linking the credit card to their checking account for automatic payments, so they don’t incur any late fees.
  4. Buy a few shares of stock in several companies. Let them pick the companies, so they have an interest in following their progress. A great way to learn about financial markets and the economy is to own individual stocks because they will have skin in the game. They’ll also learn a lot by reading annual reports from Berkshire Hathaway, Apple, JP Morgan, and Tesla.
  5. Encourage them to donate 10% of their income or savings to charities. Help them help others through giving. A giving mindset is emotionally and financially rewarding.

Please don’t wait until your kids get their first job after graduating from college before learning the basics about money; educate them today on banking and finance. Then, your children will make wise financial choices, and they won’t live in your basement until they’re forty.

The lack of money is the root of all evil. ~ Mark Twain

May 10, 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] https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007, Daniel Kurt, March 16,2021

I Want It All!

I’m addicted to stocks. They’re shiny objects to me, and I want to own them all. I’m not impressed with cars or material things, but show me a portfolio of stocks, and I get excited.

I run several stock screens daily, looking for the next market mover, hoping to find a company that can rise 10x or more. I search for large, mid, and small size companies. Some screens filter for earnings, others for dividends. My anxiety surges because I want to buy them all, and I know I can’t; it’s mathematically impossible.

When I started my investment and financial planning firm, I made the gut-wrenching decision to sell my stock holdings in my IRA. I said goodbye to Apple, Home Depot, Microsoft, Pepsi, McDonald’s, and dozens more. It was a tough call, but I had to do it; it was a humbling experience, but I needed to check my ego at the door.

However, I kept my historical allocation of 75% stocks and 25% bonds after buying a basket of mutual funds managed by Dimensional and Vanguard. My passive approach gives me exposure to tens of thousands of companies. I no longer fret about missing the next great company because I probably own it in one of my funds.  

When I owned individual stocks, I checked my IRA balance constantly, trying to absorb every tick. Now that I invest in mutual funds, I go days or weeks without looking at my balance. My IRA is in capable hands, so I don’t feel the urge to micromanage the investments. And my anxiety level has dropped.

My IRA rebalances a few times per year if the allocation gets too aggressive or too conservative, so my turnover is low, and I will keep my 75% allocation to stocks for the foreseeable future. Since I converted to a passive investment model, my average annual return for my IRA has been 11.9%.[1]

Another reason to go passive is that most active fund managers and stock pickers fail to outperform their benchmark. According to Morningstar’s SPIVA study, more than 80% of large-cap mutual fund managers underperform the S&P 500.[2]

It was hard to surrender my stock-picking model, but I did it, and so can you. My passive IRA gives me global stock exposure, reduces my stress, frees up my time, and generates decent returns – not too shabby.

Humble yourselves before the Lord, and he will exalt you. ~ James 4:10

May 6, 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] Last five years, ending May 6, 2021.

[2] https://www.evidenceinvestor.com/morningstar-active-passive-barometer/, Robin Powell, April 1, 2021

Are You Rich?

Bill and Melinda Gates shocked the world by announcing their divorce after twenty-seven years of marriage. Likewise, Jeff Bezos and his ex-wife, MacKenzie Scott, divorced two years ago after a quarter of a century of marital bliss. Collectively, these four are worth $380 billion, so it’s true, money can’t buy love.

Globally, more than 3 million people died from COVID. At the pandemic’s peak, 15% of our population were unemployed, numbers not seen since the Great Depression. And, nearly 100,000 businesses closed their doors forever.[1]

Closer to home, my dad had successful bypass surgery; my uncle endured a marathon cancer surgery. A college classmate lost his dad a few weeks ago, a friend from high school told me he was a recent cancer survivor, and a dear friend lost his life to COVID.

I recently switched cardiologists for insurance reasons, so I updated my vital signs. My doctor ran a battery of tests, checking me from head to toe, inside and out. Thankfully, no issues. I look like a Volkswagen, but I run like a Porsche.

My net worth calculates to the penny and updates in real-time. Several apps inform me of changes to my investments. In addition, I have spreadsheets from here to Mission Beach that calculate multiple financial scenarios. My HP 12c rarely leaves my side. I use professional financial planning software to determine my fate. My money never sleeps.

I’ve been in the investment business for thirty-plus years and have seen thousands of accounts from a few dollars to hundreds of millions. And, for the most part, the accounts are the same, save for a few zeros, and the goals are similar – people want to make money and avoid losses; they want wealth without risk. We want to be rich.

What does being rich mean? I can calculate your net worth to tell you if you’re rich or not based on worldly data, but does it matter if you’re in poor health or have tattered relationships? I don’t think it does. Also, if you’re losing sleep because of your investments, you own the wrong assets. If you’re worried a market correction will ruin your life, your allocation to stocks is too high. Maybe it’s time to redefine the definition of wealth.

I am rich because I’m healthy with a loving wife, a beautiful daughter, a supportive family, great friends, and a couple of crazy pets.

What’s your definition?

Do not wear yourself out to get rich; do not trust your own cleverness. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle. ~ Proverbs 23:4-5

May 4, 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] https://fortune.com/2020/09/28/covid-buisnesses-shut-down-closed/, September 28, 2020 by Anne Sraders and Lance Lambert

Do As I Say?

Berkshire Hathaway held their annual shareholder’s meeting in Los Angeles on Saturday led by Warren Buffett and Charlie Munger. The two held court on everything from Bitcoin to taxes. At one point, Mr. Buffett mentioned the twenty largest companies in the world by market capitalization. The list included powerhouses like Apple, Amazon, Facebook, Tencent, and Walmart. He wondered how many of these behemoths would be on the list thirty years from now. He then highlighted the top twenty companies from 1989, and not one of the companies made the current list. The 1989 list included IBM, Exxon, GE, and Merck.[1]

Mr. Buffett added that most people should invest in an S&P 500 index fund and ignore picking individual stocks because the top companies are constantly changing. Owning index funds gives you access to the world’s leading companies, regardless of their size or location.

Despite Mr. Buffett’s previous comments on buying an index fund, his stock crushed the S&P 500 by 114% for the past thirty years. So should you do what he says or do what he does?

However, if we shorten the window to ten years, the S&P 500 beat Berkshire Hathaway by 39%.

For the past five years, the index has outperformed Berkshire Hathaway by 33%.

And, finally, for the past year, the two are locked in a dead heat.

Investing is more than buying stock in Berkshire Hathaway or picking an S&P 500 index fund. Instead, investors should choose a globally diversified portfolio of index funds, including domestic, international, emerging, and small-cap stocks. Adding a pinch of bonds and real estate holdings will also help.

The United States accounts for 57% of the world’s market capitalization.[2] US stocks trounced international companies for the past ten years by 184%, so why invest in a global portfolio? Because markets are perpetually moving. International markets outperformed US stocks during the first decade of this century – 2000 to 2010. And adding small caps can give your portfolio a boost. For the past year, small companies crushed large ones by 34%.

I agree with Mr. Buffett that most investors would benefit from a basket of index funds. Index funds are low-cost and tax-efficient. They also give you exposure to thousands of companies around the world. Another benefit of index funds is that you don’t have to find tomorrow’s winners. According to YCharts, there are 21,079 publicly traded securities. Is it possible to unearth tomorrow’s best companies today? An arduous task, but if you owned several index funds, your odds increase dramatically. It’s also less stressful.

For the past thirty years, a balanced portfolio of mutual funds consisting of 60% stocks, 40% bonds has produced an average annual return of 10.29%, and it has made money 83% of the time. A $10,000 investment is now worth $193,300.[3]

Mr. Buffett’s advice is usually correct, so I recommend we follow it this time by investing a majority of our nest eggs in a basket of index funds.

“A low-cost index fund is the most sensible equity investment for the great majority of investors,” said Buffett. “By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals.” ~ Warren Buffett

May 3, 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] https://www.yahoo.com/news/warren-buffett-evolution-worlds-largest-183022665.html

[2] DFA 2021 Matrix Book

[3] DFA Returns Web – 1/1/1990 to March 31,2021.