Grandma’s House

Hannah loved visiting her grandparent’s cabin in the mountains of Colorado. She especially enjoyed sitting on the river’s edge listening to her Nana’s stories.

“Nana,” Hannah said, “Tell me the story where you beat up the stock market.”

“Little Bird, I didn’t beat up the market; I beat the market.”

“What’s the difference?”

“Well, for one, you can’t beat up something you can’t see, and beating the market means our investments performed well over time, generating favorable returns.”

“I see. I guess. How did you know what to buy?”

“When your Tata and I got married, we had little money, but we were good savers. We started buying a few shares of companies we liked. We called it investing with our eyeballs and our checkbooks.”

“Cool. What’s a checkbook?”

“Ha, ha, Little Bird, you’re too funny. In the old days, before credit cards, PayPal, and Venmo, we wrote checks for things we bought.”

“I get it. I think. I’ve never heard anybody invest with their eyeballs before. What do you mean?”

“Well, for example, when we went to McDonald’s to buy your mom’s dinner, we noticed that the lines were long, and the lobbies were crowded.  When we shopped at Sears, the aisles were full of shoppers.”

“Sears?”

“You probably won’t believe this, but at one time, Sears was larger than Amazon. The Sears catalog was huge, and you could purchase anything from a house to a muffin pan.”

“No way. I’ve never heard of them. Where are they now?”

“They’re a former shell of themselves. Amazon evaporated its business model.”

“What other companies did you own that are no longer around?”

“When we started investing in the 1970s, we owned some of the largest companies in the world like Eastman Kodak, Xerox, and Revlon. These companies are barely alive today. We also rented videos from Blockbuster.”

“You actually had to go to a store to rent a video to watch a movie?”

“Yes, it’s not like today where you can watch a movie on Netflix. Netflix destroyed Blockbuster. There’s only one store left, and it’s in Bend, a small ski town in Oregon.”

“Wow. So you didn’t make money on every stock?”

“No. We lost money on several companies over the past fifty years, but our winners outpaced our losers by a wide margin. Our investments in McDonald’s, Home Depot, Apple, Amazon, and Tractor Supply have done very well.”

“I love Tractor Supply!”

“I know you do!”

“If you’ve done well, how come you don’t have big homes and fancy cars? My friend’s parents seem to buy new cars all the time.”

“Your Tata and I decided it was better to live modestly and invest our money in stocks and experiences. Our simple strategy allowed us to buy this cabin to spend more time with you and your cousins. Besides, who wants to clean a big house?”

“My friend’s parents are in a hurry to get rich, and they always talk about money. How come you and Tata don’t seem to be in a hurry to get rich?”

“Well, Little Bird, do you see the river?”

“Yes.”

“The river is in no hurry to get where it’s going. Sometimes it goes fast, sometimes slow, but it’s never in a hurry. It also knows where it’s going, twisting and turning through the countryside, enjoying the journey. We’re like the river. We know where we’re going, but we’re in no hurry to get there. We, too, are enjoying our journey.”

“I see. I guess.”

“When you hurry, you make mistakes or miss opportunities. Our motto is ‘never hurry, never worry.'”

Hannah pondered her next question and asked, “Do you own Bitcoin?”

“We don’t understand Bitcoin. Your Tata and I decided to only invest in things we know and understand. We have also avoided fads over the years.”

“What fads?”

“Well, in the late 1990s, people were trying to get rich buying dot com stocks – companies with no earnings, no profits, no future. When the stock market crashed in 2000, several of our friends lost a lot of money, and a few got wiped out. I don’t know if Bitcoin is a fad or not; too early to tell. We also avoided pet rocks and beanie babies.”  

“Rocks and beanie babies, what the heck?”

“We can talk about those some other time.”

“Okay, when will you know if a fad is a real thing?”

“Probably in ten or twenty years.”

“That’s a long time, Nana.”

“It is, but your Tata and I are patient, and we can always buy it later. We invest in good companies, and most of our stocks pay a dividend.”

“What’s a dividend.”

“A dividend is a payment we receive from the companies we own. For example, McDonald’s sends us a quarterly check for more than $5,000. The annual dividend we receive is larger than our original investment!”

“Wow! Do I need a lot of money to buy stocks and collect dividends?”

“Of course not. We started small, buying five shares here and ten shares there, and over time, it added up.”

“So I can invest some of my money, and it will grow yours did?”

“Do you see the tall aspen trees?”

“Yes, they look like they have eyes.”

“Do you think they started big or small?”

“Small. Nothing starts off big, except elephants and whales.”

“Yes, silly goose, you’re right.”

“These big aspen trees were seedlings, and then they grew towards the sky. Tata and I started with small investments, and we let them grow over time.”

“Nana, you’re the best storyteller ever. Can we have a snack and then ride the horses?”

“We sure can. Let’s get some chocolate chip cookies and grab the horses. I’ll ride Salty Sailor, and you can ride Sage.”

“Let’s do it!”

Moral: Invest in what you know and think long-term.

April 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.

Why Worry?

As the market climbs higher, investors are worried about a correction. Just because stocks go up, does it mean they must come down? Of course, stocks fluctuate daily. They rise and fall as they react to reports or headlines or opinions.  Since 1970, the S&P 500 has finished a calendar year in positive territory 82% of the time. Over the past 50 years, the index has been up 41 years and fallen nine.  The average gain was 18.5%; the average loss was 15%. And, year-to-date, it’s up 9.90%.[1]

During the same time frame, there have been seven bull markets with an average gain of 294% and an average duration of 77 months.  There have also been nine bear markets with an average drop of 32% and an average length of nine months.[2]

If you are worried about a stock market correction, then consider adding bonds to your portfolio. In the chart below, the S&P 500 fell 31% last March. Let’s compare the all-stock index to three different globally diversified portfolios.[3]

  • The seventy portfolio is 70% stocks and 30% bonds and cash. During the COVID correction, it fell 26.5%, or 14.5% less than the market.
  • The sixty portfolio is 60% stocks and 40% bonds and cash. During the COVID correction, it fell 23.5%, or 24% less than the market.
  • The fifty portfolio is 50% stocks and 50% bonds and cash. During the COVID correction, it fell 19.5%, or 37% less than the market.

By November, the market and all three portfolios recovered their losses and were profitable for the year. The index is 100% stocks, so it makes sense it fell further and recovered faster than the globally balanced portfolios.

Regardless of your risk tolerance, a hefty allocation to stocks can give your wealth a boost. Do not let short-term pain get in the way of long-term gains.

April 14, 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 and YCharts

[2] Ibid

[3] Ibid

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.

No Fear

When I was in the ninth grade, I wanted to play quarterback, but I was too afraid to stand up when coach McCarn asked for volunteers. I had a decent arm, but I lacked the courage of my convictions. It was my first year of tackle football, and I was enamored with NFL quarterbacks like Kenny Stabler, Bob Griese, James Harris, and Fran Tarkenton. I wanted to sling the ball all over the field just like my NFL heroes, even though we rarely ran a passing play. Anyways, because I didn’t take a step forward, I ended up playing offensive guard.

Investors who fear a market correction often miss out on the long-term performance of common stocks. Since 1981, the Dow Jones Industrial Average generated an average annual return of 9.15%.  A $10,000 investment is now worth $347,000.[1] However, the index experienced several corrections. On October 19, 1987, the Dow fell 22%. During the Tech Wreck from 2000 to 2003, the index dropped more than 30%. The popular index lost more than 45% during the Great Recession from 2007 to 2009. Last year, it dropped close to 30% as the world shutdown from COVID. Despite these occasional setbacks, stocks continue to climb higher.

On the other hand, if you did not want to experience losses, you could have invested in one-month US Treasury Bills. The safest investment in the world has never lost money. If you invested in T-Bills and not stocks, you averaged 4.1%.[2] A $10,000 investment is now worth $50,000, or $297,000 less than your investment in equities.

Stocks are in a constant state of fluctuation. Daily, stocks are unpredictable, but over time, they produce solid returns. Don’t let your fear of losing money keep you on the sidelines. If you want to score generational wealth, you need to own stocks.

Winning means being unafraid to lose. ~ Fran Tarkenton

April 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] YCharts. Dow Jones Industrial Average. January 1, 1981 to April 7, 2021.

[2] Dimensional Funds 2020 Matrix Book

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.

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.

What A Year!

What a difference a year makes. Last March, COVID appeared, and global commerce came to a halt. The Dow Jones fell more than 30% as investors reacted to the virus and economic shutdown. Initially, working from home was expected to last a few weeks before things returned to normal. Larry Kudlow, former director of the National Economic Council, said, “We have contained this. I won’t say it’s airtight, but it’s pretty close to airtight.” He added, “The outbreak is a human tragedy. It will likely not be an economic tragedy.”[1] Mr. Kudlow made these comments last February. COVID has been a human and economic tragedy. It killed more than 500,000 US citizens, and the financial death toll for restaurants, movie theaters, airlines, cruise ships, and thousands of small businesses is staggering.

The Dow Jones Industrial Average bottomed on March 23, 2020, as investors pivoted to working from home via Zoom, DocuSign, Adobe, Microsoft, Slack, Shopify, and Amazon. The virtual economic engine roared to life. How will companies adapt to a post-COVID world? I expect working from home and virtual meetings will be permanent fixtures for everyone.

One of the best things to happen during the pandemic has been the COVID vaccine. Moderna, Pfizer, and Johnson & Johnson received FDA approval for their vaccines, and according to NPR, 15% of the US population has received at least one dose, and 7.5% have received both. To date, more than 75 million doses have been administered.[2] The vaccine is allowing states to reopen – finally.

During the initial phases of COVID, investors were aggressive sellers of stocks, but it didn’t last long as people went bargain hunting. The buyers eventually won out, and the “bear market” was the shortest on record. Over the past year, the NASDAQ is up more than 56%, small-cap stocks climbed 47%, and international companies rose 21%. Bonds, however, sold off. Long-term bonds dropped 9.5%.

A natural reaction is to sell first and check the facts later, especially during a crisis. Panic selling occurs when investors don’t have a plan, or if they have one, they don’t follow it. A financial plan or investment policy statement can keep you in the market to achieve your goals. If structured properly, your plan allows for market shocks and corrections. A suitable plan ensures your assets are in line with your short and long-term goals. Your asset allocation should represent your risk tolerance. If you’re an aggressive investor, you’ll likely own more stocks than someone who is conservative. Regardless of your risk tolerance, allocating a portion of your account to cash or bonds is wise. Safe components allow you to ride out a storm or sell them to buy more stocks. Our bonds performed well last March when the market dropped. As it rebounded, we rebalanced our accounts to more aggressive investments.

As the world awakes from the COVID slumber, here are a few thoughts for your investment portfolio.

  1. Create a financial plan. Your plan allows you to focus on your goals while ignoring the short-term fluctuations in the market.
  2. Allocate a portion of your account to cash and bonds. Safe investments can help your portfolio when stocks fall, and they can be sold to buy stocks.
  3. Rebalance your accounts. The markets were extremely volatile last year. If you did nothing, your investments fluctuated between too conservative and too aggressive. Rebalancing allows your asset allocation and risk profile to remain intact.
  4. Invest for growth. Market corrections and pullbacks are normal, but stocks always recover. If your time horizon is three to five years or more, allocate a sizeable portion of your account to stocks.

My prayer is that we all get vaccinated to attend sporting events, go to movies, and eat in crowded restaurants. I believe we are close to experiencing life in a post-COVID world, and I look forward to it.

Be safe and happy investing.

“Don’t worry about the world coming to an end today. It’s already tomorrow in Australia.” — Charles Schulz

March 1, 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.cnbc.com/2020/02/25/larry-kudlow-says-us-has-contained-the-coronavirus-and-the-economy-is-holding-up-nicely.html, by Fred Imbert, February 25, 2020

[2] https://www.npr.org/sections/health-shots/2021/01/28/960901166/how-is-the-covid-19-vaccination-campaign-going-in-your-state, March 1, 2021