Tag: Financial Planning

How is your life plan?

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Financial planning is important, but life planning is better. A financial plan is a finite service, a one-time event. Life planning takes financial planning to a higher level. It’s enduring, vibrant, and active. It’s proactive. It’s forever, and forever is a long time!

I’ve run several marathons, and I always envision myself finishing the race before I start training. It motivates me to continue training on cold winter days or hot August nights. My training requires several months to build up my endurance to run 26.2 miles, and on race day, I never focused on the daunting task of running the entire marathon. I take it one step at a time, a mile at a time, and eventually, I finish the race.

Life planning is like running a marathon. However, you’ll have multiple goals, all competing simultaneously for your attention. When my daughter was born, I had conflicting goals: paying for college and saving for retirement. In addition, I had a mortgage and other household expenses, and I didn’t have the luxury to choose one task over the other.

The Harvard MBA Class of 1979 was asked, “Have you set clear, written goals for your future and made plans to accomplish them?” Only 3% of the graduating class had written goals; ten years later, they accumulated ten times the wealth of the remaining 97% – combined![1] Setting goals with timelines is paramount for life planning. Committing them to paper allows you to succeed and prosper.

Financial planning is excellent until life gets in the way, and then you must decide what you can do with your resources. How do you prioritize your most important life goals? Are short-term goals more important than long-term ones?

You’ll pass through several exciting life stages if you’re fortunate to live long enough. I’m sure if you look back over your life, you can identify several memorable moments that have shaped who you are today.

How do you approach life planning? Here are a few suggestions.

  • Inventory. Take stock of your current situation. What are your resources? How are you spending your money? How are your assets invested?
  • Goals. Write down your goals. Document your dreams, and journal your thoughts. Don’t worry about your current situation when you start this exercise. President Kennedy didn’t have the resources or knowledge in 1962 to put a man on the moon, but his vision and optimism drove others to make it happen.
  • Progress. Monitor your progress. Check off items from your list after you’ve reached your target. As you move through your life stages, set new goals and objectives. It’s imperative to continue to grow and pursue new endeavors.
  • Eliminate. Eliminate goals that are no longer important. I wanted a Porsche when I was young, but now that I’m older, it’s no longer an ambition. My cousin had a Porsche, and he let me drive it often so I could test-drive my dream before I let it go. Eliminating goals is just as important as establishing new ones.
  • Focus. Keep your eyes on the horizon, and don’t let obstacles get in your way. Of course, you’ll encounter hardships, but if you stay focused on your dreams, you’ll eventually arrive at your destination.
  • Partner. Don’t fly solo. You and your spouse can work on your goals together. Family projects are just as important as personal ones. If you’re single, share your wishes with a friend or trusted advisor because accountability is a powerful tool.
  • Think. If you have a family, think in generational terms. Are you in a position to financially help your children, grandchildren, or great-grandchildren? A successful life plan must include your family’s future.
  • Thankful. Give thanks in all circumstances. You’ll encounter several people on your travels who need extra help; stop and give them a hand. You’ll be glad you did.
  • Review. Review your past goals. How did they turn out? What can you learn from your successes or failures? Can your past direct you to better opportunities or help you from repeating previous mistakes? Pause, rest, and reflect on where you’ve been and what you’ve done. Climbing a mountain takes time, and after you reach the peak, look around and enjoy the beauty of achieving your goal. Take solace in your journey.

Life planning is perpetual. It’s forever. Let your written goals motivate you to live life on your terms.

Enjoy your journey.

People with goals succeed because they know where they’re going. ~ Earl Nightingale

September 23, 2023

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.

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. Prices and yields are for today only and are subject to change without notice. Past performance is not a guarantee of future performance.

[1] http://www.lifemastering.com/en/harvard_school.html

The Race To Zero

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Zero sugar. Zero emissions. Zero fees. The number zero is popular these days as people pursue more with less, and investment giants like Vanguard, Fidelity, and Schwab continually shave basis points from their expense ratios to remain uber-competitive.

The Wall Street Journal recently published an article about index funds and fees, mentioning that several companies offer expense ratios of 0.05% or lower, compared to the standard expense ratio twenty years ago, which was nearly 1%. Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, said, “It is hell for issuers, but heaven for investors.”[1] The average ETF fee is 0.55%.

There are more than 15,000 registered investment advisor (RIA) firms in the United States, and most provide similar services, like financial planning, investment management, and portfolio rebalancing. It’s challenging to differentiate one firm from the other because they’re grafted from the same tree of Modern Portfolio Theory (MPT) and observe the teachings of Harry Markowitz, Burton Malkiel, John Bogle, Eugene Fama, Ken French, and others who preach asset allocation, diversification, and low fees. They often quote Warren Buffett, Peter Lynch, and Daniel Kahneman, and their websites show pictures of giant compasses, sailboats, happy couples, giant buildings, or exotic animals, further blurring the distinction.

During my career, I’ve reviewed thousands of financial plans and investment accounts, and the portfolios are comparable unless managed by enormous brokerage firms or insurance companies. RIAs typically invest client assets in a globally diversified portfolio of low-cost funds, which include large, small, and international equity funds sprinkled with a few bond or alternative holdings.  

I follow several firms on social media and realized our firm is a low-cost provider. We charge a half percent (0.50%) to manage client assets, about half the industry average of 1% to 1.50%. High fees and higher asset minimums hinder people seeking financial assistance and planning, so we removed these barriers. Firms charge a fee of 1% or more because they can; it’s the industry standard, so they can get away with it – if everyone else is doing it, so can we, a line of thinking with which we disagree.  

In addition to our asset management fee, our financial planning fee costs $800, which we waive for our asset management clients. Many firms charge thousands of dollars or require a monthly subscription for financial planning. Still, you don’t need to pay exorbitant fees for this service, especially if your situation is not complicated.

Michael Kitces states the median asset management fee for a $1 million account is $10,000. In this same study, he references many ways to pay your advisor, including a retainer at $4,000, a standalone financial plan at $2,500, or an hourly rate of $250.[2]

Our low fee does not mean no service, and we frequently say, “We’re half the price but twice the service of our industry peers.” We respond quickly to emails and phone calls. We don’t walk dogs, offer dry cleaning, or own an airplane, but we pride ourselves on excellent service and pass on our savings to our clients.  

We have low fees because we manage our bottom line well and rely heavily on technology, allowing us to provide multiple services. For example, we can rebalance hundreds of accounts in minutes, assess a client’s risk tolerance, and review tax returns with the click of a mouse. We are data-driven and, when needed, outsource functions to other firms, like insurance and estate planning. We also say no to private placements, private equity, real estate syndicates, or expensive insurance products that charge high commission rates. Our competitive model and lean structure are suited for cost-conscious investors who want to invest wisely and save money. It’s not rocket science.

We don’t have a niche because when I started my investment career at age 24, I wasn’t connected to an affinity group or had access to money, so I worked with anybody willing to give me a chance. It’s in my DNA, and as a result, our firm helps anyone needing financial guidance, regardless of age, assets, or income, because it’s the right thing to do.

Others have criticized our business model, but it’s working. Since 2015, we’ve grown at an average annual clip of 32% and have been profitable yearly. And we work with clients in fifteen different states. We can scale and continue to grow because of our streamlined process.

We have already reduced our asset management and financial planning costs once and expect to lower them further as our firm grows. I believe the investment management process is becoming a commodity if it’s not already. Also, AI and computer-driven trading may also eliminate the need for money managers or active fund management, forcing lower fees.

Moral: If your advisor charges you 1% or more to buy a basket of index funds, it’s time to find a new firm.

When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.” ~ Warren Buffett

September 19, 2023

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.

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. Prices and yields are for today only and are subject to change without notice. Past performance is not a guarantee of future performance.

[1] https://www.wsj.com/finance/investing/you-might-be-paying-too-much-for-that-index-fund-a2458f24, Jack Pitcher, September 18, 2023

[2] https://www.kitces.com/blog/financial-advisor-average-fee-2020-aum-hourly-comprehensive-financial-plan-cost/, Michael Kitces and Derek Tharp, February 8, 2021

Only You             

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Smokey the Bear is a firefighting hero. The US Forest Service and Ad Council created the campaign in 1944, and 96% of adults recognize Smokey Bear and his catchphrase, “Only YOU can prevent wildfires!”[1] According to the National Park Service, humans cause nearly 85% of wildfires in the United States.[2] Smokey Bear was right: Only you can prevent wildfires.

What does Smokey the Bear have to do with investing? Well, only you can provide for your financial future. It’s your responsibility and no one else’s, and it’s up to you to save money and invest wisely. Of course, you can obtain help from financial planners, but you must implement your plan because you are the spark for creating financial abundance. A financial planner provides suggestions and recommendations, but you must act on them to succeed financially. If you ignore them, you risk missing out on achieving your financial goals.

Several years ago, my family and I went camping in rural Texas, and we brought all the necessary items – a tent, firewood, marshmallows, etc. We built a raging fire that lasted well into the evening, and before we called it a night, we doused it with several gallons of water to ensure it was out. We did not want any embers landing on the parched Texas prairie.

How can you control your financial future? Here are a few suggestions.

  • Spending. Spending is in your control. The more money you spend, the more assets you need to retire. It’s simple math.
  • Savings. The more money you can save today, the more you can spend tomorrow.
  • Growth. To grow your wealth and maintain your lifestyle, you must own stocks. If you invest too conservatively during your working years, you risk not having enough resources in retirement.
  • Start. The sooner you start investing, the better. For example, a twenty-five-year-old can save $158 monthly to become a millionaire at age 65. If you’re fifty, you must save $2,412 monthly, or fifteen times someone half your age.
  • Emotions. Self-control is paramount for successful investors. Peter Lynch said, “The key organ in your body is your stomach; it’s not your brain.” Warren Buffett added, “Emotional stability will always beat intelligence in investing.” Investing during a stock market correction is devastating and painful, like a forest fire, but you must not panic and sell your stocks. Stocks, like forests, eventually recover. If you panicked in 2008, 2018, 2020, and 2022, you’ve missed significant gains as the market rebounded.

You’re it. It’s up to you to succeed financially, and you must take control of your financial future to prosper. You need to strike the match and start the fire, but make sure you have a plan before you do.

What matters is hard work and emotional intelligence. ~ Mickey Drexler

September 4, 2023

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 Schwab, and our annual fee starts at .5% of your assets and drops depending on your asset level.

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. Prices and yields are for today only and are subject to change without notice.

[1] https://www.stateforesters.org/2022/08/03/smokey-bears-birthday-is-fast-approaching-whos-up-for-a-history-lesson/#:~:text=America’s%20favorite%20black%20bear%20turns,old%20on%20Tuesday%2C%20August%209th.&text=Smokey%20Bear%20and%20his%20signature,impressive%2096%25%20of%20adults%20nationwide., Grant Peterson, August 3, 2022

[2] https://www.nps.gov/articles/wildfire-causes-and-evaluation.htm#:~:text=Nearly%2085%20percent*%20of%20wildland,and%20intentional%20acts%20of%20arson.&text=Lightning%20is%20one%20of%20the%20two%20natural%20causes%20of%20fires.

How do you compare?

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Comparison is a killer. Occasionally, someone will ask me how they financially compare to others in their field or demographic. They want to know if they’re wealthier than their peers, and it’s usually an attorney. At our firm, we say there are no good plans or bad plans, just your plan. Theodore Roosevelt said, “Comparison is the thief of joy.” You’ll never be happy if you regularly compare yourself to friends, family, or neighbors.

Trying to keep up with the Joneses is the fastest way to the poor house. In my neighborhood, there has been a recent outbreak of Range Rovers. They’re everywhere, and it’s the car to own, and prices can range from $100,000 to more than $300,000. A few years ago, it was Tesla, and before that, BMW. Buying a luxury car every few years can drain your bank account quickly.

Financial magazines write articles about how much money you should have by a certain age. For example, Ally suggests you should have three times your household income by age 40.[1] If you earn $100,000, your retirement assets should be $300,000, but what if you only have $200,000? What do you do? What if your account balance is $400,000? Can you retire? Rules of thumb or suggested amounts are meaningless because they do not apply to your situation.

Another trap is to follow financial influencers because they present their best image. In most cases, they probably don’t own the home, car, boat, or plane where they’re filming because they are trying to sell a lifestyle or product. You are funding their lifestyle and making them rich.

Comparison can force you to make poor investment decisions, increase debt, or spend wildly. Did you buy pet rocks, lava lamps, beanie babies, or NFTs? It was short term gain, long term pain. Spending money on fads or trends can distract you from investing wisely.

A college acquaintance sold a business for several million dollars, which greatly bothered one of my friends, who was obsessed with money. My friend’s obsession with our classmate’s windfall was stealing his joy.

Don’t let comparison ruin your golden years. I read a story about two retirees discussing investments when one asked the other, “Did your investments outperform the market during your working years?” The other retiree replied, “I don’t know, nor do I care because I’m retired, living at the beach.”

Rather than worrying about your neighbor’s wealth, focus on your own. Here are a few tips to help you avoid comparison.

  • Budget. Your budget can help create a successful saving and spending plan based on your numbers.
  • Plan. A financial plan can guide you toward your most important goals, like paying for college or retirement.
  • Invest. Investing today can help you tomorrow. Invest in 401(k) plans, IRAs, and brokerage accounts.
  • Save. Contribute regularly to money market funds or savings accounts. An emergency fund can prevent some financial disasters.
  • Give. Charitable giving and helping others is a common cure for comparison.

Comparison reminds me of the classic scene from Caddyshack between Judge Smails and Ty Webb.

Judge Smails:
Ty, what did you shoot today?

Ty Webb:
Oh, Judge, I don’t keep score.

Judge Smails:
Then how do you measure yourself with other golfers?

Ty Webb:
By height.

August 12, 2023

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.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog; past performance does not guarantee future performance. 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. Prices and yields are for today only and are subject to change without notice.

[1] https://www.ally.com/stories/retirement/savings-by-age-40/

Retirement Woes

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Google News posted articles from CNN, Yahoo! Finance, The Motley Fool, and The Daily Wire about retirement woes.

CNN reported that individuals continue withdrawing from their 401(k) plans, and according to Yahoo! Finance, 41% of US employees cashed out a portion of their accounts, and 85% took out everything.[1]

The Motley Fool stated that 78% of Americans struggle to save for retirement. The Daily Wire said that 29% of workers under 55 don’t think they can ever retire.[2]

Why the angst? Factors include the pandemic, last year’s stock market correction, and inflation. What can you do to eliminate your retirement concerns? The two obvious choices are spending less and saving more because those are the items you can control. However, most people don’t like those choices, so let’s explore a few more options.

  • Move. If you live in Los Angeles, San Francisco, New York, or any big city, consider moving to a different part of the country with a lower cost of living. Technology allows you to work from anywhere, and most towns have similar services and opportunities for retirees. U.S. News and World Report states that Tulsa, Pittsburgh, and Little Rock offer affordable living.
  • Gig. The gig economy is ideal for retirees through on-demand or part-time work. The IRS gives a few examples, like ridesharing, delivery services, and property rentals. In addition, you can sell crafts or goods online. Also, if the IRS suggests it, they will tax it.
  • Create. Can you create video courses or podcasts? Do you have a specialty or niche? If so, start creating and posting. You can become an influencer in no time!
  • Consult. Turning your career into a new revenue stream through consulting is possible. Several clients have returned to their industry as consultants, typically at higher pay rates.
  • Tutor. Parents are paying top dollar for tutors. Consider tutoring a few of your favorite students if you’re a teacher.
  • Allocate. US Treasuries are paying attractive rates of 5% or more. If you carry a cash balance at your bank, transfer your money to US Treasuries to generate more income.
  • Start. If you’re in your twenties or thirties, start investing today. Let the long-term performance of the market help you achieve your financial goals. Today is the day you were worrying about yesterday.
  • Participate. If your company offers a 401(k) plan, SEP-IRA, or any retirement account, participate. Other corporate benefits may include an employee stock purchase plan, restricted stock, a cash balance plan, or non-qualified deferred compensation.
  • Budget. Do you know how and where you’re spending your money? A budget can identify issues and opportunities to create a successful spending plan.
  • Rent. Consider selling your home if it has substantial equity. You can redeploy your equity to meet your needs or reduce debt. As a renter, you don’t need to worry about property taxes, repairs, or other big-ticket expenses.
  • Plan. A financial plan can help you make informed and educated decisions with the above items. It will give you clarity and confidence to stay put or make changes.

Last, owning stocks is a must to maintain your lifestyle. Despite the volatility and corrections, stocks produce superior returns over time, generating an average annual return of 10% since 1926 and 12.3% over the past ten years. Stocks also outperform inflation, not so with bonds or cash.

Retirement is challenging, but you can eliminate many concerns with proper planning.

Casting all your anxieties on him, because he cares for you. ~ 1 Peter 5:7

August 8, 2023

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.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog; past performance does not guarantee future performance. 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. Prices and yields are for today only and are subject to change without notice.

[1] https://finance.yahoo.com/news/retirement-expert-says-too-many-130009722.html, Laura Beck, August 8, 2023

[2] https://www.dailywire.com/news/millions-of-americans-give-up-hope-theyll-ever-be-able-to-retire-poll-finds, Joseph Curl, August 7, 2023

Investment Lessons From Thirty Years of Marriage

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My wife and I recently celebrated our 30th wedding anniversary, thirty years of marital bliss. We were young and naïve at first, but we’ve navigated our journey well, and so far, so good. We started in California, traveled through Connecticut, and landed in Texas. We’ve touched three coasts; who knows where our travels will take us next.

Like a strong marriage, investing requires a firm commitment and covenant. Entering a marriage without committing to your spouse is doomed to failure. The same is true with investing. It requires a strong commitment. We built our marriage on a solid foundation of faith. It hasn’t been easy, but we always reach the peak after walking through the valley. A successful marriage is not linear but full of twists and turns, ups and downs. As Jimmy Dugan said, “It’s supposed to be hard. If it wasn’t hard, everyone would do it. The hard is what makes it great.” As for us, the good times far outweigh the bad ones.

What can thirty years of marriage teach us about investing? Let’s walk down the aisle and take a look.

  • Patience. A successful investment plan requires patience. You won’t get rich overnight, and few shotgun marriages last long.
  • Planning. My wife and I plan for major expenses, vacations, serving opportunities, and life events that might impact our future. Our planning gives us a range of outcomes, allowing us to proceed confidently. A financial plan is necessary if you want to flourish as an investor. Do not rely on luck as a planning tool to reach your financial goals.
  • Flexibility. I was born and raised in Southern California and thought I’d live there forever. However, my wife accepted a faculty position at Quinnipiac University in Connecticut not long after we were married, and it is about the farthest place you can get from the shores of California. We loved living in New England and its proximity to New York. Also, our daughter was born in the Nutmeg State. Flexibility is essential for successful investors. Markets are often in flux, never constant, continually moving. Last year, stocks fell 18%; this year, they’re up 20%. The one-month US T-Bill yielded 0.00% during COVID; today, it pays 5.46%, an increase of 18,100%! To be a profitable investor, you must adapt to changing conditions.
  • Fearless. Marriage is not for the faint of heart. A few trips to the ER, calls at midnight, unexpected expenses, crazy pets, etc., are unsettling. Being fearless during frightening moments or scary times makes a marriage stronger. Owning stocks is challenging, especially when they crash, like last year. Holding stocks through the Great Financial Crisis, Tech Wreck, or the Crash of 1987 requires nerves of steel. The Dow Jones Industrial Average fell 508 points, or 22%, on October 19, 1987 – Black Monday, one of the worst days ever on Wall Street, but if you did not sell or panic, you’d be up 3,238% today, averaging 10.3% per year. A $1 investment is now worth $33.38. Despite the crash, the Dow finished 1987 up 5.43%. Do not let fear drive your investment decisions.
  • Celebrate. Marriage is pure joy and worthy of celebration. We love being together, enjoy our time, and celebrate often. No victory is too small. If you made money trading or your accounts are doing well, take some profits and celebrate with your loved ones.
  • Time. We don’t let many things trouble us today because we’re older and wiser. Significant issues in 1993 do not bother us now because we can look backward and learn from our experiences. An investor in 1929 had little information about the history of stocks, but today, we have access to millions of data points to make better decisions. We have the luxury of time and history.
  • Save. We save and invest regularly, sometimes sacrificing a night out or an extended trip. During our lean years, we’d walk to a local Mexican restaurant, split a taco plate, and gorge on chips. But we can now retire on our terms because we saved and sacrificed. If you want to retire tomorrow, you must save money today.
  • Spend. We are diligent savers and planners. After saving our money and investing in our retirement accounts, we’d spend freely (sort of). We never went crazy with our spending, but we didn’t worry much because of our commitment to our financial plan and investment strategy. If you save, invest, and plan, spending a few dollars now and then is okay, especially on experiences.
  • Diversification. Over the past three decades, we’ve owned dogs, cats, horses, hamsters, goldfish, beta fish, and hermit crabs. Each animal has brought us joy and angst, but I can’t imagine a home without pets. A diversified investment portfolio can grow and survive in most market conditions. Large, medium, and small-cap stocks mixed with bonds and international holdings will expose you to several global asset classes.
  • Giving. We were reluctant and stingy givers during our youth, but we now tithe and give to those in need. In addition to our personal giving, we tithe from our business income. I was worried we’d run out of money if we donated to charities or gave money to our church, but the opposite has happened. We’ve been blessed beyond measure and have enjoyed great joy from our giving. Incorporating giving into your investment strategy can yield much fruit and tax benefits. If you are waiting to give your money away after you die, you’re missing the point because the person who benefits the most from giving is the giver.

My wife and I look forward to our next chapter, a life full of serving, volunteering, traveling, hiking, fishing, reading, and spending time with family and friends.

Our journey continues.


The days are long, but the years are short. ~ Gretchen Rubin

July 27, 2023

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 your asset level.

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. Prices and yields are for today only and are subject to change without notice.

Patience Is A Virtue

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Markets are rebounding. The S&P 500 is up 14% this year, performing much better than in 2022. The popular index has responded to lower inflation numbers and a tamer Federal Reserve. And It does not appear concerned about Russia or China.  

Investors, like warthogs, have short memories and have all but forgotten last year’s troubles and tribulations. Speculators are buying call options and driving the price of Bitcoin higher. The tech-heavy Nasdaq has risen 30% as the Magnificant Seven – Nvidia, Tesla, Meta, Apple, Amazon, Microsoft, and Google soar to all-time highs.

If we extend the time horizon for the S&P 500, the returns look even better.

  • 3-Year Return = 45.5%
  • 5-Year Return = 62.1%
  • 10-Year Return = 171.3%
  • 20-Year Return = 348.3%
  • 30-Year Return = 877.9%
  • 50-Year Return = 4,120%

The moral of the story is: time wins, stay invested!

During the 2022 market correction, we relied on our financial planning models to convince clients to remain invested, stay the course, do not panic. It was a difficult ask, as it is in all down markets, but most clients took our advice. A financial plan is central to our client’s portfolios because it gives us the confidence to advise them better about their financial futures. Last March, we tested our portfolios for a 50% market correction and 5% inflation to see how they would perform if conditions worsened. The exercise furthered our confidence that most accounts could weather the storm, but what about the ones that could not? If an account failed our test, we contacted the client to discuss several scenarios and make the appropriate adjustments. However, we did not expect the market to fall by 50%, and it didn’t.

It is not easy to be patient, especially when your net worth is dropping swiftly, but it’s paramount if you want to be successful as an investor.

Here are a few tips to help you during the next market correction.

  • Diversify your assets across stocks, bonds, and cash.
  • Build an emergency fund to cover several months of expenses.
  • If you’re retiring in the next few years, allocate three years of expenses to US Treasury Bills.
  • Create a financial plan. It is a financial GPS.
  • Buy the dips.
  • Don’t panic. Markets recover.

Enjoy this year’s market run, but always be on guard for a correction. A well-balanced portfolio and financial plan can help you during the market and economic chaos.

Be patient, my friend. Your older self will thank you.

We could never learn to be brave and patient if there were only joy in the world. ~ Helen Keller

June 28, 2023

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 your asset level.

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. Prices and yields are for today only and are subject to change without notice.

My Time In Kenya

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I spent the past weeks in Kenya, traveling with a team from my church to meet with our mission partners, Segera Mission. Segera Mission (https://www.segeramission.org/) is about 155 miles north of Nairobi, where the paved road ends. It was a humbling experience.

Nairobi is a bustling city like any other capital city, complete with abundant luxuries and traffic jams, but where we were visiting, it is not. Most families near Segera Mission live in mud huts without power or running water and must walk miles to gather food, water, and firewood. Water is an issue in Kenya, but so is firewood because they need it to purify the water, cook their food, and heat their homes, and the trees are disappearing rapidly.

However, the people we met were kind beyond measure and full of joy. They sang beautifully, prayed relentlessly, opened their homes to our team, and emptied their food cabinets to serve us. Knowing they gave us all they had was overwhelming, recognizing they’d walk miles the next day to replenish their cupboards.

My best day in Kenya was playing soccer with the third-grade boys. I was the goalkeeper, and when I stopped the ball, the boys yelled, “Knock, knock,” which meant kicking the ball as high and far as possible. We played for over three hours, laughing, running, and sweating. It was pure bliss.

I thought about the people I met and the sites I saw during my thirty-three-hour journey back to the United States, and here are a few thoughts.

  • Joy. Joy is internal, independent of your surroundings or station in life. If you rely on money or things to bring joy, you’ll never find it because you’ll always want more, forever beyond your reach.
  • Community. The people in the villages near Segera Mission rely on each other for fellowship, safety, food, water, and more. They can’t do it alone, and neither can you. Find your community.
  • Provision. Several families relied on daily bread but wanted for little. They did not concern themselves with luxuries we take for granted, like TVs. Americans are obsessed with how much money we need for retirement, and according to a recent Schwab Modern Wealth Study, most people think we need $2.2 million to feel wealthy. Yet, the respondents in the survey only had a quarter of that amount. Kenya’s per capita income is only $5,130, yet the people we met felt exceptionally wealthy because their measure of wealth is different than ours.
  • Action. The women of SATUBO took action to provide for themselves and their families. The name is an acronym for the three different communities in Northern Kenya – Samburu, Turkana, and Borana. These powerful women make beaded bracelets, animals, ornaments, and more, keeping 70% of the proceeds and 30% remaining with the organization to cover costs and purchase land. The women of SATUBO now control more than ten acres. They took action to manage their financial future.
  • Faith. The predominant religion in Kenya is Christianity, with more than 85% of the population believing in Jesus. Their faith was evident everywhere we went, and it did not waiver because of their circumstances; it gave them strength.
  • Lions. Our team visited Ol Pejeta Conservancy, the home of the last two Northern White Rhinos. Our driver, Fred, was incredible, and he found rhinos, giraffes, water buffaloes, elephants, warthogs, and lions. As we approached the animals, except the lions, they all ran for cover. The lions did not give an inch. In fact, one of the male lions circled our vehicle. They are fearless and confident. Be a lion.

I’m glad to be home, but I miss my neighbors in Kenya and the lessons they taught me about myself and life. Sawa Sawa.

He who does not look ahead always remains behind. ~ Kenyan Proverb

June 24, 2023

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 your asset level.

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. Prices and yields are for today only and are subject to change without notice.

Halfway Home

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The year is halfway over, and asset classes are performing well. The Nasdaq leads the way with a gain of 33%, followed by the S&P 500, up 12.4%, and bonds are positive. The market recovery is welcomed, especially after last year’s drubbing. The rebound is not surprising because stocks have risen approximately 80% of the time since the end of World War II. It is not a matter of if but when. However, the bigger question is how your investments are performing. Are you participating in the recovery?

Last year was brutal, and investors wanted to abandon ship and sell their investments to ride out the market storm by liquidating their portfolios and parking the funds in money markets, savings accounts, CDs, or Treasury Bills. It’s nice in theory but challenging in practice because markets move quickly. For example, most of the market declines last year occurred during the first half of 2022, and by June, stocks started the recovery process. Since last June, the Nasdaq is up 15.8%, the S&P 500 is up 4.91%, and international markets are up 3.26%. If you sold your holdings during the first half of last year, you missed a year’s worth of gains. Patience.

The halfway point is an excellent time to review your financial plan, asset allocation, and investment holdings. Here are a few ideas and suggestions to help you with your mid-year review.

  • Financial Plan. Do you need to update your plan? Are your financial goals intact? Is it working? A financial plan is a crucial component for every successful investor. Our clients with financial plans were calmer and more likely to remain invested during last year’s market decline. Despite the drop in global markets, it did not have a material impact on our client’s financial future.
  • Asset Allocation. Stocks are outperforming bonds significantly this year, and, as a result, your asset allocation may need a tweak or two. The rise in equity markets increases your risk level. The higher prices climb, the further they fall, so reviewing and rebalancing your investments is essential to ensure they align with your risk tolerance.
  • Capital Losses. Did you realize losses last year? Do you have a tax-loss carryforward? If so, consider realizing gains to absorb your losses. No one likes losses, but you can use them to offset gains, which is a nice silver lining.
  • Prepare. Markets fluctuate, rising and falling constantly. If you need money in one year or less, invest in Treasury Bills, do not buy stocks. If you plan to retire in the next few years, keep three years’ expenses in cash. For example, if you spend $100,000 yearly, allocate $300,000 to Treasury Bills. A cash cushion can help absorb the pain of a market correction.

When I ran marathons, an aunt asked me how I could run so far. I told her my training secret was to run far from home. If my goal were to run ten miles, I would run five miles out, so I had to run five miles back. I couldn’t quit running if I wanted to return home.

Enjoy the market recovery, review your investments, adjust your goals, and follow your plan.

Believe you can, and you’re halfway there. ~ Theodore Roosevelt

June 9, 2023

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 your asset level.

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. Prices and yields are for today only and are subject to change without notice.

Can We Talk?

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Baby Boomers will transfer trillions of dollars to Gen X, Millennials, Gen Z, and AI Babies over the next several years. According to several reports, the range is estimated to fall between $30 trillion and $75 trillion and is considered the most significant wealth transfer in history. However, I’ve heard about this wealth transfer for over three decades and have not seen any evidence yet. Maybe I’m looking in the wrong spots.

The wealth transfer may disrupt financial markets as Boomers pass their assets to the next generation, and beneficiaries sell stocks and bonds to buy homes, pay off debt,  fund college accounts, or travel the world. Is your family prepared for this epic wealth transfer? Let’s explore a few scenarios and categories.

  • Wills and Trusts. If you’re a Boomer with assets, you must update your will or trust to ensure it honors your wishes. The most efficient way to transfer assets to generations is through your estate documents. Dying without a will or trust can complicate your estate transfer for years or decades, depending on the level of your assets (Google Howard Hughes). An attorney friend told me he makes good money creating wills and trusts but makes excellent money settling estates without any documents or final instructions.
  • Beneficiary Data. A simple and efficient way to transfer assets to your loved ones is through your beneficiary designations on retirement accounts, annuities, life insurance, etc. Your beneficiary data overrides your will or trust, so make sure they are current and accurate. If you’re divorced or have remarried, don’t forget to change your beneficiary information because you don’t want your assets going to your ex-spouse.
  • Life Insurance. Are you worth $13 million or more? If so, consider purchasing life insurance inside a life insurance trust (ILIT) to pay your estate tax. A married couple can transfer $26 million in assets to the next generation before paying federal taxes. The estate tax rate is currently 40%.
  • Gifting. A simple way to reduce your estate and potential tax is to give your money away while alive. The annual gift-tax exclusion is $17,000 per year per person. Donating money to your favorite charity or non-profit is also a smart strategy.
  • Final Wishes. Letting your children or beneficiaries understand your last wishes is wise and recommended. Where will you be buried or cremated? Where are your important documents? How do you track your online presence and passwords? Informing your loved ones today can avoid several problems tomorrow.

What if you will inherit assets from your Boomer parents? A financial windfall can alter your life in several ways. Like your parents, it’s paramount that you plan so you’re ready to settle their estate and allocate your new assets. Working with financial planners, attorneys, and CPAs can ensure your assets are protected and invested correctly. Also, please don’t spend the money before it’s credited to your bank or brokerage account because you might not inherit anything. I’ve worked on thousands of financial plans and always ask about inheriting money, and there have only been a few incidents where I’ve included it in a plan because most people don’t want to count their chickens before they hatch.

A financial plan, estate documents,  and family conversations can ensure a smooth transition for a difficult and complex topic. Please don’t wait until it’s too late.

Can we talk? ~ Joan Rivers

June 3, 2023

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 your asset level.

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. Prices and yields are for today only and are subject to change without notice.