Captain Ahab or Captain Phillips?

Herman Melville’s Moby Dick is an excellent book filled with colorful characters and suspense. Captain Ahab wanted revenge on Moby Dick for biting off his leg. When I finished reading Moby Dick, I thought it was a fantastic story. My other thought was that Captain Ahab didn’t have a plan to capture the whale. His only goal was to kill Moby Dick at any cost. In the end, the entire crew of the Pequod died because of Captain Ahab’s mindless pursuit. If he had a plan, his results might have been different.  

Captain Phillips, on the other hand, was a man with a plan. Captain Phillips is a movie about the hijacking of the Maersk Alabama. The film was excellent and, like Moby Dick, full of vibrant characters and suspense. Captain Phillips regularly ran drills to make sure his crew was always prepared. As a result, when trouble arrived, his team was ready. Captain Phillips saved his ship, his staff, and ultimately himself because of his plan.

Do you identify with Captain Ahab or Captain Phillips regarding your financial and investment planning? Do you hop in a boat without a goal, or do you set a course that delivers you to your destination? Most investors act like Captain Ahab because they don’t have a plan, and they’re constantly chasing something – a rumor, stock tip, return or yield. If you have a plan, as did  Captain Phillips, your odds of success rise. 

I recommend you spend time planning your financial future to end up more like Captain Phillips and less like Captain Ahab. A well-prepared investor is more apt to follow their plan through all types of market conditions.

Confidence is going after Moby Dick in a rowboat and taking the tartare sauce with you.” Zig Ziglar

October 11, 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.

A $2,000,000 Fee?

In the mid-90’s I received a call from a client asking me to invest a lot of money. I asked him how much money, but he was reluctant to answer because of the large sum. He was the sole beneficiary of his uncle’s estate. He was delighted but nervous to be in a position to receive a substantial inheritance. When the money arrived, we parked it in a six-month T-Bill until we developed a plan.   

My client’s uncle did not have an estate plan, and, as a result, he wrote a $2,000,000 check to pay the estate tax! It was the most significant check he had ever written, and it went to pay taxes.

After he paid the IRS, we established a plan so his beneficiaries would not worry about paying an estate tax when he and his wife passed away.  I referred him to an attorney who established several trusts to protect their assets. I assembled a portfolio of California tax-free municipal bonds and high-quality dividend-paying stocks. When they passed, their heirs did not pay any taxes.

Why a $2,000,000 fee?  After he wrote his check to the IRS, he asked me what the fee would be to set up the investment accounts and family trusts. I said it would be less than $2,000,000. He chuckled at my comment because he knew his plan would protect his family for generations.

Next year, under the American Families Plan tax proposal, the estate tax exemption may drop to $5.85 million per person, or $11.7 million per couple – a 50% reduction from current levels. If your net worth is near $6 million, please call your estate planning attorney or financial advisor to ensure your assets are titled correctly. A little planning can go a long way, potentially spanning generations.

The only difference between death and taxes is that death doesn’t get worse every time Congress meets. ~ Will Rogers

October 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.

We Can’t Win!

When my daughter was in the first grade, I had the honor of coaching her soccer team.  These little Mustangs consisted of a band of young ladies, most of whom were playing an organized sport for the first time in their lives. Our league did not keep score because the primary goal was to introduce the girls to soccer. Before our first game, one of the girls said to me, “if we don’t keep score, we can’t win.” She was right.  

Most investors don’t keep score, so they don’t know if they’re winning or losing the investment game. In addition, they don’t know what game they’re playing or the road they’re traveling. As the Cheshire cat said to Alice in Alice in Wonderland, if you don’t know where you’re going, it doesn’t matter which road you take. 

How do you know if you are winning the investment game or on track to reach your goals? Here are a few ideas that can help you keep score and increase your odds of winning.

  • Financial Plan. A financial plan will help you keep score and guide you towards your goals and assist you in quantifying your hopes, dreams, and fears. It will become your financial GPS, your investment cornerstone.
  • Investment Policy Statement. An IPS will address your investment selection, asset allocation, time horizon, and risk tolerance.
  • Quarterly Review. A quarterly review is a quick check-in to assess your account performance, investment income, and market conditions. 
  • Annual Review. The annual review is a deep dive into your financial plan and investment policy statement. Are you still on track to reach your goals? Do you need to amend your plan? The annual meeting is an excellent time to review every aspect of your financial life.

As a note, the girls kept the score at each game.

I’ve worked too hard and too long to let anything stand in the way of my goals. I will not let my teammates down, and I will not let myself down. ~ Mia Hamm

October 5, 2021

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

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

The Realities of Retirement

There are several theories and unlimited opinions about retirement. Hot topics include distribution rates, Social Security start dates, and paying off your mortgage.

I’ve read dozens of books on retirement planning, but I’m moving from theory to reality for this blog, so I contacted three retired friends. Stuart is a long-time neighbor, and our daughters were classmates when they were younger. He recently retired after spending his entire career with Motorola and its successors. Richard is a friend from church, and he retired from his career as a human resource executive and consultant. Fluent in Spanish, Richard and his wife, Linda, moved to Mexico. Tim is my former college roommate, and he and his wife, Irene, retired to Wyoming after his successful career as a financial advisor and hers as an HR consultant.

All three individuals are unique with varied backgrounds, but they have several things in common. While working, each had a financial plan to help guide them towards retirement, they are debt-free, and none eat dinner before 5:00.

Stuart refers to his plan often, correcting his course as needed. He wants to stay on top of his plan. Richard also relies on his plan and his advisor. After a long career as a financial advisor, Tim does not refer to his plan as often as he used to because it’s still in his head, but he and Irene rely on a budget.

One of the first questions I asked them was how they knew it was the right time to retire. Richard said, “We have enough money. We are good.” He knew he was financially secure, but Linda needed some convincing beyond Richard’s optimism. She became comfortable about retiring after reviewing their plan data with their advisor. Richard also added, “God had a plan and would not let him fail.” Tim said, “I did not want to be the richest guy in the graveyard.”

Stuart had a target date in mind from an early age because his father retired at 57, and his father-in-law not long after. Stuart said his father is “comfortably off,” as is his father-in-law. He added, “They don’t live extravagant lifestyles, but they’re comfortable.” Stuart knew at a young age he probably could retire early because of the examples set by the men in his life. He also benefited from a pension plan that he could access at 60 without a penalty. He did not stay at his employer for the pension, but it was a deciding factor in retiring early. In preparing for an early exit, Stuart said it helps to “talk about it” with others to make sure you’re financially and emotionally ready to leave the workforce. More importantly, Stuart and his wife Audrey were “100% aligned on their approach and decision making throughout the planning process.”

Tim and Irene weren’t ready to retire before 55. “Between 50 and 55 were formative years for them,” Irene added. They set a retirement target age of 55 after meeting in their forties, realizing they had similar financial goals. They were both financially stable when they met.

It’s not uncommon for retirees to get more conservative in retirement, but each of these recent retirees kept a hefty allocation to stocks. Richard is not a risk-taker, so he reduced his stock exposure about ten years before retirement, relying on his financial plan and guidance from his advisor.  As for stocks, Tim, referring to Warren Buffett, said, “If it doesn’t have a board of directors or dividends, he’s not interested.”

Richard will start receiving Social Security benefits in December because “we aren’t guaranteed a tomorrow.” His Social Security benefit coupled with his pension payouts should cover their living expenses, allowing their investments to grow. Tim, Irene, and Stuart will delay their Social Security benefits for as long as possible. Most people use financial decisions to decide when to receive Social Security benefits, but Tim will rely on his health. As long as he is healthy, he will defer his payout. Richard encourages young people to start saving money early, so they don’t have to rely on Social Security benefits.

How you spend your time in retirement is essential. No one wants to be bored. Stuart feels a sense of accomplishment daily by focusing on projects around the house. He also spends time playing golf with friends and his wife, Audrey. Stuart is also a music enthusiast and owns several guitars, and he may get the band back together at some point. He emphasizes health by walking the “loop” in our neighborhood – not an easy thing to do! Richard’s new hobby is cooking. In what he called a “role reversal,” he does most of the shopping and cooking. His go-to dish is chicken mixed with sausage, peppers, and potatoes. In addition to cooking, he and his wife volunteer with their new church. Tim and Irene are busy building a home in Wyoming. When they aren’t hammering nails, they’re fly-fishing or hiking. Richard has discovered streaming on Netflix.

Richard and Linda paid off their mortgage and other debt items before retirement, as did Tim and Irene. Stuart paid off his mortgage ten years before retirement. He paid it off early because “It is the most predictable return on your capital.” By paying off his mortgage, it freed up his cash flow for more important things.

None of them miss working. Richard’s previous jobs did not define him, and Stuart made a “clean break” from his employer. Stuart does not keep up with former colleagues or past work projects. He wants to focus on the future. Tim and Irene answered in unison with a definite “No!” Irene was worried about retiring because she worked so much and “had a lot of balls in the air,” but her transition has been much easier than expected.

The cost of healthcare is a concern for people retiring early. Stuart opted for COBRA; Tim and Irene have a high-deductible plan and health savings accounts. Richard is now eligible for Medicare, and he says, “It’s a sweet deal and not that expensive.”

Richard and Linda have a long-term care policy because it brings them peace; Linda has term life insurance. A few years ago, Stuart dropped his life insurance coverage; Tim and Irene did not own life insurance.

I asked Richard what advice he would give to his 30-year-old self, and he said he would have started saving earlier. He spent money because he could. He lacked discipline. Stuart recommended working with advisors to make sure you’re doing the right thing. Tim and Irene added that marrying the right spouse is paramount for financial success.  Stuart started working with an advisor in the UK as soon as possible, and he recommends others “take advantage of all the resources available to them like a CPA.” He relied on company and government resources often. Initially, his plan was “general in nature” but “sensible and foundational.”

Stuart’s vision of retirement matched up “almost perfectly” with the realities of retirement, and he has not experienced any surprises. His life “has continued along.” Richard’s retirement has exceeded his expectations.  Tim and Irene said their retirement has been better than expected. Richard added, “people probably need less money than they think.”

A popular strategy for individuals entering retirement is to convert their traditional IRA to a Roth. Stuart will convert his IRA to a Roth, but Tim and Richard will not.

Stuart said, “a key to his early retirement is relying on friends who also retired early.” His new community allows him to chat about retirement and other topics. When I asked him about his overall retirement experience, he said, “so far, so good.”

What can we learn from Stuart, Richard, Tim, and Irene?

  • Develop and follow a financial plan. A financial plan will give you the confidence to retire on your terms.
  • Pay off your debt before you retire. If you pay off your debt, you can spend the extra money on things important to you and your family.  
  • Find a hobby. Do you enjoy cooking? Hiking? Fishing? Playing music? A hobby is an excellent way to spend time and meet new friends.
  • Find your community, surround yourself with family and friends – don’t travel the retirement road alone.
  • Take care of yourself – exercise and eat well, get outside. Health is wealth.
  • Hire professional advisors to help you plan for your retirement. A successful team may include a financial planner, CPA, attorney, insurance agent, and mortgage broker.
  • You probably need less money than you think for a comfortable and secure retirement.
  • Be positive  – if you’re not already. When I talked with Stuart, Richard, Tim, and Irene, they oozed joy and happiness – all three were excited about their future. They weren’t concerned about the stock market dropping or other financial calamities.  

If you think you’re ready for retirement, give your advisor a call to crunch some numbers and discuss the process – you’re probably closer than you realize!

Stay young at heart, kind in spirit, and enjoy retirement living. ~ Dannielle Duckery

September 29, 2021

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

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

Financial Planning Goals

Jim Collins wrote about Big Hairy Audacious Goals (BHAG) in his best-selling book Built to Last. He describes BHAGs as “clear and compelling, needing little explanation; people get it right away.” Goals need to be specific and leave little doubt about what they want to accomplish. I recently received a financial planning questionnaire where the individual wanted to own half of central Texas. A big goal for sure, but not specific, nor realistic.

Setting a financial planning goal that is generic or vague is not beneficial. Wanting to retire with a lot of money is not a goal. It tells us nothing about when you want to retire or how much money you’ll need. For example, a specific goal would be retiring in five years with no debt and $5 million in assets. The more detailed your goals, the better the planning. An ambiguous goal will get you nowhere – garbage in, garbage out.

Here are a few ideas to help you with your planning if you’re contemplating retirement.

  1. Set a target. When do you want to retire? Do you want to retire at a certain age or asset level? For example, you can say I want to retire at age 65 or when my assets reach $5 million.
  2. Set a destination. Where do you want to retire? Do you want to say in your current home or move to a new location? If you move, will it be more or less expensive? Moving from San Diego to Topeka will be cheaper than moving from Topeka to San Diego.
  3. What do you want to do in retirement? Will you volunteer? Golf? Fish? Travel? Hobbies can be time-consuming, expensive, or dangerous, so plan accordingly.
  4. Writing your thoughts down will convert your dreams to goals. When you transfer your dreams from your mind to paper[1], you will start making them a reality.
  5. Review and adjust. Once you commit your goals to paper, review and revise them often. Annually evaluating your goals, and tweaking them accordingly, will keep your plan on track.
  6. Work with an accountability partner. A financial planner can act as your accountability partner or coach, helping you focus on your goals. If you mention your goals to someone else, they will hold you accountable and ensure you’re moving in the right direction.

Here is an example of a specific retirement goal: I want to retire at age 65 with $15 million in assets and live in Lake Tahoe, California, where I can hike, bike, fish, and ski. I also want to travel two times per year. In addition, I want to volunteer 10 to 20 hours per week and donate at least 10% of my income each year to charities and organizations I support.[2]

Are you ready to commit your dreams to paper? If so, congratulations. If not, hire a Certified Financial Planner™ to help you organize and quantify your hopes, dreams, and goals.

We all have dreams. But in order to make dreams come into reality, it takes an awful lot of determination, dedication, self-discipline, and effort. ~ Jesse Owens

September 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] Paper can be an iPhone, iPad, etc.

[2] This is not my goal, but I wouldn’t mind it if it was.

Friday the 13th

The Friday the 13th movie series has, so far, produced twelve scary movies. In 1984 it was Friday the 13th: The Final Chapter, followed by Friday the 13th: A New Beginning one year later. The Final Friday movie appeared in 1993, but three more films followed it, so I don’t believe Jason will ever die.

The movie franchise has been highly profitable. The budget for the series cost $80.9 million, and the films generated more than $468 million worldwide —a value play.[1]

In honor of this frightening movie series, here are thirteen terrifying thoughts that can derail your financial success.

  1. You don’t have a plan. If you don’t know where you’re going, how will you know when you’ve arrived? The plots for the Friday the 13th movies are simple, but the directors and actors still followed a script.
  2. You don’t have a budget. Do you know how you’re spending your money? Do you track your expenses? It’s difficult to create wealth if you spend more than you earn. A budget can help you avoid unpleasant surprises.
  3. You’re not contributing to your company 401(k) plan. A company retirement plan is an efficient way to create wealth because your contributions are automated. Every pay period allows you to invest in a diversified portfolio of stocks regardless if the market is up, down, or flat.
  4. You’re not matching the match. If your company offers to match your contribution up to 3%, you should at least contribute 3% to your retirement plan.
  5. You don’t own stocks. Stocks create wealth. Since 1926, they have generated an average annual return of 10% per year. It is startling when stocks fall, but they typically recover quickly. In fact, the three major indices are trading at all-time highs despite decades of volatility and corrections.
  6. You’re cash-rich. A significant cash position can be an anchor for the growth of your portfolio. After establishing an emergency fund, invest the remainder of your cash into stocks. The US T-Bill is a proxy for cash, and since 1926 it has averaged 3% per year, but so has inflation, so your net return is zero.
  7. You’re an active trader. Trading aggressively is a fast way to get killed in the market. In addition to rapidly moving from one stock to another, you might incur significant fees or taxes.
  8. You try to time the market. Somebody, somewhere, is saying the market will crash. I started my career in 1989, and a senior broker at a prestigious investment firm told me to buy silver because stocks would crash. The Dow Jones was 2,500 at the time, and it has since soared 1,333%, while silver increased 387%.[2] Trying to time the market is pointless.
  9. You procrastinate. The best time to start investing was yesterday, and the second-best time is today. Don’t wait! For example, if you start investing $500 per month at age twenty-five, it may be worth $3.16 million at age sixty-five. If you waited ten years, it would be worth $1.13 million, a difference of $2 million!
  10. You worry about politics. Since 1789, the stock market has returned 9.1% per year. When a Democrat controls the White House, the market has returned 8.8% per year. When a Republican occupies the White House, the return has been 8.6% – a difference of 0.20%.[3]
  11. You take advice from talking heads.  Commentators and financial experts do an excellent job of reporting the news, analyzing stocks, updating economic conditions, but they’re not talking to you directly. They aren’t familiar with your financial situation, nor do they know your hopes, dreams, or fears. Do your homework before reacting to a news story.
  12. You try to keep up with the Joneses. If you try to spend like your neighbors, you could end up in a poor house. Your neighbor will not support you in retirement, so don’t worry about the size of his boat.
  13. You die with millions of dollars in the bank. Of course, no one wants to run out of money, but if you pass away with millions of dollars in your bank account, then you’ve short-changed yourself and others. If your wealth exceeds your wildest dreams, consider helping others like your church, favorite charity, or loved ones. You can’t take your wealth with you, so if you donate it to others while you’re alive, you’ll have the opportunity to experience the joy of giving.

As I mentioned earlier, stocks are trading at all-time highs. The long-term trend for stocks is up, so don’t fear a correction. If you follow your plan, invest often, start early, buy stocks, then good things could happen.

Happy Friday, the 13th!

“Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also. ~ Matthew 6:19-21

August 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.


[1] https://en.wikipedia.org/wiki/Friday_the_13th_(franchise), website accessed August 13, 2021

[2] Ycharts – June 1, 1989 to August 13, 2021

[3] Fidelity Investments Stock Returns and Elections by Jurrien Timmer, Director of Global Macro, Fidelity Management & Research Company. Report accessed, July 24, 2020

I Am the Greatest!

Muhammad Ali repeatedly let everyone know he was the greatest. And he was. Who is the greatest Olympian of all time? Allyson Felix. Other GOATs include Michael Jordan, Tom Brady, Cal Ripken, and Steffi Graff.

My friends and I played sports every day – football, baseball, basketball, golf, volleyball, tennis, Wiffle ball, etc. We were a competitive bunch, each one claiming to be the greatest at whatever sport we were playing. Our aggressive style of play was a combination of the king of the hill and survival of the fittest. We weren’t humble.

My firm receives several inquiries a week from people seeking help with currency conversions, Social Security benefits, investments, or financial planning. Most times, they want a quick answer to a unique situation. If they’re looking for a long-term relationship, they often ask why they should hire me as their financial planner. It’s a valid question, of course, but I don’t know how to answer it. I don’t want to brag or toot my own horn, and I don’t feel comfortable telling someone I am better than any other planner in Austin or elsewhere.  

Last year, I was the president of the Financial Planning Association of Austin, and I spent significant time with several planners and advisors. I was fortunate to get to know them as friends, not competitors, and I was amazed at their knowledge about our industry and the level of service they provided their clients. Our association is a collection of two hundred individuals working together to advance our profession. We collaborate on several projects, and if someone is not a good fit for me, I will refer them to another firm and vice versa.

However, I understand that prospective clients want answers; they want the truth, so here are a few questions you can ask a financial planner or investment advisor.

  1. How long have you been in the business? Experience matters, but don’t discount youth. I’ve been in the investment business for thirty-two years, and I have learned much on my journey. However, I’m thankful I started my career in my early twenties, and I was blessed to work with exceptional mentors and colleagues.
  2. How do you get paid? A planner’s fees should be fair and reasonable, and they should disclose all their charges. The industry average is about 1% of the assets they manage. For example, if you invest $1,000,000, your fee will be $10,000. Our fees start at 0.50% and go down as your assets grow. As a reminder, the fees you pay your advisor do not include mutual fund expenses or commissions.
  3. Are you a fiduciary? Registered investment advisors, including us, are fiduciaries. We are legally bound to act in your best interest. We must put your interest first and disclose any conflicts of interest.
  4. What designations do you hold? Most registered investment advisors are Certified Financial Planners (CFP)™ or Chartered Financial Analysts (CFA). We earn these designations after studying for years and passing rigorous exams. Individuals who hold the CFP designation must complete thirty hours of continuing education every two years.
  5. How do you invest your own money? Advisors and planners should eat their own cooking. What do they own? How do they allocate their assets? How they invest their money will tell you much about how they will handle yours.
  6. Who is your custodian? Most advisors use third-party custodians like Schwab or Fidelity to manage your money. Your advisor should not act as your trustee and custodian.
  7. Have you been fired, suspended, or sanctioned because of any legal activity? Advisors and planners are required to disclose any disciplinary actions.
  8. How often will we meet to review my account and goals? Your advisor should meet with you as often as you want or need. We offer quarterly meetings, and we’re available at any time.

As I mentioned, there are many excellent advisors, so you need to find one you’re comfortable working with and who puts your interest first.

Here are two resources to help you find an advisor, and if you can’t find one, give me a call.

Happy Searching!

“I am the greatest; I said that even before I knew I was.” ~ Muhammad Ali

August 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.

Variants

The Delta Variant is throwing a wrench into the economic recovery as COVID cases spike. Companies like Microsoft, Wells Fargo, Blackrock, and Amazon are delaying returning to the office for their workers. Labor Day was a return date for some employers, but it won’t occur until January 2022. Officials canceled the New York Auto Show scheduled for August 20, and Comic-Con postponed its in-person event until 2022.  Austin raised its COVID risk level to stage 5 – the highest level.

Global COVID cases now exceed 200 million, and they do not appear to be slowing down. COVID incidents in California, Texas, Florida, and New York continue to climb.

When COVID arrived and global economies shut down, the S&P 500 fell more than 35% as investors sold stocks. The market quickly recovered, but people were left scarred over the speed and severity of the drop.

The market continues to perform well despite fears over the Delta Variant. It has been volatile lately, and the S&P 500 dipped about 3% in July – not a significant pullback, but enough to cause concern with investors. I believe our elected leaders will not shut down the economy again, but people may be cautious about venturing out. And if consumers are nervous, they won’t spend money which may cause stocks to stall or sell-off. What can you do if you’re concerned about another market sell-off due to COVID? Let’s explore a few ideas.

  1. Buy bonds. Bonds are not an attractive investment from an income perspective, but they will provide safety if stocks fall. Bonds and stocks are negatively correlated, so when one rises, the other falls. When stocks dropped in July, long-term treasury bonds climbed 4.4%. When the S&P 500 crashed in March 2020, bonds rose 36%. Many advisors, including me, have panned bonds because of low yields, but you won’t find a better investment than bonds to hedge your stock holdings.
  2. Sell stocks. Since the market bottom on March 20, 2020, the S&P 500 is up 92%, so you probably have significant gains. If you’re worried about a pullback, sell stocks and park your proceeds in cash. Reducing your stock exposure lowers your risk level.
  3. Buy the dip. If you’re sitting on cash waiting for a correction, you can buy quality companies at lower prices when the market falls. I recommend creating a list of companies you want to buy, so when stocks fall, you’re ready to pounce.
  4. Rebalance. Rebalancing your accounts will keep your risk tolerance intact. If you have not rebalanced, your equity exposure is probably higher than usual. For example, if your allocation was 60% stocks, 40% bonds five years ago, then it’s 75% stocks, 25% bonds today – too much risk! Rebalancing your accounts once or twice per year is recommended.
  5. Stay put. The market rises more than it drops. For the past 100 years, stocks have risen three-quarters of the time, and it has averaged more than 10% since 1926. Trying to time the market because of what might happen is not a wise investment strategy. Investors who liquidated their holdings in March 2020 missed significant gains. A buy and hold strategy is still an excellent way to grow, or maintain, your wealth.
  6. Follow your plan. A financial plan can calm your nerves. During the COVID correction, we regularly monitored our client’s financial plans and investment portfolios. Though the market fell sharply, it did not impact our client’s financial goals. We recommended they stay invested.

I’m frustrated with the spike in COVID, and I don’t want to work from home or wear a mask. My heart aches for those infected with the horrible disease, but I’m hopeful it will pass shortly. In the meantime, be safe, and be patient!

To lose patience is to lose the battle. ~ Mahatma Gandhi

August 5, 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.

Ready. Set. Go.

The Olympics are off and running and swimming and jumping and rowing and so on. The Olympics are extraordinary because it brings the world together. We have the opportunity to witness amazing feats from incredible athletes – young and old. I’m always astounded at how fast athletes run or how high they jump. As viewers, we see the final results as athletes pursue gold. However, we rarely see their years of training, struggles, or setbacks.

My first experience with the Olympics was the 1976 Montreal Games. I sat in my parent’s office eating McDonald’s, watching a small colored TV. I was enamored with Bruce Jenner winning the decathlon, Alberto Juantorena winning the 400 and 800-meter races, and Edwin Moses setting a world record in the 400-meter hurdles. My grandmother donated a few dollars to the US Olympic Committee, and she gave me a yearbook listing the members of the US team and their results from the events.

Olympic athletes are naturally gifted, but they must train for several years or decades to sharpen their skills. Usain Bolt won eight Olympic gold medals, and he holds the world record for the 100 meters with a blistering time of 9.58 seconds. He probably trained for thousands of hours to run 100 meters in less than ten seconds.

What can investors learn from Olympic athletes? Let’s take a look.

Ready

Investors must prepare to succeed. Investing is a life-long journey, and there are no shortcuts. To get ready for your financial future, you need a plan. A financial plan will guide your steps as you get closer to the finish line – whatever your goals may be. It will keep you focused on your goals and help you avoid distractions or pitfalls. Can you imagine Sydney McLaughlin or Simone Biles training without a plan? I can’t.

Set

After your plan is complete, you’re set to launch.  If you completed your plan correctly, it should set you up for a lifetime of success. However, because it’s finished doesn’t mean you can file it away, never to review it again. It should be checked regularly and adjusted as needed. Athletes monitor, review, and modify their training based on results and feedback, and we should do the same.  

Go

It’s go time. You’re ready to run. For your plan to work, you must follow the recommendations. You need to act. If Katy Ledecky always trained but never raced, she would not have shattered world records or won multiple gold medals. To cross the finish line, you need to leave the blocks.

A key factor to an athlete’s success is their coach. Most elite athletes work with coaches who help them reach their goals. Coaches act as mentors, accountability partners, or confidants. Likewise, trusted professionals can assist you in reaching your goals. A financial planner or advisor can organize and quantify your finances. In addition, your team may include a CPA, attorney, mortgage broker, insurance agent, real estate agent, or banker.

Unlike Olympic athletes, you’re not competing against others to achieve financial success. Everybody can get a retirement medal. You don’t need to keep up with the Joneses or retire with more money than your brother-in-law. In fact, if you try to spend money like your neighbors, you could lose the retirement race. Focus on your goals – not your neighbors.

You’re ready to perform; I know you can do it! It’s time for you to run for retirement gold.

Citius – Altius – Fortius. ~ Olympic Motto

August 4, 2021

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

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

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