Investing Is Easy

I recently read a post where an advisor said investing is easy, and he recommended buying two or three index funds and holding them forever. While I agree with his thesis, investing is challenging because it requires emotional fortitude, and that’s where we fail. To create generational wealth, you must buy and hold stocks through the down years, which is the hard part. Shelby Davis said, “You make most of your money in a bear market; you just don’t realize it at the time.”

Since 1926, the S&P 500 has generated an average annual return of 10%, but to receive this return, you had to start investing 96 years ago, allocate 100% of your assets to stocks, and never sell. I doubt this person exists. This year, US stocks are down 18.5%, international equities have fallen 23.2%, and global bonds have dropped 13%. A traditional 60% stock and 40% bond portfolio is down 14.5%. Long-term gains come from short-term pain because risk and reward are related.

Advisors compile raw data and say if you had bought XYZ fund ten years ago, you’d be up X% today, but the numbers do not capture the emotional component of the investor. Emotions make investing difficult. I can access hundreds of thousands of data points, but it doesn’t matter if a client is losing money and panicking. Their primary concern is getting out of the market, and they could care less about historical data.

From 1961 to 1979, inflation soared from 0.7% to 13.3%, an increase of 1,800%. During that time, the S&P 500 produced an annual return of 7.2%, international stocks averaged 9.8%, and long-term bonds gained 2.95% per year. US stocks lost 39% from 1973 to 1974, long-term bonds dropped 12.5% from 1968 to 1969, and international stocks fell 56% in 1975. A few years later, you met the stock market crash in 1987, the Gulf War in 1991, the Tech Wreck in 2000, the Great Recession in 2008, COVID in 2020, and the current correction. However, if you still own your investments from 1961, your equity returns averaged 10.36%, international stocks returned 10.8%, and long-term bonds produced an average annual gain of 6.52%. Small-cap stocks delivered an average annual return of 12.7%. Time in the market wins.

Picking a few funds or stocks is easy, but managing your emotions is challenging. We are our own worst enemies.

Here are a few suggestions to help you improve your investing program.

  • Create a financial plan. Your financial plan quantifies your goals and dreams and can keep you grounded when stocks and bonds fall. It can change your time horizon from days to decades and keep you focused on what is important to you and your family.
  • Ignore the media. Media outlets and social media sites constantly post news about markets, especially when falling. Markets in turmoil? If you want to buy or sell a stock because of a media story, wait a few days to ensure it is the correct decision. In addition, write down the reasons why you want to buy or sell an investment.  
  • Diversify your assets. A balanced portfolio of stocks and bonds, diversified across countries and sectors, and asset classes, allows you to weather financial storms better than concentrated portfolios.
  • Keep your costs low. Buying index funds with low fees and avoiding excessive trading can improve your long-term results.

Investing is difficult, but you can improve your odds by following your financial plan, buying low-cost index funds, and extending your time horizon.

We have met the enemy, and he is us. ~ Pogo

September 21, 2022

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.

Buy T-Bills?

Stocks, bonds, and Bitcoin are down sharply this year as inflation and interest rates soar. The Federal Reserve continues to raise short-term interest rates to try and combat inflation, and, as a result, cash is an alternative to stocks and other growth-oriented assets. Why is it time to buy T-Bills? Let’s find out.

T-Bills are the safest investment in the world, guaranteed regardless of how much you invest. If you want safety and liquidity, look no further. The current rate for a one-month T-Bill is 2.56%, and if you extend the maturity to one year, it jumps to 4%, a sharp increase from the past couple of years. The 1-Year T-Bill has ranged from a high of 8.64% to a low of zero since 1990, and the 32-year average has been 2.85%.  

According to Barrons, Berkshire Hathaway, led by Warren Buffett and Charlie Munger, own more than $75 billion worth of T-Bills.[1] They use them to fund their corporate operations and make strategic acquisitions. In last year’s annual report,  Mr. Buffett had this to say about cash and other short-term investments, “Charlie and I have pledged that Berkshire (along with our subsidiaries other than BNSF and BHE) will always hold more than $30 billion of cash and equivalents. We want your company to be financially impregnable and never dependent on the kindness of strangers (or even that of friends). Both of us like to sleep soundly, and we want our creditors, insurance claimants, and you to do so as well.”

Here are a few reasons to buy T-Bills.

  1. T-Bills are an excellent choice if you’re anxious about rising interest rates. They are auctioned weekly with maturities of 4-, 8-, 13-, 26-, or 52 weeks. It’s possible to build a short-term ladder with bills expiring weekly, and if interest rates continue to rise, you can reinvest your proceeds at higher rates without suffering a principal loss.
  2. T-Bills can protect your account if you’re worried about a further stock market correction. Transferring 50% of your account to bonds from an all-equity portfolio can lower your risk by 37%. T-Bills are a hedge against falling stocks because they’re negatively correlated. The S&P 500 lost 8.25% in June, and T-Bills rose 0.06%, and during the initial phase of COVID, stocks fell 12.4%, and T-Bills jumped by 0.13%.[2]
  3. T-Bills can offer you more safety than your bank if you hold a significant cash position. T-Bills are guaranteed, regardless of the amount you buy. Rather than transferring money between several banks to qualify for FDIC insurance, you can purchase T-Bills.
  4. If you need your money in one year or less, T-Bills offer liquidity and safety not found in other investments, like stocks.

Treasury Direct (https://www.treasurydirect.gov/) is an excellent way to buy US Treasuries. After you create your account, you can participate in auctions or buy existing issues. You can also contact your advisor if you don’t want to buy them yourself.

T-Bills are bought for safety, not for growth. You must own stocks to create generational wealth and T-Bills to preserve it.

Bye, bye, and buy bonds.

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

September 19, 2022

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

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


[1] https://www.barrons.com/articles/warren-buffett-t-bills-ultra-safe-investment-51660580408, by Andrew Bary, August 16, 2022

[2] DFA Returns Web

In Hindsight

In hindsight, I should have sold all my stocks in January to avoid massive losses in my account. I could have traveled the world, bought a vacation home, or retired with the money I’ve lost in the market this year. It seems obvious now that stocks are down because interest rates are rising, inflation is climbing, countries are fighting, and the supply chain is tightening. The writing was on the wall. The S&P 500 Index is down 19% this year, and the trend appears to be lower, so maybe I should sell now and buy US Treasures to avoid further losses – that makes sense.

At the beginning of the year, the 1-Year T-Bill yielded 0.40%; it now yields 4%, an increase of 890%. Last year the S&P 500 Index returned 29%, so why would I want to sell my stocks and buy T-Bills paying 0.40%? I was convinced stocks were going higher. So far, the tables flipped this year as T-Bills earned 4%, and stocks lost 20%. In hindsight, I should have sold everything.

The Federal Reserve raised interest rates 100% from 3% to 6% in 1994, and stocks barely budged, returning a paltry 1.3%. If I sold my stocks while the Fed was tightening, I would have missed a 37.6% return in 1995, a 23% return in 1996, a 33.4% return in 1997, a 28.86% return in 1998, and a 21% return in 1999.

I should have sold my stocks In March 2020 during COVID because the pandemic shut down the world, but had I sold, I would have missed an 18.4% return that year and a 29% return last year.

I should have sold my stocks during the Great Recession, where stocks fell 37% in 2008, but I would have missed a 329% return from 2008 to 2022.

I should have sold my stocks during the Tech Wreck, where stocks fell 43%, but I would have missed a 340% return from 2003 to 2022.

I should have sold my stocks before the Gulf War in 1991, as stocks fell 3% in 1990. If I had sold, I would have missed a 1,007% return from 1991 to 2022.

I should have bought stocks in 1982 when I started working part-time for my grandfather’s company. I did not earn much, but I could have created a monthly dollar cost averaging program to take advantage of buying stocks while they were down. Since 1982, the S&P 500 has averaged 12.3% per year and jumped more than 3,000%! A $100,000 investment is now worth more than $3.1 million!

The US T-Bill is the safest investment in the world and has never lost money over the past 95 years. If you crave safety, look no further. Since 1926, it has averaged 3.3%, and so has inflation, so your net return is near zero. A $1 investment in 1926 is now worth $21.

The S&P 500, on the other hand, is volatile and loses money often, about once every four years, and in some decades, it earns nothing. For example, from 2000 to 2011, it averaged 1.7%. From 1969 to 1975, it returned 1.6%, and during the Great Depression, it took more than fourteen years to breakeven. However, since 1926, the S&P 500 has averaged 10.5% per year, and $1 is now worth $14,076, or more than 67,000% times the T-Bill!

Shoulda, coulda, woulda, is a terrible disease, and it can drive you crazy because no one knows what will happen tomorrow, not even the experts on CNBC. If you need money in one year or less, buy T-Bills; if your time horizon is two to three years or more, buy stocks.

It is challenging to buy and hold stocks, but markets eventually rebound. In the meantime, follow your plan, diversify your assets, think long-term, and good things will happen.

For the record, I still own my stocks, and my asset allocation is 75% stocks and 25% bonds, where it has been for the past thirty years.

I’ve had a lot of worries in my life, most of which never happened. ~ Mark Twain

September 17, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. I didn’t buy stocks in 1982 because I had no clue what they were.

A Walk In The Park

My wife and I recently returned from our vacation, where we visited several national parks, including Arches, Canyonlands, Zion, and the Grand Canyon. It was a fantastic trip where we hiked trails, gazed at stars, and waded in rivers. The vistas and canyons were breathtaking.

Most trailheads posted ominous warning signs about running out of water or food, encountering rattlesnakes, or falling into a canyon. The Bright Angel Trail in the Grand Canyon was our most challenging hike. It has rest stops about every 1.5 miles, and most publications recommend hiking to the three-mile rest stop before returning to the canyon’s rim, and that’s what we did. We started our hike at 6:00 in the morning to beat the heat and throng of hikers. When we reached the three-mile point at 8:00, there were two gentlemen in the rest house, one sleeping. His hiking partner said they had been hiking for two days when his friend had stopped eating, and now they were waiting for the rescue helicopter and park rangers. It was only 8:00 in the morning, and it was the third rescue of the day! As my wife and I climbed out of the canyon, we saw the helicopter land on a tiny sliver of rock to rescue the hiker. It was a frightening reminder of how quickly things could change while hiking.

Before our trip, we spent several days and hours planning our hikes to ensure we had enough water, food, and maps. We mapped our routes and picked our trails, and our goal was to hit the trailheads before 6:00 to witness beautiful sunrises, especially at the Windows Arch. Our pre-planning paid dividends and allowed us to enjoy the parks confidently and safely.

There are numerous analogies to hiking and investing; below are a few that may help you with your investment strategies.

  • Planning. A financial plan is like a trail map, guiding you to various points, alerting you to trouble, and giving you hope for the future. You ask for problems if you hike in a national park without a trail map, and if you invest without a financial plan, you can suffer a similar fate, though you might not notice your errors until several years later.
  • Patience. As we hiked the Bright Angel Trail, we stopped every half mile to drink water and catch our breath. We weren’t in a hurry. Successful investing could take years before you see significant results, especially when the stock market is not cooperating, like this year. It takes patience and wisdom to buy and hold stocks and bonds through challenging markets, but those that do will eventually reap the rewards.
  • Goals. Our hikes had specific goals and targets. We knew how many miles to hike on a given day and trail, and when we reached our destination, we turned around and returned to the trailhead. We did not venture off trail or go beyond our stopping point. When you invest, it’s paramount to have goals to know when to stop and enjoy the fruits of your labor. Do you want to retire early or buy a beach house? Do you want to travel the world or read books all day? Whatever your dreams are, write them down and commit them to your plan.
  • Risk. As I mentioned, each trail we hiked listed dire warnings. We also knew which routes to avoid, like Angel’s Landing in Zions. Risk and reward are related, and we were compensated with thrilling hikes and beautiful vistas while walking on the sides of cliffs. Stocks are risky investments and can fall without warning. Stocks are posting horrible numbers this year, and most investors are losing money, but you must occasionally endure a few bad years to generate long-term wealth. If you can’t stomach significant losses, reduce or eliminate your equity allocation. Also, if you need your money in one year or less, do not buy stocks; keep your money invested in US T-Bills. Knowing your limits is essential if you want to be a successful investor.
  • Review. After each hike, we reviewed our itinerary and made changes based on what we saw. We added new hikes and eliminated others. We decided to visit Dead Horse Point in Utah after looking at our maps and talking to other hikers, and I’m glad we did because it was stunning. Reviewing your accounts and trading history can help you identify opportunities or eliminate risks.

Our national parks are treasures, open to everyone, and offer beauty not found in other parts of the world. To truly enjoy a park visit, you must hike where others don’t, and according to some, 90% of visitors never leave the road.[1] To be a successful investor, you must do what others won’t, like buy stocks as they fall.

“The story is, a man came up to Yosemite, and the ranger was sitting at the front gate, and the man said, “I’ve only got one hour to see Yosemite. If you only had one hour to see Yosemite, what would you do?” And the ranger said, “Well, I’d go right over there, and I’d sit on that rock, and I’d cry.” ~ Dayton Duncan

September 14, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. Thelma & Louise was filmed at Dead Horse Point, and the park is used as a stand-in for the Grand Canyon.


[1] https://talesfromthebackroad.com/90-percent-of-national-park-visitors-never-leave-road/, Mary Horne, 10/1/2017

College Football

Next week starts another college football season, the best time of the year. The usual suspects like Alabama, Georgia, and The Ohio State University are projected to finish near the top. The offseason was entertaining as USC and UCLA said they would leave the Pac-12 and join the Big-10, causing a domino effect amongst the other power conferences. Regardless of who ends up where I know the season will be exciting and enjoyable.

Before the season starts, analysts and industry experts opine about the best teams in college football. There is no shortage of lists projecting conference winners, bowl games, and Heisman Trophy finalists. However, these projections are futile because teams still must play the games, and as Mike Tyson said, “Everyone has a plan until they get punched in the mouth.” For example, last year, the Baylor Bears were picked to finish in eighth place in the Big-12 Conference. The experts said they would win two games and finish conference play with a mediocre record of two wins and seven losses. What happened? Baylor finished the season with twelve wins and beat Oklahoma State for the Big-12 Championship. And they did not stop there as Baylor dismantled Ole Miss in the Sugar Bowl. So much for predictions.

The best coaches and teams in college football focus on plays and execution. They’re only concerned about things they can control and do not worry about predictions or projections. They know that if they do not turn over the football or make mental mistakes, the odds of winning rise dramatically.  

As an investor, consider following the lead of great college football coaches and programs by focusing on your goals, spending, savings, and asset allocation. They are the only things you can control; everything else is beyond your reach. If you decide to time the market, trade excessively, or attempt to predict the future, you could end up in the poor house. It’s impossible to control interest rates, market volatility, or the inflation rate, so don’t try. Also, ignore those who think they know what will happen tomorrow. Though they may look the part while pontificating on TV, they don’t know more than the viewing audience.

Focus on your financial plan and goals as markets continue to bounce around. Think long-term, buy stocks, and enjoy the college football season.

Though I don’t make predictions, I believe Baylor beats Alabama for the National Championship.

Win one for the Gipper. ~ George Gipp

August 20, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. I did not attend Baylor, but I did play college football for the University of San Diego.

Pikes Peak

Pikes Peak looms large at 14,115 feet above sea level, known as America’s Mountain, and is also the inspiration for America the Beautiful. Pikes Peak Highway allows people of all abilities to enjoy the spectacular views from the summit. In addition to driving to the top, visitors can enjoy a comfortable ride on the Pikes Peak Cog Railway, and more adventurous types can hike to the summit.

The trip to the summit by train takes about an hour and a half. If you drive, allow for three to four hours, and if you hike the 13.5-mile trail, allocate eight hours or more. The fastest recorded time to summit Pikes Peak was 7 minutes 57 seconds in 2018 as driver Romain Dumas of France raced up the hill during the annual Pikes Peak Hill Climb. I recently reached the summit via the Cog Railway. It was a beautiful ride through the Pikes National Forest, and the views were stunning.

As I mentioned, there are several ways to reach the peak, and if you invest, there are numerous routes to reach your financial goal, and you must decide which one to take. You may obtain your goal sooner or later, depending on your chosen path.

Let’s explore a few investment tools to help you reach your financial goals.

  • You will need a financial plan regardless of the path you choose. All the visitors that reached the summit of Pikes Peak followed a route, or path, to the top, and they had a plan. A financial plan is your trail map, train schedule, or road map, and it will help guide you on your financial journey and lead you to your final destination.
  • Establishing goals is paramount for financial success. Each visitor to Pikes Peak had a goal to summit the mountain. If you set financial goals, you will increase your odds of investment success. According to a Harvard study, 3% of their graduating 1979 MBA class had written goals, and their net worth was ten times that of the remaining 97% of their classmates who did not have any written goals.[1]
  • A timeline can help you succeed as an investor. After committing your dreams to paper, prioritize them, so you know which ones to pursue first. In addition, consider your timeframe. For example, buying a new car may have a shorter timeframe than retiring to a tropical island.
  • The proper investment can enhance your investment success as well. If you need your money in less than one year, invest in CDs or US Treasury Bills. If you don’t need the money for decades, buy stocks.
  • Regardless of your path, stop to enjoy the view, check your bearings, and take stock of your inventory. A regular check-up can ensure that you’re still on the right path.

There are many roads to financial success; select the one that best suits your needs and utilize all the tools and resources available to reach your financial summit!

Oh beautiful, for spacious skies
For amber waves of grain
For purple mountain majesties
Above the fruited plain

~ America the Beautiful

August 12, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. I enjoyed the train trip to the summit, but my goal is to hike the trail to the top of Pikes Peak.


[1] https://www.wanderlustworker.com/the-harvard-mba-business-school-study-on-goal-setting/

Ready To Launch

My daughter starts her job in a few weeks, and we are helping her set up her apartment. After years of schooling, she is ready to begin her career, and assisting a child in launching her career takes years of planning and patience. It’s bittersweet because she is leaving the nest to create a new life in a new state, but she is ready to soar.

As a parent, I give my daughter unsolicited financial advice regularly, and sometimes she welcomes it, so here are a few more tidbits for her as she begins a new chapter.

  • Create an emergency fund because unexpected expenses occur often. As your income rolls in, allocate a few dollars monthly to a savings account or money market fund so you can access it quickly. Do not invest your emergency fund in stocks, bonds, or cryptocurrency.
  • Contribute at least ten percent of income to your 401(k) plan. If your company offers a Roth option, choose it because your money can grow tax-free for decades. Initially, allocate 100% of your funds to stocks, and do not buy bonds.
  • Donate ten percent of your income to groups, charities, or organizations you support. Cheerful givers are also successful investors.
  • Open a brokerage account to buy stocks. Investing in a taxable account gives you flexibility if you want to retire early, buy a house, or travel the world.  
  • Buy and hold stocks. Don’t worry if the stock market rises or falls because it will do so regularly, and the market will experience corrections of 20% or more every few years. The odds of a 50% stock market crash during your working career is 100%. Down days in the market are opportunities to buy great stocks at lower prices. Don’t fear corrections.
  • Avoid buying gold, silver, or other commodities. It’s okay to buy gold or silver coins as collectibles but not as investments. Historically, commodity investments perform poorly relative to stocks.
  • Buy insurance to protect your car, home, valuables, and loved ones. Do not buy life insurance as an investment, and avoid whole-life insurance.
  • Avoid credit card debt at all costs. Debt is a four-letter word; if it grows, it can lead to delayed gratification or financial ruin.
  • Spend freely. If you’re contributing to an emergency fund, a 401(k) plan, and an investment account, then it’s okay to spend the rest of your paycheck on anything you want without guilt.

I’ve seen thousands of financial plans and investment accounts during my career, and the most successful investors I’ve met own stocks, start investing early, save money, and control spending. Individuals who fail to save or invest in their twenties or thirties struggle to make ends meet later in life.

Let’s run a few numbers as to why it’s essential to start investing sooner rather than later if your goal is to retire with a million dollars at age sixty-five.[1]

  • At age 25, you need to save $380 per month.
  • At age 35, you need to save $820 per month.
  • At age 45, you need to save $1,920 per month.
  • At age 55, you need to save $5,777 per month.

If you start investing early, your money can grow through the power of compounding and time. If you started your career forty years ago, in 1982, you enjoyed close to 10% returns as the S&P 500 rose 3,888%; for every $10,000 you invested, it’s now worth $398,000!

Investing takes time and patience. If you start early and save often, the stock market can grow your wealth, even if you make a few bad investments along the way.

Good luck, Little Bird!

You can be young without money, but you can’t be old without it. ~ Tennessee Williams.

August 9, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. My first investment was the Franklin Utility Fund when I was 24.


[1] I used a 7% annual return, and I know $1 million dollars in forty years will not be sufficient to retire.

Time To Buy?

The Nasdaq soared more than 12% in July, its best monthly return since 2020. Small-cap stocks, international holdings, and bonds also participated in the broad-based rally, providing some relief to weary investors. The markets are trying to recover from rising interest rates and persistent inflation, and since the near-term bottom in June, the Nasdaq is up 16.5%. Will the trend continue? Is it time to buy?

The Nasdaq was down 32% when it touched its June low, and if you panicked and sold, you may suffer from FOMO. Of course, no one knows what will happen tomorrow, but the recovery looks robust so far, particularly if inflation retreats and interest rates subside.

Let’s explore projected recovery times for portfolios with three different allocations and investment holdings.

  • An evenly balanced portfolio of stocks and bonds, 50% stocks and 50% bonds, produced an average annual return of 8.3% since 1926.[1] If you keep this allocation, it could take about three years to recover your loss if you were down 20% to start the year.
  • If you sold your investments after a 20% drop, it would take approximately twelve years to recover your loss if you only invested in US T-Bills yielding 2%.
  • If you were down 20% and buried your money in a bank account earning 0.1%, you would never recoup your loss because it would take 224 years to compound your interest payments.

It’s tempting to call a market bottom and buy stocks, but no one knows when they will recover. And the market does not go up in a straight line. They fluctuate like the tide. From 1995 to 1999, the Nasdaq climbed 441%, generating an average annual return of 40%! Staggering! Despite the meteoric rise, it routinely fell 10% or more, and in October 1998, it dropped 30%. If you remained invested through the dips, dives, and drops, you enjoyed exceptional returns, but if you liquidated your holdings, your returns were significantly less.

If you sold your holdings these past few months, is it time to repurchase them? Let’s examine a few scenarios.

  • Do not buy stocks if your time horizon is one year or less. Buy T-Bills or keep your funds in a savings account or money market fund.
  • Is the money earmarked for a significant purchase like a downpayment, tuition bill, or new car? If so, do not buy stocks. Keep your money in short-term cash investments.
  • Buy stocks if your time horizon is three to five years or more. Time wins, and stocks recover, so take advantage of down days to buy quality funds and companies.
  • Are you working and contributing to your company’s retirement plan? If so, keep buying. 401(k) plans are an excellent tool for creating generational wealth because you buy stocks every two weeks regardless of the market conditions.
  • Is your money invested in an IRA that you can’t touch for decades? If so, buy stocks.
  • Buy stocks if the bear market is not impacting your financial plan or long-term goals. A financial plan is paramount if you want to succeed as an investor.

Our investment philosophy is to buy and hold diversified portfolios of stocks and bonds through low-cost mutual funds or ETFs because we don’t know when, where, or why markets will recover, and trying to time the market is a fool’s errand. It’s like getting on an airplane after it has taken off; it’s impossible. Rather than selling stocks when they fall, follow your financial plan, think long-term, and buy the dip.

Success is a result of consistent practice of winning skills and actions. There is nothing miraculous about the process. There is no luck involved. ~ Bill Russell

August 1, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. I like watching Shark Tank, and Wall Street was one of my favorite movies. I’m a Los Angeles Lakers fan, but I always admired the Celtics and Bill Russell.


[1] DFA Returns Web

It’s An Emergency!

Dave Ramsey takes a lot of heat from financial professionals, but his seven steps have helped millions of people pursue a better life. I don’t agree with his entire philosophy, but establishing an emergency fund,  paying off debt, and saving for retirement are tenants that make sound financial sense.

During challenging times, an emergency fund is paramount. I recently bought a new refrigerator, and my Jeep needs an engine repair. Thankfully, I have an emergency fund to cover the costs. If I didn’t have the fund, I would have charged the expenses to my credit card, and a credit card is not an emergency fund!

Stocks and bonds are down sharply. The S&P 500 has dropped 21%, while long-term bonds have fallen 26%. It’s difficult for investors as all major asset classes are in negative territory, and cash is the best-performing asset. If cash is your best investment, you know it’s a tough year! However, a significant cash balance allows your stocks and bonds to recover, and that’s why an emergency fund is necessary if you want to be a successful investor.

What is an emergency fund? Well, it’s a fund you can tap in an emergency, so you’re not forced to sell stocks or bonds when they’re down. The fund is a liquid resource you can tap at any time without losing money. Your emergency fund should own cash, money market funds, CDs, or T-Bills. A silver lining to rising interest rates is you can buy short-term investments with competitive yields. The 1-Year Treasury rate currently yields 3.15%; two years ago, it was 0.14%, an increase of 2,150%!

Here are a few suggestions for establishing your emergency fund.

  • Invest in short-term instruments like cash, money market funds, CDs, and US T-Bills.
  • Your emergency fund should cover nine to twelve months of expenses in the current environment. For example, if you spend $10,000 monthly, your fund value range would be $90,000 to $120,000.
  • Ladder your emergency fund with CDs or T-Bills maturing monthly: one month, two months, three months, etc. The short-term maturities provide liquidity when you need it most.
  • Automate your savings so you don’t have to think about investing monthly.
  • Don’t use Bitcoin, stable coins, credit cards, or a line of credit as a substitute because they can lose value or get terminated by your bank. During previous recessions, banks curtailed credit, and it wasn’t easy to get a loan.

Markets always recover as they did in 2020, 2018, 2016, 2008, 2000, etc., and an emergency fund allows your stocks and bonds to rebound. Cash is valuable, especially when the economy and markets are imploding.

An emergency fund turns a crisis into an inconvenience. ~ Dave Ramsey

June 15, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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.

What’s Under The Hood?

The gear heads at my high school loved to pop the hoods of their muscle cars and gawk over the engines. Most were pristine on the outside but lousy on the inside; it was impossible to tell until the hood was agape. Likewise, it’s similar to investment models – on the outside, they all look the same, but when you look under the hood, they’re radically different.

The standard asset allocation model is 60 percent stocks and 40 percent bonds, but what does it mean? What constitutes the sixty percent, and how is the remaining 40 percent invested? Investment models vary from firm to firm and are not equal.

Our sixty – forty models hold funds managed by Dimensional, Vanguard, and Blackrock, and sixty percent of the portfolio invests in stocks diversified by size, type, sector, category, and country. The funds own thousands of companies, including Exxon, Pfizer, Amazon, Apple, Amgen, Dollar Tree, and Matador Resources. Technology is our largest allocation, followed by financial services and industrials. The United States accounts for most of the assets, followed by Europe, then Asia.

Our forty percent bond allocation is split evenly between corporate and government bonds with an average maturity of eleven years. We recently extended the bond maturities because of rising interest rates, which is counterintuitive. The last time we adjusted our bond holdings was March 2020, during COVID, when we sold most of our long-term bonds and bought short-term bonds with an average maturity of two to three years. It was a profitable trade because interest rates were falling, and we preserved capital with our short-term bonds as rates started climbing. Hopefully, we’re correct again – time will tell.

We use TD Ameritrade’s iRebal platform and screen our portfolios weekly, looking for changes to our allocations because we don’t want to get too aggressive or too conservative at the wrong time. We aim to maintain a close relationship with our benchmarks to keep our client’s risk tolerance in check. If we find portfolios that deviated from our pre-set tolerance bands, we rebalance them back to their original allocation.

As you invest and build your portfolio, check your fund holdings, allocation, and fees to ensure they align with your financial plan and goals.

The cars we drive say a lot about us. ~ Alexandra Paul

June 3, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located 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.