New Year’s Resolutions

Lose weight. Exercise more. Save money. Take a trip. It’s that time of year again to make New Year’s Resolutions. In January, optimism is high, but by year-end, it fades. According to one study, only 8% of people achieve their goals.[1] My two main 2020 goals are to climb a 14er in Colorado and learn to play guitar. Maybe I can play the guitar on top of a 14er! What are your goals for next year?

Most goals fail because they aren’t specific. Saving money is a good goal, but how much? You’re more likely to hit, or come close, to your goal if you say, “I want to save $10,000 by December 30, 2020.” Details matter when setting goals.

Financial planning works because it requires specific data. Retiring at 65 is a tangible target, retiring someday is not.  Hoping to pay for college is not as powerful as saving $500 per month towards tuition in a 529 account.

Of course, health and wealth are important goals. But what if this year you set goals to give more, serve more, and love more? Bob Goff said, “Plans work, or they don’t. Love always works. Go with the sure thing.” He adds, “Make your life about people, and you won’t regret it.”

If you’re setting financial goals, you probably have money to give. What if you changed your focus to serve others? For example, can you give away 10% of your income to groups or organizations you support? Giving money to those in need has a multiplier effect. Your gift will benefit many, but most importantly, it will benefit you and your family.

What if you can’t give away 10% of your income? Give 5%. Give your time. Can you donate 10% of your time to serve? A Google search will yield a bounty of non-profit opportunities. Serving others is powerful. Several years ago we downsized our house, and I was feeling down because I had to give up the swimming pool. A few months after we moved, I went on a mission trip to Nicaragua and served those living in homes built with cinder blocks and plywood. I don’t miss my pool anymore.

Love always works, as Bob Goff said. Loving others sounds simple, but it’s hard to do. Jesus said in Mark 12:31, “Love your neighbor as yourself.” A simple command. Can it be quantified? Probably not, but do it anyway. Spend time with friends and family. Listen more; be present. Also, men, you don’t have to solve every problem.

Give, serve, and love are resolutions that cost you little, but they’ll pay huge dividends to those who benefit from your kindness.

Give often, serve early, and love always.

Happy New Year!

 In the same way, let your light shine before others, that they may see your good deeds and glorify your Father in heaven. ~ Matthew 5:16

December 31, 2019

Bill Parrott, CFP®, CKA®, 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.

 

 

 

 

 

[1] https://nypost.com/2018/12/21/new-years-resolutions-last-exactly-this-long/, Shireen Khali, December 21, 2018

Are You Emotionally Attached to Your Stocks?

It’s easy to fall in love with a stock, especially if you handpicked it yourself. Over the years, I’ve talked to scores of investors about their favorite stocks, and most prefer to hold on to them forever regardless of allocation or performance. If you’re emotionally attached to a company, try not to overlook several risk factors.

It’s easy to get anchored to your original purchase price. If your stock falls below your purchase price, you might be reluctant to sell it for a loss for fear of admitting you were wrong. Another challenge for investors is when a stock drops below the all-time high. If it hit the high price once, it must do it again. Of course, it doesn’t have to do anything.

Enron traded at an all-time high on August 23, 2000, closing at $90.75 per share. At its peak, Enron’s market-cap was more than $70 billion, and, at the time, it was the 7th largest publicly traded company.[1] Two years later, it would be worthless. As a comparison, Berkshire Hathaway is currently the 7th largest publicly traded company.

Here are a few companies that are currently trading off their all-time highs: IBM peaked at $215 on March 14, 2013. It’s now trading at $135, down 37%. Boeing peaked at $440 on March 1, 2019. It’s currently trading at $339, down 23%. Tesla traded to an all-time high of $385 on September 18, 2017. It’s currently trading at $328, down 15%. Exxon traded at $104.37 on June 28, 2014, and it is now $69.25, down 34%. 3M sold at $258 on January 26, 2018. It’s currently selling for $166, down 36%. These companies may return to their peaks, but in the meantime, they’re a drag on portfolios.

During my career, I’ve found investors fall in love with three types of stocks. The first is a company located in their backyard, the second is a story stock highlighted on TV, and the third is a mega-cap stock.

Locals in California, pick Apple. Oregonians run with Nike, Washingtonians click on Amazon or Microsoft. Texans ooze over Exxon and Tennesseans like the way FedEx delivers. Investors who own homegrown stocks like to hold them forever.

Story stocks get big headlines. Tesla gets a lot of screen time, as do recent IPOs like Uber, Peloton or Beyond Meat. If it’s new, it must be a winner, but not always.

Mega-cap stocks like Apple, Microsoft, Alphabet (Google), Amazon, Facebook, Berkshire Hathaway, Visa, JP Morgan, Walmart, and Procter & Gamble are popular holdings, and, rightfully so. These battleship stocks have stood the test of time and have rewarded shareholders handsomely. Mega-cap stocks also have another benefit to shareholders in that consumers use their products daily.

By investing in homegrown stocks, you might miss opportunities in companies scattered around the globe.  Advantest Corporation is a Japanese company, which is up 148% year-to-date. Fortescue Metals Group in Australia is up 137%. Li Ning Company in China is up 213%, and Hotai Motor in Hong Kong is also turning in a stellar performance, up 108%.

A basket of globally diversified index funds will remove the emotional attachment of investing and give you exposure to thousands of companies. It’s easy to fall in love with Tesla, not so much with a small-cap international index fund. Also, your diversified portfolio will allocate a portion of your assets to bonds, and no one falls in love with a bond fund. However, when the market corrects, you’ll be glad you own a bond fund or two.

A financial plan will also help you with your emotional attachment. A good plan will quantify and prioritize your financial goals. Your plan will also direct your advisor on how best to construct your investment portfolio. Your plan and portfolio will synch to your goals.

Despite the numerous benefits of financial planning, a recent study by Vanguard found, “many advisors are not preparing financial plans for their clients.” Their study found that only 47% of advisors created a formal plan for clients with $100,000 to $1,000,000.[2]

To achieve long-term financial success, create a financial plan, invest in a globally diversified portfolio of mutual funds, and keep your fees low.  If you follow this plan, you might fall in love with your results!

Love is patient and kind; love does not envy or boast; it is not arrogant or rude. It does not insist on its own way; it is not irritable or resentful; it does not rejoice at wrongdoing but rejoices with the truth. Love bears all things, believes all things, hopes all things, endures all things. ~ 1 Corinthians 13:4-7

 

October 28, 2019

Bill Parrott, CFP®, CKA®, 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.

 

 

 

[1] https://www.begintoinvest.com/enron-stock-chart/, Website accessed on October 23, 2019

[2] The Vanguard Advisor’s Alpha® Guide to Proactive Behavioral Coaching, Donald G. Bennyhoff, November 2018.

The Hallmark Channel

The Hallmark Channel has hit the motherlode with their romantic holiday themed movies.  Women of all ages are attracted to their shows, especially women between the ages of 25 to 54. My wife is a huge fan of their movies, especially during the Christmas season. She says, “I love a good love story, they make me laugh and feel good.” She adds, “The women are often portrayed as positive female role models in the workplace and the men are nice guys who respect women.”

Their movies follow a predictable pattern. A snowstorm or some other event brings a man and woman together in a bucolic setting straight from a Norman Rockwell painting.  At first, there’s no connection between the two, but through a series of events the couple gets together and fall in love at the end of the movie – usually in the last 5 minutes.  In addition to being predictable, the movies are safe to watch with the entire family without any hidden surprises. It’s wholesome entertainment and they have no desire to lower the bar by adding R-rated material or foul language. They know their target audience well.

One of their more popular shows was Christmas Under Wraps starring Candace Cameron Bure. She was about to receive a prestigious fellowship before taking a job as a doctor in a small Alaskan village. Ms. Bure has appeared in several Hallmark movies, as have many of their cast members including Meghan Markle, the Duchess of Sussex.

But does their model work? In 2017 they generated $390 million in ad revenue from the Hallmark Channel. The movies and mysteries added another $146 million – that’s a lot of love! The HBO channel spends about $10 million to $15 million to produce one of their shows; Hallmark spends about $2 million. In 2017 they were expected to draw 85 million viewers and since 2008 they have made 136 original movies.[1] The shows are economical to produce, and they generate a lot of revenue

Investors would be wise to follow Hallmark’s blueprint for success. They focus on predictable content, steady actors, minimal locations, and sensible budgets.

How can you write an investment script to stand the test of time? Here are few thoughts.

  • Develop a financial plan. Your financial plan will direct your investments, asset allocation, risk tolerance, goals, timeline, etc. It will be your guide.
  • Diversify your portfolio with a basket of low-cost mutual funds or exchange traded funds. Funds managed by Blackrock, Dimensional or Vanguard are solid candidates for your portfolio. A portfolio of large, small and international stocks will give you global exposure. Adding bonds to your account will reduce your risk.
  • Stay invested. The less you trade, the better. If you trade often, you’ll end up paying excess fees and missing key market moves. For example, traders who moved to cash in December because of the drop in the stock market, missed the surge in January. A buy and hold strategy will allow you to create wealth over time.
  • Rebalance your accounts once or twice per year. Keeping your asset allocation and risk tolerance intact is key to your long-term success as an investor. If you start the year with 60% stocks, 40% bonds and by the end of the year your allocation is 70% stocks, 30% bonds, then sell 10% of your stock holdings and buy bonds.
  • Work with an advisor. A registered investment advisor (RIA) who holds the Certified Financial Planners designation can work with you to develop your financial plan, implement your investment strategy, and keep you focused on your financial goals.

A buy and hold strategy with low cost investment funds based on your financial plan and asset allocation is safe and predictable. It’s a G-Rated strategy that’s appropriate for investors. And, who knows, you may fall in love with your long-term results!

Do everything in love. ~ 1 Corinthians 16:14

February 4, 2019

Bill Parrott 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.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog. I like the Hallmark Channel too – but don’t tell anybody.

 

[1] https://www.marketplace.org/2017/12/27/life/christmas-movies-netflix-hallmark-channel-prince-numbers, by  Jana Kasperkevic, 12/27/2017

Look for Silver Linings.

In fifty years, I will be dead and the stock market will be higher.   Fifty years ago, our country was embroiled in the Civil Rights Movement, the Vietnam War and a space race with Russia.  The late sixties were a difficult time for our county but we survived.

Today, I’m deeply disturbed with the division in our country and I’ve never understood racism, bigotry or hatred.   The acts of white supremacist, neo-Nazi groups or the KKK are deplorable and have no place in our great nation.  Our country is in dark place but let’s try to find the good in our fellow man and look for silver linings.    

Everyone who does evil hates the light, and will not come into the light for fear that their deeds will be exposed. ~ John 3:20.

The stock market has had an average annual return of 10.2% since 1967 despite numerous issues and headwinds including the 1970s and 2000s. In 1973 and 1974 the stock market dropped over 41%.   The S&P 500 averaged .4% from 2000 to 2010, a lost decade for investors.   A $10,000 investment in the S&P 500 fifty years ago is worth $1.2 million today.   If this investment could run for another fifty years, it would be worth $165 million in the year 2067!

I’m confident our country and stock market will thrive over the next fifty years so what can you do today to make our world a better place for our children and grandchildren?  I’ve found it’s hard to hate while serving others.

The point is this: whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. ~ 2 Corinthians 9:6.

Here are few suggestions to help you help others.

Serve.  Can you be a greeter, reader or youth leader at your Church, Synagogue, or Mosque?

Volunteer.  Can you volunteer at your local school or library?

Give.  Can you use your financial resources to help those in need?

Mentor.  Can you mentor a young high school or college student who will benefit from your wisdom?

Teach.  Colleges, junior colleges, and high schools need educators with real world experience.  Can you use your knowledge to help the next generation succeed?

Join.  Civic organizations like Rotary, Kiwanis or the Lions Club are always looking for new members.  These groups do wonderful and amazing things in the communities they serve.

Travel.  Travel the world to meet new people and learn about their cultures.  Mark Twain said, “Travel is fatal to prejudice, bigotry, and narrow-mindedness.”

Love.  Love and hate can’t exist at the same time.  Introduce yourself to your neighbors and love on them!

…You shall love your neighbor as yourself. ~ Matthew 22:39

In fifty years, the world will be a better place so don’t worry about the current gyrations in the stock market or the political turmoil in Washington.  Instead, get out there and do some good!

Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.  ~ Matthew 6:34.

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.  For more information on financial planning and investment management, please visit www.parrottwealth.com

August 18, 2017

Note: Your returns may differ than those posted in this blog.