Dow 36,000

The Dow Jones Industrial Average will top 36,000 at some point. It’s not much of a forecast because the Dow is currently trading at 35,645, and it surpassed 36,000 only a few weeks ago. However, in 1999, authors James K. Glassman and Kevin A. Hassett projected the Dow would soar above 36,000, which they outlined in their book Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market. It was a bold prediction because the Dow was trading at 10,700 at that time. They argued that stocks were undervalued, and the index would triple in value over the next few years. When they made their prediction, the Dow had soared 168% from 1995 to 1999, averaging 24% per year. How did their prediction turn out?

The Dow peaked about a month after their book was published, and by 2003, the index dropped 23%. It did rebound before crashing again in 2008 to a low of 6,875. Twenty-two years later, their prophecy rang true as the Dow breached 36,000.

Dow 36,000 doesn’t have any shock value today, but how about Dow 250,000? What is your reaction to the index soaring 600%? If the market were to jump seven-fold, how would you allocate your portfolio today? Would you buy stocks or bonds? Would you worry about market corrections?

Why Dow 250,000? Dow 250,000 is a twenty-year goal if the index rises 10% per year. Since 1915, stocks averaged 6.3% per year without dividends.[1] If we included dividends, the average annual return would have been 10%, so my target is not far-fetched. Will the Dow best 250,000? Who knows? It might. If I’m half right, the index will triple from today’s value.

The Dow has tripled since Messrs. Glassman and Hassett published their book despite several recessions, numerous market corrections, rising interest rates, falling interest rates, high inflation, low inflation, and four different presidents – two Democrats, two Republicans.

The stock market rises about three-quarters of the time, so don’t worry about short-term moves. Instead, follow your plan, invest often, and let the long-term trend of stocks grow your wealth.

Prediction is difficult – particularly when it involves the future. ~ Mark Twain

November 24, 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.macrotrends.net/1319/dow-jones-100-year-historical-chart

Can You Do Nothing?

It’s hard to do nothing and harder to disconnect in a connected world. If you have children, you’ve probably heard them say: “I’m bored; there’s nothing to do!” If you want to see how hard it is to do nothing, turn off everything around you and close your eyes for ten minutes. Welcome back. How’d you do? Seinfeld was a show about nothing, and it was one of the most popular sitcoms of all time.

A challenging investment strategy is the buy and hold model, an approach that relies on making few changes to your portfolio over time. You do nothing but sit and wait for your investments to perform. It’s easy to do nothing when stocks rise, but how about when they fall as they did in March 2020 or December 2018? It takes courage and conviction to hold your investments during a market rout, but those that do will enjoy gains when markets recover.

A buy-and-hold strategy is boring and not sexy. Tell people you own a diversified portfolio of index funds that you plan to hold forever, and they’ll roll their eyes. If you read the tortoise and the hare, you know slow and steady wins the race. A balanced portfolio of low-cost index funds with 60% stocks and 40% produced an average annual return of 10.5% for the past years.

Several years ago, I worked with a broker who periodically bought and sold stocks to show his clients he monitored their accounts. His activity “strategy” benefited him more than his clients because he generated a commission with each trade.  Activity for activity’s sake is not wise. A common saying on Wall Street is, “Investing is like a bar of soap; the more you touch it, the smaller it gets.”

Since 1950, the S&P 500 Index has returned 10.7% per year; staying invested allows you to get market returns. Dimensional Fund Advisors found that investors earned an average annual return of 10.5% from 1990 to 2020. A $1,000 investment grew to $20,451. However, if you missed the 25 best days during this period, returns dropped to 5% per year. A $1,000 investment grew to $4,376, or $16,075 less than those that did nothing.[1]

Of course, there are times when you must sell or update your portfolio. Using your funds to generate income, pay tuition, or reduce debt is warranted. We recommend rebalancing your accounts as needed to maintain your asset allocation and risk level.

A financial plan can help you improve your investment results and give you the necessary tools to stay invested during all market conditions. It’s a financial roadmap on how best to invest your assets by aligning your goals and risk tolerance to your portfolio. Your plan is an antidote against making poor investment decisions.

 Give it a try – do nothing!

I think I can sum up the show for you in one word. Nothing. ~ George Costanza

November 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.


[1] https://my.dimensional.com/dfsmedia/f27f1cc5b9674653938eb84ff8006d8c/27544-source/the-cost-of-trying-to-time-the-market.pdf

Buy Silver?

Buy silver because inflation is coming and stocks will fall, a senior broker told me when I started my investment career some thirty years ago. The seasoned broker’s office was impressive, lined with charts and graphs adorning his wood-paneled walls. He referenced his charts and educated me on why silver would rise and stocks would fall. How did his prediction turn out?

In 1990, silver traded at $5.59 an ounce, and it’s currently selling for $23.41. Had I taken his advice and bought silver, my average return would have been 4.55%. A $10,000 investment in silver is now worth $42,000.

What about stocks? The S&P 500 in January of 1990 was 353, and today it closed at 4,704, a gain of 1,230% or 8.45% per year. A $10,000 investment is now worth $133,000, or three times the amount of the silver trade.

Inflation is climbing, and commodity investments are popular again. Inflation currently yields 6.22%, the highest level since 1990 where it touched 6.27%, and by January 1992, it dropped to 2.6%. In August 2008, the inflation rate was 5.37%, and by July 2009, it crashed to a negative 2.1% during the Great Recession.

Post World War II, the highest inflation rate occurred in 1980, exceeding 14.5% before falling to 2.86% in 1983. Where is inflation going? I don’t have a clue, but inflation spikes don’t last long. For the past thirty years, I’ve heard the stock market is overvalued, and silver, gold, wheat, oil, etc., was going to outperform stocks. In the short term, this may be true, but I will always place my bet on a diversified portfolio of stocks.

How much better to get wisdom than gold, to get insight rather than silver! Proverbs 16:16

November 18, 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.

The Watchman

Vanguard recently surpassed $7.1 trillion in client assets, an enormous number. Vanguard was founded in 1975 during the oil embargo recession and grew by putting the interest of their clients first, a novel concept on Wall Street at the time.  

Vanguard is named after the 18th-century battleship the HMS Vanguard, which means “in the forefront.” John Bogel, the legendary investor, led the firm for years, and he was at the forefront of the index revolution, having started one of the industry’s first funds, the S&P 500 Index Fund. His idea wasn’t well-received, and the fund got off to a slow start. Today it’s one of the largest mutual funds in the industry, and it has produced a total return of 14,470%. Mr. Bogel was a watchman for all investors.

A watchman stands guard, hired to protect others. They should be faithful, trustworthy, and put the interest of others first. 

How can you find a financial watchman?  Here are a few suggestions.

  1. Find a fiduciary advisor. By law, a fiduciary must put your interest first, act in your best interest,  and disclose any conflicts of interest.
  2. Work with a Certified Financial Planner Practitioner™.  An advisor with the CFP designation must go through years of study and pass a rigorous exam. To keep the designation current, they must regularly participate in continuing education programs.
  3. Work with an advisor with a simple fee model and straightforward investment philosophy.
  4. Seek an advisor who owns investments that he recommends to others. 
  5. Identify an advisor with a servant’s heart and who returns your phone calls and emails promptly. 
  6. Discover an advisor who shares your values.

Blessed is the one who listens to me, watching daily at my gates, waiting beside my doors. ~ Proverbs 8:34

November 16, 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.

Puzzle Pieces

My family and I like to put together a puzzle or two during the holiday season. When my daughter was young, the puzzles were simple and easy to manage. As she grew older, they became more complex and took several days to finish. Obviously, a puzzle with twenty pieces is easier to handle than one with thousands.

YCHARTS tracks more than 28,000 companies. Can you imagine assembling a 28,000-piece puzzle? When building your investment portfolio, how do you pick the best stocks from 28,000 publicly traded companies? And how many companies should you own to diversify your portfolio?  10? 25? 100? 400?  A study by the American Association of Individual Investors suggests owning more than 400 stocks. Owning 400 stocks can reduce your diversifiable risk by 95%.[1] Dimensional Fund Advisors recommends holding 11,000 companies.[2]

How can you achieve diversification?  

  1. Buy several stocks. You can, of course, buy as many stocks as you want. Jim Cramer suggests owning between five and ten companies and committing an hour of research per week for each one you own.[3]  If you own 20 companies, expect to dedicate 20 hours per week to review your holdings.
  2. Purchase index funds. A portfolio of index funds will hold hundreds, if not thousands, of companies. An advantage to owning index funds is achieving diversification at a low cost. If you purchase four, five, or ten index funds, you can simplify your financial life because it’s much easier to follow a few funds when compared to tracking hundreds of companies.

Life is a puzzle, and there are many roads to financial success, so travel one that makes sense for you and your family.

It’s not about the pieces; it’s how they fit together. ~ Anonymous.

November 15, 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] http://www.aaii.com/journal/article/how-many-stocks-do-you-need-to-be-diversified-.touch, AAII Journal by Daniel J. Burnside, July 2004

[2] https://my.dimensional.com/insight/purely_academic/23691/, Effective Diversification and the Number of Stocks by Jim Davis, 9/26/2008.

[3] http://www.cnbc.com/id/100765791, Lee Brodie, 10/7/2014, Stocks, How Many is too Many?

Bye bonds or buy bonds?

I started my investment career in 1989 when the 30-Year US Treasury Bond yielded more than 8%. Investors were reluctant to buy bonds because they worried interest rates were going higher. They remembered the double-digit yields from 1979 to 1985; convinced interest rates would climb again, they kept their money in cash. Thirty-two years later, they are still waiting for rates to rise. 

Today, interest rates are a fraction of where they were many years ago, and investors are still focused on rising rates. Reluctant to buy bonds for fear of missing a rate rise or losing principal, they keep their money in cash or a money market with a near 0% yield waiting for the Fed to raise rates. Though rates are low, investors should not ignore the safety, and income bonds provide to a portfolio. 

In the October 1, 2015 issue of Fortune Magazine, Josh Brown of Ritholz Wealth Management outlines a compelling case for owning bonds. He suggests allocating a portion of your portfolio to bonds to help “cushion a portfolio for down years.” Adding that stocks and bonds have only had three times where their returns were both negative – 1931, 1941, and 1969. He suggests investors should ladder their bond portfolio, which will help investors with “a built-in-defense mechanism against a gradually rising interest rate.”

In fact, when stocks fell in 2002 and 2008, bonds performed well. In 2002 stocks dropped 22.1%, bonds rose 17.8%. In 2008 stocks were fell 37%, bonds climbed 26%.

So, I would recommend giving bonds another look.  

Bye, bye and buy bonds.

I would never be 100 percent in stocks or 100 percent in bonds or cash. ~ Harry Markowitz

November 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.

The Giving Season

Thanksgiving marks the beginning of the giving season.  Charities and non-profits will receive much-needed dollars to fund their good works, and the money they receive in the next few weeks will be the bulk of their annual budget because Individuals typically wait until the end of the year to give. Some people give from their wallets, and others from their hearts.  

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

During the financial planning discovery phase, I ask people if they donate money to charities, and  I’m happy to report most people are generous, but not all. I once worked with a young pilot who didn’t believe in giving money away while living, and he planned to donate his money at his death through his estate. I told him part of the joy of giving money away while you’re living is you get to see your gift bear fruit. 

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.

Here are a few ideas and strategies to help you with your charitable donations.

  1. Appreciated Securities. The stock market has produced stellar results this year, and you may own several companies that have performed well. When you donate appreciated securities, you get a deduction, avoid a capital gains tax, and your charity receives the money. Let’s say you purchased Dicks Sporting Goods in January at $56, and today it’s selling for $129 for an unrealized gain of $73 or 130%. You can gift your shares directly to your charity and avoid paying taxes on your profit. The charity can sell the stock and receive the cash, and they, too, will avoid the capital gains tax. To qualify for a tax deduction, donate your securities to a 501c3 organization. 
  2. Qualified Charitable Distribution. The IRS lets you satisfy your required minimum distribution by donating your money directly to a charity from your IRA. This distribution is called a qualified charitable distribution (QCD), and you’re allowed to give up to $100,000. One advantage of the QCD is that you avoid paying income taxes on your gift.
  3. Donor-Advised Fund. If you don’t know which organizations to support but want to make a charitable contribution, consider establishing a donor-advised fund (DAF). You can fund your DAF today and donate to charities at a later date. You will receive the deduction for this calendar year, even though you can defer your payouts. You can also manage and invest the money inside your DAF.
  4. Cash.  Cash is king, and it’s easy to give away. The IRS allows you to give $15,000 per person per year without paying taxes on your gift, nor will your recipients, but you won’t receive a tax deduction. For example, if you have four children and ten grandchildren, you can give $210,000 per year.

There is always a right time to help others, and the end of the year is a wonderful time to give money to those in need. However, to improve your giving, consider a charitable giving strategy. 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 9, 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.

Marathons and Retirement Planning

My first marathon was a total disaster. I finished the race exhausted, dehydrated, and sunburned. After years of running shorter races, I was ready to conquer the 1991 Los Angeles Marathon, and on race day, I thought I was prepared for the 26.2-mile journey. I was young, naïve, and in shape, and my strategy was to run as fast as possible for as long as possible. In short, I had no plan.  

I avoided all water stations until late in the race – too late because I was already parched and sunburned. At mile twenty, a young boy gave me a giant bottle of Gatorade, and his gift gave me enough fuel to get to the next aid station. However, it was useless because I couldn’t drink enough water to quench my thirst. I finished the race, made it home, licked my wounds, and reflected on the events of the day. 

If I was going to run marathons, I needed a better strategy. As the years went on, I read books on running and applied what I learned. As a result, my race experiences went up, and my race times went down.  I ran the 2011 Boston Marathon, and in 2015 I set a personal best in San Diego. My plan worked.

What do running marathons and planning for retirement have in common? Let’s find out.

  1. Plan. Your retirement plan will guide your steps and help you quantify your hopes, dreams, and fears. It will align your investment holdings to your goals, so they’re both working for your benefit, and it will give you a baseline of your current financial situation.
  2. Think long-term. A marathon is 26.2 miles, so don’t worry about what’s happening during the first few miles. Likewise, don’t worry about short-term market moves if you’re going to retire in 10, 20, or 30 years.
  3. Be consistent. Establish a monthly investment program and save as much money as possible. Over time, your monthly contributions will add up. For example, if you save $500 per month, it could be worth more than $1.1 million after thirty years. When I ran marathons, my goal was to run the race one mile at a time at an 8-minute pace. I never focused on the entire 26 miles on race day.
  4. Buy quality. A pair of high-quality, lightweight running shoes makes all the difference in the world. Similarly, your assets should be high-quality with low fees – control your costs and diversify your investments.
  5. Set your pace. A large marathon may have more than thirty thousand runners, so don’t worry when you get passed because each runner has their own goal. Instead, focus on your goals and pace. Your retirement plan will help you establish your retirement pace.
  6. Refuel and check-in. Smart runners take advantage of aid stations to hydrate and refuel. Once your retirement plan is up and running, check it often to ensure you’re still on pace to achieve your goals and adjust it as needed.
  7. Hire a coach. Your running results will improve if you run with a coach. A financial coach or trusted advisor can help support and guide you during your retirement journey.  
  8. Go fast. Stocks purchased for the long haul will allow your assets to grow faster than safe investments like bonds or cash.
  9. Celebrate. Finishing a marathon is a significant accomplishment, so celebrate your success. Equally, when you have saved your money and invested successfully for decades, and you can retire on your terms, take a victory lap – you have won the retirement race!

A plan for running and retirement will keep you moving for years, so get out there and start planning!

“Don’t dream of winning; train for it!” ~ Mo Farah

November 2, 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.