Ready to Retire?

When should you retire?  Today, tomorrow, never? The answer is both emotional and financial. The financial side of retirement is easy – you either have enough money to retire, or you don’t. If you have more than enough money to cover your expenses, you can retire at any time regardless of your age. The math, for some people, does not help determine when to retire because they like to work or feel the need to continue working long after they’ve amassed a significant retirement nest egg.  

I worked with a client who gave his employer his notice to retire. He worked for his company for several years, and he was one of their key executives, so he had to give them at least two months’ notice before leaving. We went through the financial planning process to make sure he could afford to retire. We ran several scenarios, and all of them returned the same result; he could afford to retire. His assets were more than sufficient to meet his needs. His challenge was not financial but emotional. Once he came to grips with the financial side, he was ready to accept the emotional side. He called me on the day he gave his notice, and he sounded happy and relieved to move on to the next chapter of his life.

The emotional side of retirement is more difficult to factor into the retirement equation. Walking away from a career you’ve held for 20, 30, or 40 years isn’t easy. You have to put yourself into a position to retire emotionally. 

  • What will you do in retirement? 
  • Where will you live? 
  • How will you spend your time? 
  • Will you volunteer?  
  • Do you want to travel the world?  
  • Will you learn a new skill?  
  • Will you golf? Fish? Hike? Bike? Camp?

These are essential questions, and you’ll need to answer them before you transition into retirement.  

Moving from work to retirement is like jumping over a 6-inch, 100-mile-deep crevasse. One hundred miles is a long way to fall, but you know you can make the 6-inch leap to the other side. I’ve worked with several people who’ve made the leap from work to retirement, and all of them made it to the other side.   I have yet to have one of these individuals return to work because they’re not enjoying retirement. The clients who have retired say they are busier and happier than ever and wish they’d have done it sooner.

Are you ready?

The company gave me an aptitude test, and I found out the work I was best suited for was retirement. ~ Unknown

April 13, 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.

Get Ready To Travel!

Get Ready To Travel!

I booked a flight for the first time in over a year. In May, I will fly to Los Angeles to visit my parents; our first in-person visit since December 2019. I look forward to waiting in long lines and battling the Los Angeles traffic.

The Dow Jones US Travel and Leisure Index just traded to an all-time high after cratering last year. When COVID arrived, the index dropped 38%. It bottomed last March, and it has since risen 85%! Apparently, I’m not alone in my willingness to travel. As we emerge from our COVID winter, planes, trains, and automobiles will benefit from the surge in demand. Housing, travel, and entertainment should also do well.

A key component in a financial plan is spending. Spending is one item we can control. The more we spend, the less we can save. However, now is an excellent time to spend some money. The current US personal saving rate is 20.3%; since the late 1980s, this number has mostly been negative, and the 62-year average annual savings rate is a minus 20.8%. It appears we have money burning a hole in our wallets.

If you have invested wisely and followed your plan, you’re an excellent candidate to spend money. Here are a few ideas to help you kick-start your spending.

  1. Shop local. If your neighborhood looks like mine, several restaurants and small businesses have closed their doors. It’s time we support the survivors and give a boost to the newcomers.
  2. Take a trip. It’s time to hop on a plane or take a road trip. Load up your family, rent a home through Airbnb or Vrbo, and make some memories. Invite friends and family to join you on your journey.
  3. Buy a big-ticket item. Maybe it’s time to buy a second home, a sailboat, a new car, or all three! Are you ready to spend a month or two in the mountains or at the beach?
  4. Upgrade your home. Adding a fresh coat of paint or installing new floors will enhance your home. Purchase a new BBQ and picnic table and invite your neighbors over for a feast.
  5. Donate to your favorite charity. Families and individuals struggled last year as the nation’s unemployment rate soared above 14%. People who don’t own a home or investment portfolio missed the recovery. Donating money to a charity will give these people an opportunity to experience some joy.

It’s been a long twelve months, but things are starting to improve. Now is the time to spend some money and rev up the economy. Let’s all do our part!

A mind that is stretched by a new experience can never go back to its old dimensions. ~ Oliver Wendell Holmes

April 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.

When To Sell?

The stock market is trading at all-time highs. The S&P 500 topped 4,000 this week, it’s up more than 53% over the past year, and investors are euphoric.  As the market climbs, is it time to sell stocks? Unfortunately, there is no one simple answer for everyone, so let’s examine a few reasons to sell your holdings.

  1. You need money. If you don’t have an emergency fund or your cash balance is low, sell some shares to meet your needs.
  2. You need your money in one year or less. Stocks have generated substantial returns over time, but they can be extremely volatile in the short term, producing significant gains or painful losses. If stocks drop when you need the money the most, it may impact your goal.
  3. You’re 100% invested in stocks. If you’re allocated 100% to equities, sell shares to add bonds or cash to your portfolio. The bonds and cash will lower the volatility in your account.
  4. Your risk exposure is too high. Last year, stocks soared. If you didn’t rebalance your account, your stock exposure might be too high. For example, if your target equity exposure is 70% and jumped to 80% last year, sell 10% of your holdings to reduce your risk. 
  5. One or two stocks dominate your portfolio. If a stock accounts for more than 25% of your assets, consider selling some shares to reduce your exposure to 10% or less.

According to Dimensional Fund Advisors, when stocks reach all-time highs, they keep going. After one year, stocks were 14% higher.[1] As stocks continue to rise, enjoy the ride. Don’t worry about a correction, instead focus on your goals and your plan. If your plan is working, stay the course.

Given a 10% chance of a 100 times payoff, you should take that bet every time.” — Jeff Bezos

April 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] DFA 4S Framework: Stock Market Conditions – 1926 to 2018.

My NCAA Basketball Bracket

What a tournament! March Madness did not disappoint. I was rooting for Baylor to win, and they did! I entered ESPN’s Tournament Challenge and finished in the 94th percentile, ranking 843,000 out of 14 million. My final game prediction was Baylor beating Gonzaga 74 – 72. The final score was 86 – 70. As always, there were several surprises and exciting moments like UCLA’s march to the final four and Jared Suggs game-winning shot.

Scott Drew inherited a struggling Baylor Basketball program in 2003 with the goal of winning a national championship. His assistant head coach, Jerome Tang, joined Coach Drew’s staff the same year. It took them eighteen years of blood, sweat, and tears to realize their dream. At the time, Baylor Basketball was involved in a scandal when one player murdered another, and their former coach was making financial payments to players.[1] It was a dark time to take over the program, but their perseverance, faith, and vision paid off.

Investors can learn much from the Baylor Bears and their run to the national championship. To succeed as an investor, you need a plan, patience, vision, and luck. Long-term thinking is a must. And, buying stocks when they’re down is an excellent way to acquire great companies at discounted prices.

Learning to overcome losses is also essential because when you invest, you will own some losers. There were 68 teams in the tournament – 67 losers and one winner. However, every team that made it to the big dance had a successful season, and most of them will return next year. Gonzaga ended their season with a record of 31-1, the University of North Texas won their first-ever tournament game, and Abilene Christian stunned Texas. Cut your losses, learn from your mistakes, and refine your process. Don’t be distraught with your losers, and let your winners run.

Diversification is also a must. The Baylor team has several elite athletes, role players, and specialists, and every person contributed to the team’s success. Your portfolio needs several components to perform well. A globally diversified portfolio of low-cost funds gives you exposure to numerous markets and thousands of securities, each playing a vital role.

To produce generational wealth, build your team, diversify your assets, invest often, and think long-term.

I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed. ~ Michael Jordan

April 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] https://en.wikipedia.org/wiki/Baylor_Bears_basketball

Obstacles To Wealth

The Evergreen container ship ran aground in the Suez Canal, and it’s disrupting global trade. Efforts to dislodge it from the shore have been futile, and it may be weeks before the canal is open. Meanwhile, several hundred ships are waiting to pass through the channel. Last year, 19,000 ships used the canal, representing 12% of global trade.[1] Many products are in limbo, and I sure hope we don’t experience another toilet paper shortage.

The 120-mile Suez Canal was completed in 1869, connecting the Mediterranean and Red Seas. It allows ships to avoid traveling around the Cape of Good Hope, eliminating an extra 6,000 miles. The canal facilitates faster trade between Europe, Asia, and the United States.[2]

It’s impossible to predict what events will impact global trade or economic conditions. I doubt anyone expected a container ship to get stuck in a canal for weeks, but here we are. The vessel will eventually move from the shore allowing ships to flow freely, so the long-term economic impact should be negligible.

Countless things can disrupt your wealth creation. Obstacles are everywhere. Here are a few things that may disrupt your financial future.

  • You hold too much cash. A significant cash position can hinder your long-term returns. If you’re not using your money for a specific purpose, consider investing it in stocks or bonds. Over time, cash will lose value to inflation and taxes. A 3% inflation rate will reduce your purchasing power by 25% over ten years.
  • Your portfolio is too conservative. Allocating a high percentage of your account to cash or bonds will limit your growth. If your time horizon is three to five years or more, allocate a sizable portion to stocks, even if you’re retired. A portfolio with 80% stocks and 20% bonds averaged 14.5% for the past five years. If we flip the allocation – 20% stocks and 80% bonds, it generated an average annual return of 8.19%.[3]
  • You don’t have a will or trust. Investors are mainly worried about stock market corrections. No one wants to lose 10% to 20% of their portfolio, but if you don’t have a proper estate plan, your heirs may have to pay 40% or more in taxes to the IRS.
  • You don’t own life insurance. Life insurance is mandatory if you’re a young family with kids or you carry a significant amount of debt. Life insurance is also a resourceful tool for paying estate taxes or passing on a more substantial estate to your heirs.
  • You’re not saving enough. An excellent strategy for creating wealth is to save more money. It’s a strategy where you have total control. The more money you invest today, means more money for you tomorrow. How much should you save? My recommendation is at least 10% of your income. My personal goal is a 10-10-10 model: give 10%, invest 10%, save 10%.
  • You’re spending too much money. The opposite of not saving enough money is spending too much. You can control your spending, and the less you consume, the more you can save. The two are linked.
  • You lack diversification. A diversified portfolio can help you o avoid short-term setbacks. Last year, when stocks were falling, bonds performed well, and this year, small-cap stocks lead the way. A globally diversified portfolio of stocks, bonds, and cash is a prudent investment strategy.
  • You’re too concentrated. Don’t put all your eggs in one basket or all your products in one container. If 100% of your merchandise is in a container on the  Evergreen, you’re in trouble. A portfolio that relies on one or two stocks does well when they’re rising, but it could damage your returns when they fall. Limit your single stock exposure to 10% of your account balance.
  • You don’t have a  plan. Your financial plan is your GPS, and It will help you navigate treacherous waters. Last March, during the COVID correction, we relied on our client’s financial plans to remain invested. When the market rebounded, our clients profited.

It’s easy for a small thing to magnify a bigger problem, and most of the time, it’s not evident until after the fact. To avoid a minor issue turning into a major one, work with a Certified Financial Planner® who can help you create a plan based on your goals.

We may have all come on different ships, but we’re in the same boat now. ~ Martin Luther King, Jr.

March 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] https://www.abc.net.au/news/2021-03-27/what-is-the-suez-canal-and-how-many-ships-go-through-it/100032734#:~:text=Almost%2019%2C000%20ships%20passed%20through,the%20Canal’s%20150%2Dyear%20history.,

[2] https://www.washingtonpost.com/business/energy/why-a-canal-built-in-1869-is-more-important-than-ever/2021/03/26/2aef3bb8-8dfe-11eb-a33e-da28941cb9ac_story.html, By Robert Tuttle, Bloomberg

[3] DFA Reteurns Web: long-term bonds and S&P 500 index

The NCAA Tournament and Investing

It’s finally here! The greatest sporting event is back after last year’s hiatus. Though fans, bands, cheerleaders, and mascots are missing, it’s still exciting to watch. My family and I look forward to competing against each other with our brackets, and I always participate in ESPN’s Tournament Challenge, hoping that I will be the one with the perfect bracket. However, after Oral Roberts beat Ohio State, I’m out, and so are 95% of the other participants. Picking winners is not easy. The odds of a perfect bracket is 1 in 9,223,372,036,854,775,808. If you know something about basketball, your odds improve to 1 in 120 million.[1]

According to ESPN, there are 108 perfect brackets out of 14.7 million submitted or .000735% after the opening games. And 93 participants lost every game! Is this an ideal bell curve? I rank 8.9 million after selecting nine winners, so I still have a chance. My choice to win it all is Baylor because they’re a good team, and it’s my daughter’s alma mater. I’m also rooting for Gonzaga because of their affiliation with the West Coast Conference and Arkansas since their head coach is a graduate of the University of San Diego.

The only thing harder than picking a perfect bracket is selecting a basket of individual stocks that outperform the market every year.  Yes, it’s possible to beat the market in the short-term. I’m sure several individuals bought Peleton, Zoom, DocuSign, or NIO last year and made a lot of money riding the COVID wave. However, have they been profitable for five, ten, or thirty years? Also, the more stocks you own, the closer your portfolio will resemble an index fund. What is the magic number of stocks to hold? In one study, it’s twenty.[2] How are the four companies faring this year? They’re down 12.5%, underperforming the S&P 500.

Standard & Poors SPIVA study revealed that 82% of large-cap fund managers did not outperform the S&P 500 over ten years, and 87% failed to do so after fifteen years. The same data holds for small and mid-cap money managers. The study found that 74% of mid-cap managers did not beat the S&P 400, while 75% of small-cap managers failed to match the S&P 600.[3] I know what you’re thinking; I’ll only invest in the winners. Some professional money managers outperform the market over time, but can you identify them before they start their run?

Peter Lynch, the legendary fund manager of the Fidelity Magellan mutual fund, was thirty-three when he took over managing the fund. The fund only had $18 million in assets in 1977. The fund’s assets would swell to $14 billion when he retired. Before taking over as the lead money manager, the fund lost 42% in 1973 and 28% in 1974. If you invested $10,000 in the fund, you lost 70% of your capital. Would you have remained invested in the fund as Mr. Lynch took the helm? If you sold out to find a better money manager, you missed incredible returns. Mr. Lynch posted eye-popping returns from 1977 to 1990 as the fund generated an average annual return of 29.2%, more than double the S&P 500. In hindsight, Mr. Lynch was an obvious choice. His fund returned 2,570%. A $10,000 investment grew to $267,420![4]

I bet the person who currently has a perfect bracket is posting about it on social media letting the world know they picked Oral Roberts and North Texas. The same is probably true for people who chose a few winning stocks last year. I will let them enjoy their fifteen minutes of fame. If they can do it every year, then I will give them the credit they deserve.

In the meantime, I would recommend investing your money in a globally diversified portfolio of low-cost mutual funds. If you want to take a flier on a stock or two, then allocate 1% to 3% of your investment capital to your ideas.

Invest for the long-term, buy the dips, save your money, follow your plan, and good things will happen.

It’s the little details that are vital. Little things make big things happen. ~ John Wooden

March 20, 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] Google

[2] https://www.investopedia.com/investing/dangers-over-diversifying-your-portfolio/, by Brian Beers, 1/13/2020

[3] http://www.ginsglobal.com/articles/80-of-us-fund-managers-underperform-sp-500-over-5-years/#:~:text=Over%20the%20past%2010%20years,ending%20June%2030%2C%202020), Webiste accessed 1/20/2021

[4] https://en.wikipedia.org/wiki/Fidelity_Magellan_Fund

Time To Buy T-Bills?

Stocks, Bitcoin, and NFTs, are surging. The NASDAQ is up 41% since last March, Bitcoin soared 627%, and last week, the artist Beeple sold an NFT for $69 million. The economy is opening up, stimulus checks are coming, and investors are in growth mode. If everyone is making money buying stocks and other investments, why is it time to buy T-Bills? Let’s find out.

T-Bills are the safest investment in the world, and they’re guaranteed regardless of how much money you invest. If you want safety and liquidity, look no further. However, you pay the price for allocating capital to T-Bills. The current rate for a one-month T-Bill is .03%. If you extend the maturity to one-year, the rate jumps to .09%. Relative to everything, the interest rates are anemic.

In 1981, the yield on the one-month T-Bills was 14.7%. It has since fallen 99.79%. Since 1926, they averaged 3.3% per year, so too has inflation.  After subtracting inflation, your net return is near zero.

(Chart: Macrotrends, 1-year Treasury Rate 54-year historical chart)

Berkshire Hathaway, led by Warren Buffett and Charlie Munger, owned more than $135 billion worth of T-Bills at the end of last year.[1] They use them to fund their corporate operations and make strategic acquisitions. Mr. Buffett said, “If a $100 billion deal came along that [Vice Chairman Charlie Munger] and I really liked, we’d get it done.”[2] The duo buys about $4 billion worth of government securities weekly.

If you’re still reading, here are a few reasons to buy T-Bills near historical lows while other investments perform well (and better) than short-term government bonds.

  1. If you’re anxious about rising interest rates, then T-Bills are an excellent choice. They are auctioned weekly with maturities of 4-, 8-, 13-, 26-, or 52-weeks. It’s possible to build a short-term ladder with bills expiring weekly. If interest rates rise, you’ll reinvest your proceeds at higher rates without suffering a principal loss. T-Bills have never had a year where they posted negative returns.
  2. If you’re worried about a stock market correction, T-Bills will protect a portion of your account.  Transferring 40% to bonds from an all-equity portfolio lowered your risk by 37%. T-Bills are a hedge against falling stocks because they’re negatively correlated. During the Tech Wreck in 2000, T-Bills outperformed stocks for three years in a row. When stocks fell 4.38% in 2018, T-Bills rose by 1.81%. Last March, the S&P 500 lost 12.35%, T-Bills remained firm at .12%.[3]
  3. If you hold a significant cash position at your bank, T-Bills can offer you more safety. T-Bills are insured dollar for dollar, regardless of the amount. Rather than transferring money between several banks to make sure you qualify for FDIC insurance, you can purchase one T-Bill.
  4. If you need to buy something in a year or less, T-Bills offer liquidity not found in other fixed-income investments. Stocks are volatile and can suffer significant losses. If you’re going to buy a new home for $1 million, purchase a T-Bill to guarantee that the funds will be there when you need them most.  

T-Bills are purchased for safety, not for growth. You will not create generational wealth owning short-term government investments. It’s not possible. Low rates and inflation are a poor mixture for growth. However, if you need safe investments with a hedge, the T-Bill is your answer.

Bye, bye, and buy bonds.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” ~ Paul Samuelson

March 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] https://www.berkshirehathaway.com/2020ar/2020ar.pdf, accessed March 15, 2021

[2] https://www.cnbc.com/2018/05/07/warren-buffett-if-a-100-billion-deal-that-we-like-came-along-wed-get-it-done.html, May 7, 2018, Fred Imbert

[3] Dimensional Funds Returns Web – 1926 to 2021.

Rate of Return

Do you know the rate of return on your investments? Have you ever calculated your total return? In my experience, most investors don’t know what they earn on their money. Of course, I often hear about winning stock trades – never the losers, nor do people tell me how much they allocate to their trades. A 10% gain on a million-dollar investment is more impactful than one where you only commit $100.

I recently watched a Bitcoin evangelical promote the compounding rate of return for the popular digital currency.  He was touting annual gains of 200% to the host and millions of TV viewers as if it was normal. At 200%, a $100,000 investment will be worth $5.9 billion (with a B) in ten years! If you earned 200% for twenty years, you’d be worth $348 trillion (with a T) – totally normal. After thirty years: $20,589,113,209,464,900,000, or $20 quintillion. Regulators would throw me in jail if I touted annual returns of 200%.

Rates of return matter, and being aware of what you earn is essential. Your money doubles every ten years at 7%. If you make less than 3% per year, inflation will wipe out your gains. Risk and reward are connected. A portfolio of stocks earns more than a portfolio of bonds, but the risk level is higher. The 100-year return for stocks has been 10%, but there have been several years of negative performance and numerous market crashes. During the same time frame, the one-month US Treasury Bill never lost money – not one negative year, but it generated a paltry average annual return of 3.3%.[1] Since 2005, the S&P 500 is up 224%, while short-term bonds have increased by 5.75%. The S&P had several corrections, including a 51% crash in 2008 and a 30% decline last year; bonds barely budged.

A financial plan can give you a glimpse of your future. Most planners can review your performance and risk level to determine how much of both are needed to reach your goals. If you’re far from your target, owning more stocks is recommended. A sizable allocation to equities will allow you to generate higher rates of return. If you have more than you need, allocating a bigger percentage to bonds can help maintain your wealth.

A balanced portfolio of 60% stocks, 40% bonds produced an average annual return of 9% since 1926.[2] It lost 44.5% in 1931, but it rebounded 82% in 1932, and 36% of the time, it lost money. However, the portfolio never lost money on rolling 10-, 15-, and 20-year periods.[3]

Balancing risk and return is part art and science. Allocating too little to stocks can negatively impact your wealth. If you’re young, stocks will benefit from your time horizon. If you’re retired, investing in stocks can help you maintain your purchasing power. Investing too conservatively at any age can have dire consequences to your wealth.

My best investment, so far, has been Amazon. I bought a few shares for my daughter’s education account in 2005, and it has generated an average annual return of 31%, or 6,647%. It’s not 200%, but it has helped us pay for college.

Happy Investing!

“In investing, what is comfortable is rarely profitable.” — Robert Arnott

March 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] Dimensional Fund Advisors 2020 Matrix Book

[2] Dimensional Fund Advisors Returns Web – 1926 to 2021.

[3] Ibid

Fear Rising Rates?

Investors fear rising interest rates. Since the start of the year, the 10-Year US Treasury yield is up 66% to 1.54%. It’s still low, but the speed at which it climbed is worrying investors. For the past fourteen years, the yield on the 10-Year averaged 2.33%. The high was 4.01%, the low was .52%. Does it make sense to sell stocks as rates are climbing? Maybe.

Let’s look at rate spikes during this cycle. Despite several rate spurts, the S&P is up 373% since 2008. If you bought stocks during the previous rate spikes, you’re probably sitting on nice gains today. Though we have experienced volatility in the bond market, the trend for interest rates over the years has been down.

  • The yield soared 67% from December 2008 to June 2009.
  • The yield jumped 50% from October 2010 to February 2011.
  • The yield climbed 49% from May 2013 to September 2013.
  • The yield rose 68% from July 2016 to January 2017.
  • The yield increased 54% from August 2017 to November 2018.

During the above rate spikes, stocks rose with an average gain of 11% – counter to what typically happens when rates rise.

Stocks are sensitive to interest rates. When they rise, stocks fall, and vice versa. It’s been this way for centuries. Rates threaten stocks when elevated because investors can buy bonds to realize a safe and sometimes guaranteed return. When will rates be a menace for stocks? I believe the rate threshold is 5%. A 5% guaranteed return for many will be difficult to pass up, and investors will sell stocks to buy bonds.

Additional buyers for our bonds are wealthy foreign investors and foreign governments since our rates are high relative to other countries. Here’s a look at global 10-year government bonds.[1]

  • Germany = -.274%
  • UK = .755%
  • Japan = .0122%
  • Australia = 1.786%
  • China = 3.27%
  • France = -.036%
  • Italy = .75%
  • Spain = .406%

Our rates are in line with Australia’s, but lower than China’s. However, foreign governments and wealthy investors likely will choose our market because of our safety and liquidity. As our rates climb, the money will flow into our bond market, keeping a lid on rising rates.

Rising rates may benefit your portfolio, especially if you carry a large cash balance. As rates rise, so will the yield on your money market or savings accounts. Another way to benefit is through a bond ladder. Buying bonds with different maturities can preserve your liquidity while capturing higher yields. Also, if interest rates are rising, it means our economy is doing well. And, a strong economy will benefit many.

If stocks fall because our rates are rising, I recommend buying the dip as a correction may be short-lived.

Don’t fear rising rates – for now!

Everything you want is on the other side of fear. ~ Jack Canfield

March 8, 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.barrons.com/market-data/bonds?mod=md_subnav, website accessed March 8, 2021

Buy The Rumor, Sell The News?

Is America waking up from its COVID slumber? The number of people getting vaccinated is increasing daily. Yesterday, Governor Greg Abbott of Texas eliminated the mask mandate, and he’s allowing businesses to open up at 100% capacity. Mississippi is doing the same. President Biden anticipates most Americans will receive the vaccine by May. Are we ready for another Roaring Twenties?

The NASDAQ has fallen 6.5% over the past couple of weeks. High-flying stocks like Tesla and Peloton are trading in negative territory for the year; Zoom has dropped 17% since peaking last month at $451 per share. Netflix is down 10% from its all-time high. Are investors selling the working-from-home stocks now that the economy is opening up? It appears so because companies like Carnival, Southwest Airlines, and American Express are flying.

One possible outcome of the reopening economy is a broad sell-off in stocks as we start to live our lives again.  We have been staring at screens for the past year with little to do besides ride an indoor bike, binge-watch our favorite shows, and trade stocks. Investing was gamified. Individuals day-traded stocks based on posts on Twitter, Reddit, or WallStreetBets – and the more rocket emojis, the better! As we emerge from our outdoor hibernation, will we still focus our energy on buying heavily shorted stocks with poor balance sheets? I don’t think we will.

The market is forward-thinking; individual investors are concerned with the here and now. Markets are a collection of millions of investors, and the collective reasoning is that the reopening trade is already factored into the current valuation. The recent price action could be sending us a signal that the market may fall when we can roam freely.

If there is a correction, should you sell your stocks? If you own a globally diversified basket of funds, the answer is no. You likely own thousands of companies, so no need to worry about being in the right stock at the right time, nor do you need to time the market. However, if you have been feasting on a few speculative names, then selling some shares is recommended.

Your time horizon is another consideration. If your time frame is three to five years or more, use a market correction to add to your equity holdings – buy the dip. If you need your money in one year or less, sell your stocks and put the proceeds in a money market fund.

Another reason to buy or sell stocks during a correction is your ultimate financial goal. For example, if your goal is to retire with $2 million and your account value is $3 million, reduce your stock exposure because you reached your destination. However, if your portfolio is $1 million, you still need to save and invest to reach your target. In this case, buy stocks if they fall.

Last, the NASDAQ is up 85% from the March 2020 low, and several stocks climbed substantially. If you were fortunate to catch a few shooting stars, lock in some profits. It doesn’t hurt to take some money off the table.

A financial plan can help you quantify your goals and determine your asset allocation if you’re unsure how to proceed. It will guide your investment decisions. During the COVID correction last March, we were stress-testing our client’s plans regularly. The financial plans allowed our clients to remain invested through the correction, and as a result, enjoy the gains from the market rebound. We made our decisions based on facts, not rumors.

I have a strict policy. I will not and do not publicize unsubstantiated rumors about anyone — unless they’re very funny. ~ Jimmy Kimmel

March 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.

This blog is not an offer to buy and sell Bitcoin. I do not own any cryptocurrencies because I don’t understand them as well as I should. If you want to trade this asset class, do your homework.