Chaos

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

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

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

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

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

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

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

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

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

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

May God continue to bless the United States of America.

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

January 7, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Retirement Planning – A Quick Start

It’s vital to start maximizing your 2021 retirement contributions. If you turn fifty this year, start your catch-up additions as soon as possible. You do not need to wait until your 50th birthday. For example, if your birthday is on December 31, 2021, you can increase your contributions on January 4, 2021.

Here are the limits and thresholds for this year.

  1. You can contribute $19,500 to your 401(k) or 403(b) plan, and if you’re fifty or older, you can add another $6,500 for a total of $26,000.
  2. Maximize your SEP-IRA contributions. Do you own your own business? If so, you can add $58,000 or 25% of your income (whichever is less) to a SEP-IRA
  3. Contribute to a Roth 401(k) or 403(b). Regardless of your income, you can contribute to a Roth 401(k). Your savings and earnings will grow tax-free.
  4. Rebalance your company retirement plan. If your company offers automatic rebalancing, set it to annual. January is a good time to rebalance your account and review your asset allocation.
  5. Increase your annual contribution by 1% or 2% this year.
  6. Fund your IRA’s. The maximum contribution is $6,000, or $7,000 if you’re fifty or older. You’re allowed to contribute to an IRA regardless of income.

A quick start is paramount to a successful retirement plan. After all, the sooner you start, the faster you can retire.

January 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.

Ten Ideas for 2021

This year felt like a decade. We are twenty days from the start of a new year, and it can’t get here fast enough. I’m expecting next year to be much better because it can’t get much worse – right? It’s been a wild ride for investors this year, but if you stayed the course, you probably made money. The NASDAQ, S&P 500, and Dow Jones are solidly in the green, despite falling more than 30% in March and April. The NASDAQ is leading the major US indices this year, rising 38%.

It took courage to remain invested, and even more to buy stocks at the low. As we approach the new year, what should you do now? Here are ten ideas.

  1. Review your financial plan and investment goals. Are you still on track? Do you need to make any adjustments? Last January, we helped clients review their financial plans. Several reached their goals, so we reduced the risk in their portfolios and adjusted their goals. We also encouraged our clients to remain invested during the March decline because it did not impact their long-term goals. Our financial planning process helped clients navigate the uncertainties of 2020.
  2. Review your asset allocation. Are your assets appropriately allocated? January is an ideal time to rebalance your accounts to ensure your risk level aligns with your long-term goals.
  3. Lock in profits. If you own a winning stock or two, consider selling some shares to defer your tax payment to 2022.
  4. Maximize your company retirement contributions. You’re allowed to contribute $19,500 to your 401(k) or 403(b) plan, and if you’re fifty or older, you can add $6,500 for a total of $26,000. Note: If you turn fifty in 2021, start your catch-up additions on January 1. You do not need to wait until you’re 50 to start contributing. For example, if your birthday is on December 31, 2021, you can increase your contributions on January 1, 2021.
  5. Maximize your SEP-IRA contributions. Do you own your own business? If so, you can contribute $57,000 or 25% of your income (whichever is less) to a SEP-IRA
  6. Contribute to a Roth 401(k) or 403(b). Regardless of your income, you can contribute to a Roth 401(k), and your Roth contributions and earnings will grow tax-free.
  7. Fund your IRA’s. The maximum contribution is $6,000, or $7,000 if you’re fifty or older.
  8. Open a health savings account (HSA) if you belong to a high-deductible healthcare plan. Families can contribute $7,200, individuals $3,600. If you’re 55 or older, you can deposit an extra $1,000.
  9. Open a donor-advised fund (DAF). A DAF is an excellent way to fund charitable donations. You can make significant contributions today and distribute the funds at a later date. If you want to donate to charities, but you’re not sure who should benefit from your generosity, this account is an excellent choice. In addition, you’ll receive a nice tax deduction.
  10. Buy stocks. In a zero-interest rate world, it’s near-impossible to create wealth if you only invest in cash or bonds; you need to own a basket of quality stocks. The Dow Jones has risen 256% this century, or 7.15% per year. If you invested $10,000 on January 1, 2000, it would be worth $35,670 today. A similar investment in bonds is worth $14,470.

Creating generational wealth requires optimism, wisdom, patience, courage, and luck. To increase your odds of success, consider completing a financial plan. According to one study, individuals who finish one have three times more assets than those who do little or no planning.[1] It will guide you through rising markets, falling markets, good economies, bad economies, greed, fear, doubt, and anxiety; it’s a financial GPS.

Hope springs eternal, and I’m optimistic 2021 will be a year of joy and celebration. After all, the Roaring Twenties started not long after the Spanish Flu pandemic ended.

“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence” ~ Helen Keller

December 11, 2020

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.

Data source: YCharts


[1] http://www.nber.org/papers/w17078

I Want It All!

A few individual stocks are soaring this year, like Zoom, Peleton, DraftKings, Pinterest, and Bill.com – each one up more than 225%, with Zoom leading the way, rising almost 500%, far outpacing the Dow’s gain of 7.75%. It seems logical to sell boring index funds to buy high flyers; after all, who wouldn’t want to earn 500%?

However, we have seen this movie before. During the last speculative bubble that popped in April 2000, companies like Microsoft, Cisco Systems, Qualcomm, Intel, and Applied Materials were all the rage. If you invested $10,000 into each stock on January 1, 1999, and sold them on April 1, 2000, you made 592.5%!  If you only invested in Qualcomm, you turned $10,000 into $231,510 in sixteen months, a gain of 2,220%. Investors who bought these companies were making money hand over chips.

If you chased these stocks and purchased them on April 1, 2000, and held them through December 31, 2015, you lost 40%. A $50,000 investment ($10,000 for each security) dropped to $29,903.

During frenzied markets, low-cost index funds get a bad rap. Still, during the fifteen-year stretch, where the high-flying technology stocks dropped 40%, a globally diversified portfolio of low-cost funds increased 198%. A basket of five Vanguard mutual funds – Vanguard 500, International Growth, Emerging Markets, Small-Cap Index, and Real Estate Index, performed well.  If you invested $10,000 into each fund, the portfolio grew to $149,304 from April 1, 2000, to December 31, 2015.

The lure of high-flying stocks is difficult to ignore, but you can’t buy them all. A 1% weighting means you’d own 100 companies, and at that point, you may as well purchase an index fund. If you increase the allocation to 5%, you’d own twenty companies. YCharts tracks 23,536 individual stocks. Is it possible to regularly pick the twenty best? Doubtful.

It’s impossible to buy every individual company, but you can purchase a global portfolio that owns more than 7,000 stocks in forty-seven countries through Vanguards’ Total World Stock Fund (VTWAX)[1]. Year-to-date, it’s up 13.88%, and it has generated an average annual return of 10.10%, 11.64%, and 9.41% over the past 3, 5, and 10 years, respectively.

A globally diversified portfolio of low-cost index funds is one of the best ways to create generational wealth, but I understand investors occasionally want to speculate on stocks. If you’re investing in high-flying stocks, limit your initial investment to 3% to 5% of your portfolio. If it climbs, you can continue to hold it, but it will not lead you to financial ruin if it falls.

Happy Trading!

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February” ~ Mark Twain

December 8, 2020

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.

Data source: YCharts


[1] https://investor.vanguard.com/mutual-funds/profile/portfolio/vtwsx, website accessed 12/8/20

21 Predictions for 2021

It’s the season of Wall Street predictions, so I’m throwing my hat into the ring to offer 21 projections (guesses) for 2021. If I predict all 21 correctly, I’m sure to garner immense fame and fortune. I may even be herald as the next great futurist with book deals, movie offers, and television appearances to follow. If I’m wrong and all my ideas fail, there’s no downside because most forecasters are wrong about the future. If you need proof, look no further than 2020. How many experts, gurus, wizards, pundits, and pontificators correctly predicted a global pandemic, a stock market crash, working from home, or the rise of Peleton? I will tell you – none.

Here are my 21 predictions for 2021.

  1. The 100-year average annual return for the S&P 500 has been 10%, so the stock market will earn 10% next year.
  2. The current inflation rate is 1.18%, well below the 106-year average of 3.22%. Inflation will stay below 2% for the first half of the year before rising above 2.5% during the second half as we emerge from our COVID quarantines.
  3. Pfizer, Moderna, and other pharmaceutical companies will distribute the COVID vaccine globally, and global economic activity will escalate in the second half of 2021.
  4. The yield on the 10-year US Treasury note is .95%, far below the 58-year average of 6.02%. The rate will rise above 3% as inflation returns.
  5. Small-cap stocks will outperform large-cap stocks. For the past six months, the small-cap index has outperformed the NASDAQ and S&P 500; this trend will continue.
  6. International stocks will outperform US stocks. Since June, they have bettered the NASDAQ and S&P 500.
  7. Long-term bonds (20+ years) will deliver negative returns next year as inflation returns and interest rates rise. The iShares 20+ Year Treasury Bond ETF (TLT) is down 2.5% since June. If interest rates 1%, the price of a 20-year bond will fall approximately 15%.
  8. Working from home stocks (DOCU, PTON, ZM, etc.) will fall in price as we return to our offices and leave our homes, and investors focus on valuation metrics like earnings and cash flow.
  9. The US Gross Domestic Product growth rate will rise above 5%, well above the 73-year average of 3.16%.
  10. Prices for vacation homes will continue to surge as families escape big cities like Los Angeles, San Francisco, Chicago, and New York. Ranches, beach homes, and mountain cabins will remain popular investments. My home town of Austin, Texas, will be a significant beneficiary of this trend.
  11. Companies will allow their employees to work from home or anywhere, further depressing corporate real estate valuations like office properties.
  12. Bitcoin will replace the US Dollar, the Euro, the British Pound, and the Yen as the global currency. Not really, but it will remain a volatile alternative asset class similar to gold, oil, or timber.  PayPal and Square will expand their Bitcoin offerings, so Bitcoin’s price should continue to rise.
  13. The unemployment rate will fall below 5%. It currently stands at 6.7%, and the 72-year average has been 5.77%.
  14. US public debt will climb above $30 trillion as Washington pumps more stimulus money into the economy. The current balance is $26.48 trillion. The increase in debt will have little impact on interest rates or the stock market.
  15. Merger and acquisitions will be robust next year as corporations look to expand their offerings. Low-interest rates and large cash balances will fuel the M&A boom. Apple will lead the way as they sit on $193 billion in cash and short-term investments.[1] If Apple wanted to, they could even buy a few countries like Hungary, Morocco, or Costa Rica.
  16. A new Roaring Twenties will start during the second half of 2021.
  17. Formal dress wear, high-end clothing, and custom outfits will make a comeback as people will tire of wearing yoga pants, sweats, and slippers. No one will be happier than my dad when this happens.
  18. Charitable donations and volunteerism will rise as people reach out to those economically stranded due to the pandemic.
  19. National park attendance will mushroom next year as people explore our great nation.
  20. The Baylor Bears men’s basketball team will win their first-ever NCAA championship under the leadership of Scott Drew – the Wizard of Waco.
  21. 2021 will be a good year because my mom says good things happen in odd years, and I never bet against her or her wisdom. My prayer is that 2021 will be less odd than 2020.

I was a peripheral visionary. I could see the future, but only way off to the side. ~ Steven Wright.

December 4, 2020

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 are predications and guesses only, and actual events may vary.

Data provided by YCharts as of 12/4/2020,


[1] https://www.cnbc.com/2020/07/30/apple-q3-cash-hoard-heres-how-much-apple-has-on-hand.html, Jessica bursztynsky, July 30, 2020

The Miser

The Miser is a classic Aesop Fable. It’s a story about a man who buries his gold under a rock. He visits his gold stash so often that a thief follows him and steals it. The miser is distraught when he realizes it’s gone, though he had no plans to use the gold to buy things. A lot of us are probably like the miser in the story. We check our investments daily to make sure they are safe and sound, but we don’t intend on using them to purchase anything. We’re happy when our balances rise and sad when they fall.

Money is a useful asset, intended to buy goods and services. It’s the heartbeat of commerce. But, some investors are reluctant to spend for fear of running out of money.  Since March, investors have poured $3.6 billion into savings accounts and money market funds. While it’s prudent to save money for the future, hoarding it today does not benefit anyone.

I’ve completed more than 100 financial plans over the past five years, and one of the most common fears is running out of money in retirement, a valid concern. However, this fear should not stop you from living your life today. If you don’t plan on spending your money to live, your no worse than the miser in the story. And, you can’t take it with you once you’re dead.

Here are a few ideas to help you with your spending.

  • Complete a financial plan. Your plan will guide your spending and give you projections for your assets. Once you see your spending plan on paper, you may be more comfortable in tapping your nest egg, and if you’re not pleased with the results, it can be adjusted to meet your needs.
  • Spend on experiences. If you’re reluctant to buy things, spend your money on experiences. Is a post-COVID trip in order? How about purchasing a vacation home so you and your family can create lasting memories? According to Momentum Worldwide, 76% of consumers prefer to spend money on experiences than material items.[1] My family and I enjoy visiting National Parks in the summer and skiing in the winter; it has been money well spent. My grandparents owned a vacation home in Laguna Beach, and I have fond memories of visiting it often.
  • Donate to your favorite charity. Despite a roaring stock market and robust real estate returns, people are hurting. Recently in Dallas, more than 6,000 cars and 25,000 people waited in line to receive food from local food banks.[2] Donating to your local food bank or other charities will help those in need, and it will help you as well. The IRS allows you to send up to $100,000 from your IRA to a certified charity through a Qualified Charitable Donation (QCD). If you own stock in a taxable account that has appreciated, consider donating it directly to a charity. You can write off the fair market value, and your charity can sell it free of taxation and use the proceeds to fund their operation.
  • Help the next generation. You can give away $15,000 per person per year, and your lifetime gift tax exclusion is $11.7 million (2021). If you give money away while living, it will allow you to witness the beauty of helping others while reducing your taxable estate. The government is giving you a gift to give money away, so take advantage of their generosity.
  • Donate now, give later. A donor-advised fund allows you to make a considerable contribution today and defer distributions to a later date. Your irrevocable gift is deductible in the year you make it even if you do not distribute any funds. The money can be invested for growth or safety, potentially allowing you to give more money away as your investments grow. For example, if you contribute $100,000 to a DAF today, you’ll be able to write it off your taxes regardless if you distribute any funds or not. Here is a link to Schwab’s Donor-Advised Fund: https://www.schwabcharitable.org/donor-advised-funds
  • Spend your gains. A balanced portfolio consisting of 60% stocks and 40% bonds is up 10.75% for the year.[3] If you invested $1 million on January 1, your gain would be $107,500, so you could spend this amount without invading your principal.
  • Spend your income. A portfolio of dividend-paying stocks or income-producing bonds is an excellent way to spend money without touching the principal portion of your account. If your account generates 3% in income, you can withdrawal $30,000 from a $1 million portfolio.

It’s a delicate balance between spending money today or saving it for the future, but it’s possible, especially with proper planning.  Also, tomorrow might not come, so spending money while you’re happy and healthy is recommended.

Happy Spending!

Here is a link to Aesop’s Miser Fable: http://www.read.gov/aesop/112.html

Spending money is much more difficult than making money. ~ Jack Ma

December 3, 2020

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.prnewswire.com/news-releases/76-of-consumers-prefer-to-spend-on-experiences-than-on-material-items-new-study-finds-300937663.html, website accessed December 2, 2020

[2] https://www.cbsnews.com/news/thousands-line-up-in-dallas-texas-to-receive-food-ahead-of-thanksgiving-food-bank-donation/, by Danielle Garrand, November 16,2020.

[3] YCharts – 1/1/2020 to 12/03/2020, PWM ETF Moderate portfolio

My Pilot

My last flight before COVID shut us down was an uneventful one from Denver to Austin. The flight lasted just under two hours, arriving as scheduled. My pilot brought me home safely. She probably examined a thousand items before we left Denver, like checking the aircraft, reviewing her flight plan, strategizing with her first officer, and so on. Once she felt confident with her plan, we were ready to take to the skies.

When I fly commercially, I trust my pilot to fly me to my destination safely. I don’t want to go to another city, do barrel rolls, go vertical, break the sound barrier, or land on a highway. The flight should be boring, mundane, and lack excitement.

 In 1987 I was flying home from Europe on board a TWA 747. While on our final approach to JFK, the pilot lowered the flaps and put the landing gear down. When we got near the runway, he hit the afterburners, raised the flaps, and retracted the landing gear; we were on our way to Canada. The air traffic controller closed the runway seconds before our scheduled landing because of a significant snowstorm. It was a white knuckle moment as we banked right and headed north. After a few hours in Canada, we returned to New York. Scary, eh?

If a pilot does her job correctly, I get to my destination. When I travel, I usually arrive at my location without any issues. However, I may arrive late, miss a connection, or get diverted to another airport. Regardless, I eventually get home.

One of my primary duties as a financial planner is to help my clients achieve their goals. I try to do this carefully and efficiently. Often, clients achieve their goals without much fanfare, but occasionally, things get a little messy, especially when stocks fall. During a correction, dreams may be delayed or deferred, but we can reach them if we stay focused on their plan.

A financial plan, like a flight plan, will be your guide to help you achieve your goals. Don’t invest without one!

“Every takeoff is optional. Every landing is mandatory.” ~ Anonymous

October 29, 2020

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.

Late to the party?

It’s a bit awkward to arrive late for a party, especially if it’s very late. Walking into a room full of strangers once a party has started can be intimidating or embarrassing because it forces you to interrupt conversations or eat food picked over by the punctual guests.

I was late to a junior high roller skating party once because I wrote down the wrong starting time. When I entered the rink, my friends were already having a good time, and there were no more skates available in my size, so I rented a size 15 skate (about six sizes too big). I was uncomfortable and nervous about joining one of the cliques, and my large skates didn’t help.

If you’re late to your retirement party, have no fear because all is not lost. If you’re in your forties or fifties and have not saved any money for retirement, it may feel like you’re doomed to work forever, but that’s not the case.

The best time to start saving for retirement is in your teens or early twenties and invest thousands of dollars in high-flying stocks like Amazon or Tesla. An eighteen-year-old investing $1,000 monthly will have about $13 million at age 65. However, this is lunacy because few teenagers have the foresight, wisdom, or money to start investing (except Warren Buffett). When I was eighteen, I didn’t have a job, and I only had $60 in my savings account.  Besides winning the lottery or inheriting millions of dollars, what can you do to improve your retirement shortfall? Here are a few suggestions.

  • Inventory your assets and review your investment holdings. Locate your investment statements for your 401(k), IRA, and brokerage accounts. What do you own? What is the current value of your investments? How are your assets allocated?
  •  Calculate your liabilities. Identify your debts – home, car, credit card, student loans, etc. to figure out which ones you can refinance, reduce, or eliminate. How much money do you owe to others? What are your monthly payments? What interest rate are you paying on your debts?
  • Review your monthly expenses. Where is your money going? Establishing a budget or spending program will help you find excess dollars for savings. In a post-COVID world, you’re probably paying for things you no longer need or aren’t using, such as a gym membership. Look for items in your spending that can be reduced or eliminated.
  • Invest for growth. Stocks outperform bonds, cash, and inflation. Purchase stocks for the long haul, and they will help you make up for the lost time. The 94-year average annual return for stocks has been 10.1%.
  • Avoid speculating or gambling. It’s tempting to daytrade, buy penny stocks, or purchase options but avoid the urge. If you continually try to hit home runs, you’ll strike out often. Speculating with money you can’t afford to lose is madness.
  • Contribute the maximum amount of money to your 401(k) and IRA accounts. The government allows you to contribute $19,500 to your 401(k) plan, or $26,000 if you’re 50 or older. You can contribute $6,000 to an IRA plus an extra $1,000 if you’re 50 or older.
  • Automate your savings. Establish a monthly investment program into a few mutual funds and a savings account. Automating your savings will eliminate human error and emotions.
  • Ignore the stock market. Trying to time the stock market is impossible and a waste of time. While you’re building your retirement nest egg, be a net buyer of stocks, notably when they fall.
  • Review your progress. A quarterly review of your spending habits will allow you to adjust your plan as needed.
  • Work with a financial planner. Your planner will be your guide, accountability partner, and financial Sherpa. Working with an advisor can help you increase returns. A study by Vanguard quantified an advisor relationship can add 3% in net returns.[1]   

Your retirement journey may feel insurmountable, but you can do it – particularly with a financial plan.  Saving money is akin to starting an exercise routine. It won’t be easy, but each day will get better than the next. It’s challenging to see results at first, but you will notice significant changes over time.  

Happy Retirement!

“Life is a party. Dress for it.” ~ Audrey Hepburn

October 15, 2020

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.vanguard.com/pdf/ISGQVAA.pdf

1,472,583 Things To Do Before You Retire

Retirement planning involves millions of inputs. When will you retire? Where will you retire? How much money do you need? Will you travel the world? Play golf? Fish? Surf? The list of questions is endless, and it can be overwhelming.

Financial planning can help you alleviate your concerns. It isn’t easy to pinpoint your future goals, particularly if you’re retiring in twenty or thirty years. Financial planning is great until life gets in the way. I was born and raised in Southern California. I thought I’d live there forever, but I’ve lived in three different states because of job transfers. Life happens.

If you’re unsure how to start planning for your retirement, create a file to track the important things to you and your family. For example, if you want to spend your days surfing, you’re not going to retire to Topeka, Kansas. Retirement planning is also a process of elimination. What don’t you like? What can you cross off your list? Narrowing your choices will help you make better decisions on how to spend your golden years. Of course, your plans will change often before you finally decide to retire.

Of the more than one million items to focus on for retirement, I’ve narrowed the list down to four necessary items – all things you can control to grow your nest egg.

  1. Spending. Spending is a large driver for your retirement, a key component. If your spending level is high, you will need more assets to cover your expenses. Tracking your monthly expenses is vital to determine how much money you need to retire.  After you get a handle on your annual spending, multiply your results by twenty-five. If your annual spending is $100,000, then your asset goal is $2.5 million ($100,000 x 25 = $2,500,000). If you’re on pace to reach your target, congratulations. If not, then you need to adjust your spending.  When your assets can produce enough income to cover your expenses, you can retire at any time – regardless of your age.
  2. Savings. Spending and savings go hand in hand. The less you spend, the more you can save. Contributing to your 401(k), IRA, and investment accounts early and often may yield substantial retirement assets. While working, you should be a net buyer of stocks. Don’t worry about the economy, the election, the market, etc. When I started working, the Dow Jones was at 2,376. Today it’s 28,250 – an increase of 1,089%![1] Who cares what the market is doing daily. It’s a waste of energy to try and time the market, especially if you’re going to work for another ten or twenty years.
  • Allocation. Asset allocation accounts for 93.6% of your investment return. The remaining 6.4% is due to market timing and investment selection.[2] Allocating more money to stocks is your best chance to build substantial wealth. Since 1980, the S&P 500 has generated an average annual return of 11.8%, while short-term bonds returned 4.2%, a difference of 7.6% per year.
  • Emotions. Of all the items that will impact your retirement, your emotions will be at the top of the list. You will be your most prominent advocate and your worst enemy. The stock market has produced extraordinary gains for the past century, but several large corrections forced investors out of the market. How you react during the dark days of the stock market will significantly impact your retirement assets. When the market fell in March, investors liquidated $348 billion in assets from mutual funds. They panicked and sold their holdings at the bottom, potentially missing a 52% return as stocks recovered. If you panic and sell during corrections, you will impair your future benefits. It takes courage to be a buy and hold investor, but you must do so if you want to create generational wealth.

It’s essential to plan for your future. Dream big, shoot for the stars, have fun, enjoy the journey, but concentrate on the things you can control and ignore the rest. If you focus on your spending, savings, asset allocation, and emotions, you will give yourself a chance at a successful retirement.

See you at the beach!

If you can’t control your emotions, you can’t control your money. ~ Warren Buffett

October 6, 2020

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.

Photo credit: DisobeyArt, I Stock Photo


[1] Dimensional Funds 2020 Matrix Book

[2] Determinants of Portfolio Performance, Financial Analyst Journal, July/August 1986, Vol 42, No. 4, 6 pages; Gary P. Brinson, L. Randolph Hood, Gilbert L. Beebower.

And Down The Stretch They Come!

Dave Johnson is known for this call, “And down the stretch they come!” Mr. Johnson has been calling horse races since the early 1970s, including the Kentucky Derby, Preakness, and Belmont Stakes. There are few things more exciting in sports than watching horses make the final turn towards the finish line – the stretch run.

We’re entering the fourth quarter, and 2021 is less than 100 days away – thankfully. We are in the stretch run. When horses enter the starting gate, the optimism is high; each horse has a chance to win. As the race progresses, the fastest horse separates itself from the field, and jockeys need to adjust their strategy to catch the leader. This year started with much hope, especially after a stellar 2019. The Dow Jones was up  3% through February before the world imploded with the Coronavirus. As the pandemic spread, the market fell 37%. For the past six months, we had to adapt to a new normal – masks, social distancing, self-quarantines, Zoom Calls, hand sanitizer, and a shortage of toilet paper. Hopefully, we finish the year on a positive note with strong momentum for 2021.

As we approach the end of the year, what can you do to enhance your investment portfolio for 2021 and beyond? Here are a few suggestions.

  • Let your winners run. A jockey who is riding a winning horse needs to hold on to finish the race as Ronney Turcotte did when he rode Secretariat during the home stretch of the Belmont Stakes in 1973. If you’re sitting on winning stocks, hold them until next year before realizing your gains.
  • Sell your losers. If you own a stable of losing stocks, sell them to realize your losses for this year. You can offset your gains dollar for dollar, and if you don’t have any profits, you can carry your losses forward forever. Hall of Fame pitcher Don Drysdale sold his racehorses because he said the slow ones eat as much as the fast ones.
  • Diversify your holdings.  Owners and trainers race several horses during a season – some win, some lose. A globally diversified portfolio of stocks, bonds, and cash will allow you to finish in the money more often than not. Spread your bets across several sectors.
  • Review your accounts. What worked and what didn’t? Analyzing your results is vital for investment success. Are you still on pace to achieve your financial goals? If you’re not sure, give us a call. We can help.
  • Adjust. What changes do you need to make for 2021? Is your portfolio sturdy enough to weather all types of market conditions? What changes can you make today to better position your investments for a profitable run next year?
  • Look for long shots. The technology sector will likely lead wire to wire this year, but sectors like energy and financials were left stuck in the mud. Look for investments that may rebound next year.
  • Celebrate your success. Are your investments on pace to finish the year in positive territory? Will you be in the winner’s circle at the end of the year? If you were financially successful, consider sharing your winnings with those in need. Donating money to a non-profit will benefit others and help you reduce your taxes – a win, win.

This year has been brutal, and it can’t end fast enough. We are in the stretch run, so use these next few months to get your house (barn) in order. I know you can do it. I’m betting on you to win big next year.

Riders up.

Do you give the horse its strength or clothe its neck with a flowing mane? Do you make it leap like a locust, striking terror with its proud snorting? It paws fiercely, rejoicing in its strength, and charges into the fray. It laughs at fear, afraid of nothing;  it does not shy away from the sword. The quiver rattles against its side, along with the flashing spear and lance. In frenzied excitement it eats up the ground;  it cannot stand still when the trumpet sounds. At the blast of the trumpet it snorts, ‘Aha!’ It catches the scent of battle from afar, the shout of commanders and the battle cry. ~ Job 39:19-25

September 23, 2020

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.