Do You Make These Investment Mistakes?

The market is volatile, interest rates are falling, inflation is rising, and the Delta Variant is surging.  The Dow Jones fell 725 points on Monday, but it rebounded 549 points on Tuesday. The US 10-Year Treasury yield dipped to a recent low of 1.13%, despite the inflation rate touching 5.39%. And in Florida, COVID cases are climbing again. As headline risks multiply, you may be prone to make some forced errors that could impact your financial future.

Do you make these investment mistakes?

  • Do you panic when stocks fall 1% to 2%? It isn’t easy to create wealth if you sell every time stocks fall. Panicking is a wealth killer. Rather than selling stocks when they’re down, use it as an opportunity to buy great companies at lower prices.
  • Do you participate in your company’s retirement plan? If your company offers a retirement plan and you don’t participate, you’re leaving tens of thousands, if not millions of dollars, on the table. You’re allowed to contribute $19,500 to your 401(k), and if you’re fifty or older, you can add another $6,500. Investing $19,500 for forty years can grow to more than $4 million by the time you’re ready to retire. If you can’t afford to max out your retirement plan, then contribute whatever you can – every bit counts.
  • Do you match the match? If your company offers a 5% match to your 401(k), but you only contribute 2%, you’re missing an extra 3%. If your salary is $100,000, then 3% is $3,000 per year, which can add up to more than $600,000 during your working career.
  • You are not contributing after-tax dollars to your 401(k) plan. If you max out your 401(k) contributions, you can contribute to an after-tax account if your employer allows it, substantially increasing the amount of money in your retirement plan; in some cases, you can add an extra $38,500 per year. Some call this strategy the mega back door Roth.[1]
  • Are you too conservative? If your time horizon is ten years or more, own stocks. According to Dimensional Fund Advisors, stocks made money 95% of the time over continuous ten-year rolling periods from 1926 to 2018 and produced an average annual return of 10.4%.[2]
  • Are you too aggressive? Investing in stocks when you need money in one year or less is a mistake. In the short term, stocks are violent, volatile, and unpredictable. If you want to buy a home, pay for a wedding, or take a trip in one year or less, park your money in cash or bonds.
  • Are you impatient? Creating wealth requires patience. It can take years or decades for your wealth to grow, so don’t get impatient if you don’t experience early success.
  • You aren’t diversified. Diversification is considered the only free lunch on Wall Street. If one investment zigs, another will zag. Asset allocation accounts for 93.6% of your investment return. The remaining 6.4% comes from market timing and investment selection.[3]
  • Ignore small-caps. Small-company stocks outperform large-company stocks. The Dimensional U.S. Small Cap Value Index averaged 13.1% from 1928 to 2020. A $1 investment is now worth $92,668.  The Dimensional Large-Cap Value Index averaged 11%. A $1 investment in this large-cap index is now worth $17,022.[4]
  • You attempt to time the market. Timing the market is impossible. If you invested $1,000 in the S&P 500 in 1970, it grew to $139,000 at the end of August 2019. However, if you missed the 25 best days from 1970 to 2019, or 18,139 days, your investment only grew to $32,763.[5]
  • You are investing with active fund managers. Passive index investing is better than active stock picking. The Standard & Poor’s study of passive vs. active reveals that over 15 years, 95% of active fund managers fail to outperform their benchmark, also the case for 1, 3, 5, and 10 years.[6]
  • You are only investing in US stocks. International stocks account for 43% of the world’s equity market capitalization, and if you only invest locally, you’re missing half of the world’s best investment ideas.[7]
  • You are not rebalancing your accounts. If you rebalance your portfolio, you’ll keep your risk level and asset allocation intact.
  • You are not automating your investments or payments. Automate everything like investing, paying your bills, and rebalancing your accounts. Reducing human error can improve your odds of financial success.
  • No Financial Plan. According to one study, individuals who complete a financial plan have three times the assets of those who do little or no planning.[8] Investing without a financial plan is like building a home without a blueprint. Good luck.
  • You are not working with a financial advisor. A study by Vanguard quantified an advisor relationship can add 3% in net returns.[9] An advisor can help with financial planning, estate planning, investment planning, charitable planning, and much more. 

We are our own worst enemies when it comes to investing and creating wealth. If you have a financial plan, diversify your assets, rebalance your accounts, invest often, good things can happen.

Happy Investing!

It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes. ~ Warren Buffett

July 21, 2021

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

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. Happy anniversary to my parents – 58 years today!


[1] https://www.wsj.com/articles/a-little-known-back-door-trick-for-boosting-your-roth-contributions-11625848733, Anne Tergesen, July 9, 2021

[2] Dimensional Fund Advisors 1926 to 2020

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

[4] Ibid.

[5] https://my.dimensional.com/what-happens-when-you-fail-at-market-timing

[6] https://us.spindices.com/documents/spiva/spiva-us-year-end-2016.pdf

[7] DFA 2021 Matrix Book

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

[9] https://www.vanguard.com/pdf/ISGQVAA.pdf

My Investment Tool Kit

A friend once told me you could fix anything with the right tool. Tom was a chain-smoking retired Air Force pilot frustrated with people who tried to fix everything with a screwdriver or a hammer. He often ranted that your project will turn out looking horrible if you don’t have the proper tools.

It’s true, the right tools help, and no one tool is better than the next. Each one has a unique purpose: a screwdriver or a hammer are each designed for something specific. My tool kit collection has grown over the years, adding to it as I worked on more construction projects. I now own several tools allowing me to tackle various projects.

Investors often look for the best single investment. They want to know what is working now. If stocks are good, bonds must be bad. However, it doesn’t work that way. Like tools, investments are designed for a specific purpose. Each one has pros and cons, but when used together, the pros outweigh the cons.

Stocks are best suited for long-term growth. If you buy stocks, you expect them to grow, and, hopefully, they’ll be worth more tomorrow than they are today. If you’re patient, they can increase your wealth over time and generate dividend income. They’re one of the best investments to own, but there is a dark side – stocks often fall significantly. Each year it’s not uncommon for stocks to lose 10% or more, and occasionally they can drop 40% to 50% as they did from 2000 to 2003, 2008, and 2020.

Bonds are safe, designed to generate income and preserve wealth, especially US Treasury bonds. Interest rates on bonds are currently low, so they’re not generating much income, but they still provide a level of protection not found in other investments. Also, treasury bonds are guaranteed. Bonds and stocks pair well together because they’re inversely related. Risks to bonds include inflation and rising interest rates. If rates rise, bonds fall. A 1% rise in interest rates will cause a 30-year bond to drop about 16%.

Cash is an investment, and it plays a vital part in portfolio construction. If you’re purchasing something today, you will likely use cash, not stocks or bonds. Cash is liquid. In addition to buying goods and services, it can be used as an opportunity fund, allowing your other assets to grow or generate income. If stocks fall, you can dip into your cash reserve to add to your holdings. Cash is an excellent short-term investment, but it will not keep pace with inflation.

Gold, silver, and other alternative investments on their own don’t do much. They don’t pay dividends, and historically their returns have been sub-par when compared to stocks, but if you fear a steep spike in inflation, then allocating a few dollars to this sector might work.

Investing in one asset class is speculation; investing in several is diversification and prudent. A portfolio of numerous asset classes will give you the best opportunity to make money. Rebalancing your portfolio at least once per year between stocks, bonds, and cash keeps your asset allocation and risk tolerance in check.

In addition to traditional assets like stocks, bonds, gold, and cash, you can add supporting tools like real estate, options, or crypto-currencies, depending on your risk tolerance.

Investments, like tools, are designed for a purpose, and they are unique to the owner. When you build your investment portfolio, make sure it fits your time horizon, goals, and personality.

Hammer away!

Work whatever tools you may have at your command, and better tools will be found as you go along. ~ Napoleon Hill

July 7, 2021

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

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

A Balancing Act

The Wall Street Journal recently published a good article about rebalancing your investment portfolio. (Portfolio Rebalancing Is A Good Retirement Habit, June 4, 2021).  Rebalancing is a simple yet powerful strategy for managing your accounts, whether you’re retired or not. Additionally, it’s a risk reduction strategy that may improve your returns.

We rebalance our portfolios largely driven by the market’s action. TD Ameritrade’s iRebal platform is the means we use to manage several investment models, and we automate the process to facilitate our trades. In other words, we try to eliminate emotions and human error from our system. We let the models dictate our trades, and we don’t override them because of market conditions. Each Tuesday, iRebal looks for accounts that deviate from their set allocation, and when it finds one, it rebalances the portfolio back to its original allocation. It’s like mowing the lawn or getting a haircut.

Why should you rebalance your account? The primary reason is to keep your risk tolerance intact. For example, if your allocation was 50% stocks and 50% bonds on January 1, 2020, it’s now 56% stocks and 44% bonds – too much risk. Conversely, during the COVID correction in March 2020, your equity positions fell to 40%, while your bond holdings rose to 60% –  too conservative. Rebalancing allows you to be in the right place at the right time. If you don’t rebalance, you may be too aggressive during a correction or too conservative during a recovery.

Speaking of the COVID correction, our rebalancing models worked overtime as the market crashed. Our rebalancing software sold bonds to buy stocks counter to what most investors were doing at the time. We were buying growth stocks, small-cap stocks, and real estate holdings as the market fell. Investors like to buy low and sell high, but few do it, but our models did. When we sold bonds to buy small-cap stocks and real estate holdings, they were down more than 40%! I was hyperventilating as the models made the trades. However, it worked well as growth stocks, small-cap companies, and real estate funds recovered from the COVID lows. If we did not rebalance our accounts, we would have missed impressive returns.

As the market rebounded and recovered, the models sold stocks to buy bonds to maintain our asset allocation and risk tolerance for our clients. Rebalancing works both ways – buying and selling stocks and bonds based on market conditions.

Below is a chart for a few of our models: ninety-nine, seventy-five, sixty, and fifty. The number corresponds to the equity allocation. For example, the seventy-five model is 75% stocks, 25% bonds. The most aggressive model fell further and recovered faster than our conservative ones, as expected. Our rebalancing models adjusted accordingly, so the risk level for each portfolio remained constant.

If you want to improve your investment results, consider rebalancing and automating your process so you don’t become financially paralyzed when the market falls 40% or 50%. Automating your trading will allow you to rebalance your accounts when you can’t.

How often should you rebalance? If you don’t automate the process, then rebalancing your accounts once per year is recommended. January is an excellent time to reset your accounts after all the dividends, and capital gains have been paid. If you hold assets in your company retirement plan, you probably have a rebalancing tab that you can select. The link should give a few options like monthly or annually.

If you want an investment edge, rebalance!

Happy Rebalancing!

The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard ~ Benjamin Graham

June 8, 2021

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

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

The Best Investment Strategy Ever!

Investors want an edge, a shortcut to wealth. What strategy works best? Who has the hot hand? How can I make money? Today, there is no shortage of podcasts, videos, blogs, vlogs, newsletters, posts, or tweets offering investment guidance. A Google search for investment advice yielded about a billion results.  CNBC dedicates most of its programming to the stock market. Reddit and WallStreetBets are introducing a new generation of investors to the wonderful world of stock trading. Bitcoin speculators with laser beam eyes trumpet their financial success by buying and selling digital currencies. There are many ways to make money in the stock market, so how can you find the best one?

I’ve read hundreds of investment books about investing learning from the legends like Warren Buffett, Peter Lynch, William O’Neil, Bill Miller, John Rogers, and so on. They have different investment strategies, and all of them are successful. Regardless of their style, they’re profitable because they follow a disciplined process and think long-term.

However, the best investment strategy that yields the most fruit is saving money. If you can save your money, you can prosper financially. It’s not hard to save 5%, 10%, or 20% of your salary, but few people do it. Building your nest egg takes time and discipline.  By saving a few hundred dollars every month, your nest egg may be worth a few million dollars by the time you’re ready to retire. For example, saving $500 per month and investing it in the stock market could be worth more than $1 million in thirty years. In forty years, it climbs to more than $3 million![1]

What if you don’t want to wait thirty or forty years? Let’s say you want to buy a new car in five years or a home in ten? Well, saving money is still the best way for you to reach these goals. For example, if you save $500 monthly for five years, it will be worth close to $39,000, enough to buy a new car. After ten years, it will be worth $102,000, enough for a downpayment on a $500,000 home.

I work with a young couple who save regularly and are now able to buy a new home. They started looking for their dream home about a month ago. Another client has contributed the maximum to his 401(k) plan for his entire career, and he can retire early.

Saving money takes effort. It’s not easy, especially when life gets in the way, but you need to find a way to save as much as you can. Money in the bank gives you the freedom to choose your path and lessen your dependence on others.

I’ve talked to numerous individuals about investing, and some people are spendthrifts, and money burns a hole in their wallet -money in, money out. People who live for today are like the grasshopper in The Ants & the Grasshopper from Aesop’s Fables[2]. Here is the story:

One bright day in late autumn a family of Ants were bustling about in the warm sunshine, drying out the grain they had stored up during the summer, when a starving Grasshopper, his fiddle under his arm, came up and humbly begged for a bite to eat.

“What!” cried the Ants in surprise, “haven’t you stored anything away for the winter? What in the world were you doing all last summer?”

“I didn’t have time to store up any food,” whined the Grasshopper; “I was so busy making music that before I knew it the summer was gone.”

The Ants shrugged their shoulders in disgust.

“Making music, were you?” they cried. “Very well; now dance!” And they turned their backs on the Grasshopper and went on with their work.

Moral: There’s a time for work and a time for play.

The Bible also comments on the ant in Proverbs 6:6-11: Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest. How long will you lie there, you sluggard? When will you get up from your sleep? A little sleep, a little slumber, a little folding of the hands to rest— and poverty will come on you like a thief and scarcity like an armed man.

Did you notice the last verse? It read: poverty will come on you like a thief. Saving money provides provision and a financial future. On the other hand, if you don’t save your money, there can be dire consequences. Also, if you don’t save money, you can’t buy stocks, bonds, Bitcoin, or any other investment.

To increase your odds of investment success, automate your savings. Set up a monthly draft to your savings account, brokerage account, and company retirement plan. If you get a raise, increase your savings by the same percentage: a 2% raise, a 2% increase in savings.

Money compounds over time, so the sooner you start, the better. If you’re not sure how much to save, start small and increase it over time. Don’t delay; start today! I know you can do it!

Do not save what is left after spending, but spend what is left after savings. ~ Warren Buffett

May 22, 2021

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

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


[1] $500 monthly investment at 10% before taxes and fees.

[2] http://read.gov/aesop/052.html

A Day At The Races

I spent last Sunday at the races with my mom and daughter. We had a great time despite the cold and drizzly weather. We arrived early, stayed late, and bet often.

I grew up near the Santa Anita racetrack. My high school was across the street, so I was a frequent visitor. In addition, my daughter has been riding horses since she was five, so it’s a sport we bond over.  

After downloading the daily racing forum, we examined each horse’s sires and dams and spent the evening handicapping the horses. We reviewed their previous workouts, race performances, owners, and trainers. At the racetrack, we got the official daily racing program that includes some data on the horses and riders. We were ready.

On race day, we bet on our selected horses. Our strategy and system worked well as we finished in the money for seven of the nine races. We hit an exacta in the eighth race and missed another by a nose in the sixth.

We bet conservatively for most races, but when we felt convicted, we upped the ante and pressed our bets. We felt confident in our system because we spent time doing our homework. If we only relied on the official program, we would have performed poorly. It would have been a guessing game, picking horses based on the jockey’s colors or some other random item.

At times it appears people pick investments based on random facts or data points that won’t move a stock’s price. Rather than doing their research, they choose investments from a tweet, text, or tik-tok video. If you hear about a stock on CNBC, it must be a good investment. Right?

Don’t leave your financial future to chance. Instead, take time to learn something about your investments. Here are a few tips you can use to increase your odds of success.

  • If you’re buying a stock, review the company’s mission statement, financials, price charts, and competition. Yahoo! Finance is an excellent data source. Digging into a company’s financial history can give you an idea of its future.
  • If you’re buying a mutual fund or ETF, review the fund’s objectives, managers, expense ratios, holdings, and the other funds in the category.
  • How much can you invest? Do you want to own several stocks, or do you want to place your bets on a few long-shots? If you have buckets of money, you can own many companies. However, if your resources are limited, owning a mutual fund is more prudent.
  • What is your risk management strategy? Will you let your winners run? Will you sell your losers? Will you buy the dip? Create a plan and follow it. Don’t let your emotions ruin your portfolio.
  • Review your trades, especially if you lost money. Why did your investment fail? What happened? How can you improve your trading based on your experiences? For example, in the sixth race, we lost an exacta because our horse came in third, not second. After the race was over, I reviewed our process to see if we missed anything. We didn’t. Our horse was solid; it just got beat.
  • Celebrate your success. If you made money on a trade, take a few chips off the table and celebrate your win. It’s okay to spend your winnings on things you enjoy.

If you’re inclined to work harder than the next person, you can win at the races, in the markets, and life. Unfortunately, few people are willing to go the extra mile, but I know you can do it. I’m betting on you to win!

And away they go!

A good rider can hear her horse speak to her. A great rider can hear her horse whisper. ~ Anonymous.

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

May 19, 2021

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

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

Why Worry?

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

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

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

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

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

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

April 14, 2021

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

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


[1] Dimensional Fund Advisors 2020 Matrix and YCharts

[2] Ibid

[3] Ibid

My NCAA Basketball Bracket

What a tournament! March Madness did not disappoint. I was rooting for Baylor to win, and they did! I entered ESPN’s Tournament Challenge and finished in the 94th percentile, ranking 843,000 out of 14 million. My final game prediction was Baylor beating Gonzaga 74 – 72. The final score was 86 – 70. As always, there were several surprises and exciting moments like UCLA’s march to the final four and Jared Suggs game-winning shot.

Scott Drew inherited a struggling Baylor Basketball program in 2003 with the goal of winning a national championship. His assistant head coach, Jerome Tang, joined Coach Drew’s staff the same year. It took them eighteen years of blood, sweat, and tears to realize their dream. At the time, Baylor Basketball was involved in a scandal when one player murdered another, and their former coach was making financial payments to players.[1] It was a dark time to take over the program, but their perseverance, faith, and vision paid off.

Investors can learn much from the Baylor Bears and their run to the national championship. To succeed as an investor, you need a plan, patience, vision, and luck. Long-term thinking is a must. And, buying stocks when they’re down is an excellent way to acquire great companies at discounted prices.

Learning to overcome losses is also essential because when you invest, you will own some losers. There were 68 teams in the tournament – 67 losers and one winner. However, every team that made it to the big dance had a successful season, and most of them will return next year. Gonzaga ended their season with a record of 31-1, the University of North Texas won their first-ever tournament game, and Abilene Christian stunned Texas. Cut your losses, learn from your mistakes, and refine your process. Don’t be distraught with your losers, and let your winners run.

Diversification is also a must. The Baylor team has several elite athletes, role players, and specialists, and every person contributed to the team’s success. Your portfolio needs several components to perform well. A globally diversified portfolio of low-cost funds gives you exposure to numerous markets and thousands of securities, each playing a vital role.

To produce generational wealth, build your team, diversify your assets, invest often, and think long-term.

I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed. ~ Michael Jordan

April 6, 2021

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

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


[1] https://en.wikipedia.org/wiki/Baylor_Bears_basketball

Supermarket Investing

When I walk into my local supermarket, magnificent smells of freshly cut flowers and a sea of fruits and vegetables welcome me. Further on, I encounter the aroma of baked bread, cookies, and cakes. My senses are overloaded, and I have yet to start shopping.

A supermarket layout is science-based, but pomp and circumstance also play a significant role in our shopping experience. It’s full of vibrant colors, smells, and sounds designed to keep us moving as we fill our shopping carts. The items we need are located in the back; the things we want are near the front. End caps display new or seasonal products designed to catch our attention. Between the front door and the milk section, we encounter presenters offering us free food and drink samples while introducing us to a new recipe or cooking trend. If we make it through the aisles unscathed, we must pass one final test – the checkout stand. While checking out, we stare at soft drinks, chips, candies, and tabloids, all impulse buys. I always shop with a list, and I never enter a grocery store while hungry to avoid the subtle traps.

Investing is similar to grocery shopping – a lot is going on, so a plan is recommended. Investing without one is like entering a grocery store without a list; if you’re not careful, you can get into trouble. A financial plan keeps you focused on your goals and helps you avoid distractions that may derail your future. It can also limit impulse purchases of investments that don’t belong in your financial basket.

We need staples to survive, like fruits, vegetables, meats, eggs, milk, etc. We don’t need peanut M&M’s, but they’re fun to eat on occasion. A portfolio designed to last generations needs a strong core of globally diversified high-quality stocks and bonds. An appropriate allocation for your core holdings is 85% to 95% of your total balance. Invest the remainder of your account in high-flyers, seasonal trades, or alternative investments if you want to give your portfolio a boost.  

The center aisles are a mix of, well, mixes, packaged foods, and canned foods; ingredients developed to enhance your meals. Portfolios require supporting investments as well. Small-cap stocks paired with large-cap companies mixed with a few bonds is a recipe for success.

My wife can make the rounds in our grocery store with her eyes closed, which is good and bad. She is an efficient shopper, but it’s possible to become complacent and ignore new items or products – investors who are pococurante risk missing new ideas or opportunities. If you let your portfolio get stale, you may fall behind your stated goals. I recommend reviewing your holdings and your plan two to three times per year to stay up to date with new trends. Avoid putting them on auto-pilot.

Should you always avoid end cap displays or check out items? No. These sections of a supermarket can introduce you to bargains, new products, or reflex purchases. They can also bring some fun to your shopping experience. Investing in seasonal trades, speculative stocks, or alternative investments may bring you joy if they work. Limiting your purchases to 3% to 5% of your portfolio value will avoid pain or destruction if you’re wrong.

When I was fifteen, I worked in a small grocery store with some friends. I earned $2 per hour and learned much about stocking shelves, bagging groceries, and watering produce. I was continually moving from one aisle to the next. It was our job to ensure the store looked good at all hours. It was a good primer for my chosen career.

As you build your shopping investment list, include a basket of large, small, and international companies. Add a mix of bonds, real estate holdings, and alternative investments. Rebalance your accounts annually and review your plan often. Think generationally, but pay attention to short term opportunities. A balanced portfolio based on your financial goals will treat you well over time.

Happy shopping!

Anyone who believes the competitive spirit in America is dead has never been in a supermarket when the cashier opens another checkout line. ~ Ann Landers

January 25, 2021

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

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

Brady v. Brees

Tom Brady and Drew Brees are meeting in the NFC divisional playoff game today. Tom Brady is 43; Drew Brees is 42 – the oldest match up for quarterbacks in a playoff game. Messrs. Brady and Brees will be first-ballot Hall of Famers when their careers end. Mr. Brees is the NFL leader in passing yards with 80,358. Mr. Brady is second with 79,204. Mr. Brady is the all-time leader for touchdowns with 581, Mr. Brees is second with 571. Mr. Brady ranks eleventh for games played at 301, and Mr. Brees ranks sixteenth. Mr. Brees and the New Orleans Saints won Super Bowl 45, and he was named the games MVP. Mr. Brady is the all-time leader in Super Bowl wins with six, and he was named the Super Bowl MVP four times.

A quarterback aged 40 or more is rare, and these two are defying the odds. Despite their success, they have faced criticism and doubts. The San Diego Chargers traded Mr. Brees in 2005 after successful shoulder surgery. I bet the Charges wished they had kept him on the roster. He continually faces criticism about his height and arm strength. Phil Simms said, “Listen, his arm strength was never great.”

Tom Brady was the 199th pick, drafted in the 6th round, a snub he has not forgotten. In 2016, Max Kellerman “decided to declare that Brady’s career was about to be over sooner rather than later.”[1] He also called him “a bum.” After four years, Mr. Kellerman admits he was wrong about Tom Brady’s late-term playing career.

I’ve never met Tom Brady or Drew Brees, but I suppose they ignore the criticisms, and they probably aren’t aware of most things said about their potential “demise.” Rather than listen to the experts, they work out regularly, practice often, eat well, and repeatedly perfect their craft – they follow their plan and focus on what they can control.

The average NFL career lasts 3.3 years.[2] Mr. Brady is playing in his twenty-first season, Mr. Brees is in his twentieth. To survive and excel in the NFL for two decades requires perseverance, dedication, and tenacity – traits these two NFL greats have in abundance.  

As an investor, you may face criticism and doubt about your investing style or portfolio. TV personalities, experts, analysts, relatives, neighbors, friends, or social media trolls may give you pause to think about your financial future. You may hear others say: “How come you own that company?” or “Why don’t you own this company?” or “The stock market is going to crash, you should sell your stocks!” Tune out the noise and chatter.

To create generational wealth, focus on those things you can control and ignore the rest. Here is a shortlist of things you can manage.

  1. Savings. How much money do you save per month or year? The amount you save will have the most significant impact on your future wealth. Contribute the max to your 401(k) and IRA. Automate your savings. If you save $10,000 per year for thirty years, you could have more than $1.5 million in assets when you’re ready to retire.
  2. Expenses. You have complete control over your spending. The less you spend, the more you save. January is an excellent time to review your spending habits. If you spend some time pouring over your bank and credit card statements, you may find a few expenses to reduce or eliminate.
  3. Investments. You can purchase any investment in the world – stocks, bonds, real estate, gold, Bitcoin, art, jewelry, etc. However, if you want to retire in style, it’s best to own investments that grow, like stocks. The 100-year average for stocks has been 10%. If you keep most of your money in cash, it will lose value every year because of inflation and taxes.
  4. Diversification. Diversify your assets across stocks, bonds, and cash and rebalance your portfolio annually. Diversification is considered a free lunch on Wall Street.
  5. Plan. Your financial plan is unique to your situation. To succeed as an investor, buy investments you’re comfortable owning and follow your plan; it is your financial playbook, guiding you to long-term success.

Investing is not a sporting event, but it does require a game plan with long-term strategic thinking to succeed.

If you’re wondering, Brees holds an edge over Brady in games won – 5 to 2.

“Don’t ever underestimate the heart of a champion.” ~ Rudy Tomvanovich

January 16, 2021

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

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


[1] https://www.sportscasting.com/max-kellerman-finally-admits-he-was-wrong-about-tom-brady-becoming-a-bum/

[2] https://www.espn.com/blog/nflnation/post/_/id/207780/current-and-former-nfl-players-in-the-drivers-seat-after-completing-mba-program

Follow the Bouncing Ball

To make money in stocks, buy winners. To make money betting on horses, pick the fastest one. To make money betting on football, pick the best team. It’s obvious! As Will Rogers once said, “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it. Of course, it’s impossible only to pick the winners.

In 2016, the energy sector rose 29.2%, and it was the best performing sector. If you invested in energy in 2016, you lost 2.5% in 2017, 20% in 2018, 9.3% in 2019, and 33.1% in 2020. The energy sector was the worst-performing sector for four years in a row. This year, it’s one of the best.

Utility stocks were the worst-performing sector in 2013 but the best in 2014. Financials finished 2019 as the second-best sector, and last year it was the second-worst.

Healthcare stocks underperformed energy stocks by 32% in 2016 and outperformed them by 26% a year later.

Trying to pick the best sectors or stocks can result in a feast or famine. If you’re correct, you’ll make money. If you’re wrong, you’ll lose money. Simple.

From 2011 to 2020, the S&P 500 index was never the best nor worst-performing asset class, nor did it finish any year in negative territory. It was consistent and stable relative to the individual sector components.

An S&P 500 index fund, or total market index fund, gives you exposure to every sector without trying to pick the best and avoid the worst. A broad-based index fund is an excellent choice for any portfolio.

January 14, 2021

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

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

Data Sources: YCharts