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/

Rivers

Where’s the river going, dad?

To the ocean.

Straight to the ocean?

No. It will twist and turn for thousands of miles.

Where did it start?

Up there, atop the mountain. It starts with a raindrop, fills the lake, creates a waterfall, and makes a river.

A raindrop is so tiny. How can it make a river?

One raindrop is tiny, but billions are powerful, a force of nature that creates a raging river or a tranquil pond.

How long will it take to reach the ocean?

Months, many months.

Months?

Yes. It’s in no hurry to get where it’s going. It will meander through mountains and valleys and enjoy the journey.

What does meander mean?

Hmm. Meander. Yes. It means to stroll or walk. It will take its sweet time – faster in parts, slower in others.

Why doesn’t it go fast all the time?

It goes as fast as it needs to go. If it’s flat, it goes slower; if it is flowing from a mountain or rolling down a hill, it will go faster. It has a job to do as it travels across the country.

A job?

A job.

What do you mean?

The river is a resource for many, and it’s filled with life, like fish and plants.

Like the fish we catch.

Yes, ma’am. Big, beautiful trout.

What else does it do?

It feeds the trees and plants. It provides water to farmers so they can grow the food we eat.

What else?

It lets animals and birds drink from its banks.

Like my horse?

Yes. When Sage is thirsty, she’ll bow down to the river and lap up water to quench her thirst.

What else?

It provides power to the electric company so we can turn on our lights.

Power?

A raging river produces power, and if you can harness it, it will provide energy to millions.

What else?

Big boats float on their back, moving cargo from one town to another.

What kind of cargo?

All kinds. Grains, cars, cattle, you name it.

Toys?

Ha! Yes, especially toys.

What else?

Well, others use it for fun.

What kind of fun?

Oh, boating, for example, or fishing, or swimming.

Is this the biggest river in the world?

No, there are larger ones like the Mighty Mississippi, the Nile, and the Yangtze.

Is it the fastest?

No, others are faster, I’m sure.

Is it the slowest?

I doubt it; there are slower ones.

I see.

You should live your life like a river.

I can’t be a river. What do you mean?

Enjoy your journey – don’t go too fast or too slow. Bring life to others by helping those in need; use your time, talent, or treasure and your God-given gifts to make a difference in this world. A river is beautiful, majestic, and powerful, just like you.

I should meander.

Ha, but meander with a purpose.

BP

2/2/22

An Uncrowded Trade

My family and I recently returned from a trip to Crested Butte, Colorado. It’s a slice of heaven, and we have visited the little mountain town for years. It was our first family trip since COVID, and we weren’t sure what to expect. What we found were crowds. The airports, restaurants, shops, and streets were teeming with people.  We were shoulder to shoulder almost everywhere we went, except when we went hiking.

Crested Butte is populated with beautiful trails like Oh Be Joyful, Brush Creek, Crystal Mill, Trail 403, and Copper Lake. When we ventured out, we rarely saw another human being. Our favorite hike this past trip was Copper Lake. It’s an eleven-mile out and back trail. We passed Judd Falls, several streams, and meandered through quaking Aspen trees. More importantly, it was uncrowded.

A current uncrowded trade is investing in international stocks, especially in emerging markets. For the past fifty years, the MSCI EAFE International Index has trailed the Dow Jones Industrial Average by 1.28% per year, or 2,000% in total. A $10,000 investment in the Dow Jones on January 1, 1970, is now worth $432,840, whereas the MSCI International Index grew to $233,100, a difference of $199,740. The EAFE index has also trailed the Dow Jones over a 1-, 3-, 5-, and 10- year period.  International stocks are an uncrowded trade because few want to invest in this category. Investors want to own large-cap US growth stocks like Facebook, Alphabet, Apple, Amazon, and Netflix. However, from 1970 to 2011, international stocks outperformed US companies. And from 2003 to 2007, they trounced US stocks.  

Emerging markets are falling because of the Chinese Government’s crackdown on tech and gaming stocks. Over the past six months, the iShares MSCI China ETF (MCHI) is down more than 21%. Chinese stocks like Alibaba, Baidu, and Tencent are down 22.5%, 34.5%, and 40%, respectively, over the past six months. If you want emerging market exposure without Chinese stocks, consider the iShares MSCI Emerging Markets ex-China ETF (EMXC) or the Alpha Architect Freedom 100 Emerging Markets ETF (FRDM).

International stocks make up close to half of the global market capitalization for stocks, so it’s not wise to ignore companies beyond our borders. An allocation between 5% and 25% to international stocks makes sense for most investors. Global stocks are an uncrowded trade, and at some point, they will outperform US stocks, which will make all the difference.

Two roads diverged in a wood, and I – I took the one less traveled by, and that has made all the difference. ~ Robert Frost

August 3, 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.

Grandma’s House

Hannah loved visiting her grandparent’s cabin in the mountains of Colorado. She especially enjoyed sitting on the river’s edge listening to her Nana’s stories.

“Nana,” Hannah said, “Tell me the story where you beat up the stock market.”

“Little Bird, I didn’t beat up the market; I beat the market.”

“What’s the difference?”

“Well, for one, you can’t beat up something you can’t see, and beating the market means our investments performed well over time, generating favorable returns.”

“I see. I guess. How did you know what to buy?”

“When your Tata and I got married, we had little money, but we were good savers. We started buying a few shares of companies we liked. We called it investing with our eyeballs and our checkbooks.”

“Cool. What’s a checkbook?”

“Ha, ha, Little Bird, you’re too funny. In the old days, before credit cards, PayPal, and Venmo, we wrote checks for things we bought.”

“I get it. I think. I’ve never heard anybody invest with their eyeballs before. What do you mean?”

“Well, for example, when we went to McDonald’s to buy your mom’s dinner, we noticed that the lines were long, and the lobbies were crowded.  When we shopped at Sears, the aisles were full of shoppers.”

“Sears?”

“You probably won’t believe this, but at one time, Sears was larger than Amazon. The Sears catalog was huge, and you could purchase anything from a house to a muffin pan.”

“No way. I’ve never heard of them. Where are they now?”

“They’re a former shell of themselves. Amazon evaporated its business model.”

“What other companies did you own that are no longer around?”

“When we started investing in the 1970s, we owned some of the largest companies in the world like Eastman Kodak, Xerox, and Revlon. These companies are barely alive today. We also rented videos from Blockbuster.”

“You actually had to go to a store to rent a video to watch a movie?”

“Yes, it’s not like today where you can watch a movie on Netflix. Netflix destroyed Blockbuster. There’s only one store left, and it’s in Bend, a small ski town in Oregon.”

“Wow. So you didn’t make money on every stock?”

“No. We lost money on several companies over the past fifty years, but our winners outpaced our losers by a wide margin. Our investments in McDonald’s, Home Depot, Apple, Amazon, and Tractor Supply have done very well.”

“I love Tractor Supply!”

“I know you do!”

“If you’ve done well, how come you don’t have big homes and fancy cars? My friend’s parents seem to buy new cars all the time.”

“Your Tata and I decided it was better to live modestly and invest our money in stocks and experiences. Our simple strategy allowed us to buy this cabin to spend more time with you and your cousins. Besides, who wants to clean a big house?”

“My friend’s parents are in a hurry to get rich, and they always talk about money. How come you and Tata don’t seem to be in a hurry to get rich?”

“Well, Little Bird, do you see the river?”

“Yes.”

“The river is in no hurry to get where it’s going. Sometimes it goes fast, sometimes slow, but it’s never in a hurry. It also knows where it’s going, twisting and turning through the countryside, enjoying the journey. We’re like the river. We know where we’re going, but we’re in no hurry to get there. We, too, are enjoying our journey.”

“I see. I guess.”

“When you hurry, you make mistakes or miss opportunities. Our motto is ‘never hurry, never worry.'”

Hannah pondered her next question and asked, “Do you own Bitcoin?”

“We don’t understand Bitcoin. Your Tata and I decided to only invest in things we know and understand. We have also avoided fads over the years.”

“What fads?”

“Well, in the late 1990s, people were trying to get rich buying dot com stocks – companies with no earnings, no profits, no future. When the stock market crashed in 2000, several of our friends lost a lot of money, and a few got wiped out. I don’t know if Bitcoin is a fad or not; too early to tell. We also avoided pet rocks and beanie babies.”  

“Rocks and beanie babies, what the heck?”

“We can talk about those some other time.”

“Okay, when will you know if a fad is a real thing?”

“Probably in ten or twenty years.”

“That’s a long time, Nana.”

“It is, but your Tata and I are patient, and we can always buy it later. We invest in good companies, and most of our stocks pay a dividend.”

“What’s a dividend.”

“A dividend is a payment we receive from the companies we own. For example, McDonald’s sends us a quarterly check for more than $5,000. The annual dividend we receive is larger than our original investment!”

“Wow! Do I need a lot of money to buy stocks and collect dividends?”

“Of course not. We started small, buying five shares here and ten shares there, and over time, it added up.”

“So I can invest some of my money, and it will grow yours did?”

“Do you see the tall aspen trees?”

“Yes, they look like they have eyes.”

“Do you think they started big or small?”

“Small. Nothing starts off big, except elephants and whales.”

“Yes, silly goose, you’re right.”

“These big aspen trees were seedlings, and then they grew towards the sky. Tata and I started with small investments, and we let them grow over time.”

“Nana, you’re the best storyteller ever. Can we have a snack and then ride the horses?”

“We sure can. Let’s get some chocolate chip cookies and grab the horses. I’ll ride Salty Sailor, and you can ride Sage.”

“Let’s do it!”

Moral: Invest in what you know and think long-term.

April 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.

All Time Highs!

A record number of climbers reached the peak of Everest this year. In fact, it was so crowded that climbers had to wait in a long line to reach the summit and the approach to the peak was described as a “traffic jam.”[1] A climber spends about two months getting acclimated to the elevation before they start their ascent to the highest point on earth.[2] After a few minutes at the top snapping a few selfies to capture the view they’ll start descending to base camp. A slow climb to the top, a faster descent home.

This past week the S&P 500 hit an all-time high of 3,013. It’s been a long, slow ascent for the index to reach its current peak. In 1998 it crossed 1,000 for the first time. It broke through 2,000 in 2014. Fifty years ago, it was at 92. When I started in the business it was 330 and the Dow Jones was trading below 3,000!

The rise from 92 to 3,000 hasn’t been straight up, of course. During the Great Depression the index produced a return of .6% per year (1929 – 1943). In the decade of the ‘70s it rose 15 points, or 1.5% per year. It fell 42% from August 2000 to September 2002. It cratered 46% from October 2007 to March 2009. Despite these rough patches, the index managed to generate an average annual return of 10% dating back to 1926.

What now? Will the S&P 500 fall back to earth? Will it dip or dive soon? Who knows? I’m sure it will be as volatile as it has been in the past. When it does drop, use it as an opportunity to buy a few quality stocks or funds. Buy the dip, historically, has been good advice.

If you’re concerned about a descent from the ascent, here are a few strategies you can incorporate today to protect your assets.

  • Take some gains and sell your stocks. Locking in a profit never hurts. You can sell your winners or losers to raise cash. Ideally, you’ll want to sell your winners in a tax deferred account like an IRA and sell your losers in a taxable account for the tax write off. Regardless, selling stocks to raise cash makes sense if you’re concerned about a drop.
  • Buy bonds. Buying bonds yielding 1% to 2% sounds boring. It is. Bonds reduce risk and volatility in your account. During times of duress, however, you’ll be glad you own bonds. In the drops I mentioned above, bonds performed well. During the Great Depression, long-term government bonds averaged an annual return of 4.3% (1929 – 1943). During the ‘70’s they averaged 5.5%. In 2000 bonds rose 21.5% and they climbed 25.9% in 2008.
  • Buy puts. Use put options to hedge your portfolio for short term moves. Options are used to protect individual positions like Amazon or indices like the S&P 500. This strategy is expensive, so use it sparingly. Let’s look at a put option for Amazon. Amazon is currently trading at $2,012. Buying the August 16, 2019 $2,010 put option will cost $6,155 for every 100 shares you own. If Amazon falls below $2,010 on, or before, August 16 you may profit on your trade. If Amazon stays above $2,010, you’ll lose 100% of your investment. If a short-term option strategy is too risky, you can extend the maturity date. For example, the January 17, 2020 $2,010 put option will cost $13,410. Still expensive and risky. To employ this strategy only work with an advisor who is well versed in trading options.
  • Do nothing. Be still and let your stocks run. Trying to time the market may cost you more than a market correction. Over time, a buy and hold strategy performs well. A recent study by Dimensional Fund Advisors highlights this point. From 1926 to 2018, they found the market is significantly higher after a market reaches a new high. According to their study, the market is 14.1% higher one-year after reaching a new high. The three-year average is 10.4% and the five-year average is 9.9%.[3] Don’t sell your stocks If your only reason to sell is because the market has reached a new high.

Everest will always be there and so will the stock market. Unlike Everest, the S&P 500 can continue to soar to new heights – without limit. I’m not sure what the market will do in the next few months, but I’m convinced it will be significantly higher 50 years from now. My recommendation is to stay the course and enjoy the view.

I lift up my eyes to the mountains – where does my help come from? ~ Psalm 121:1

July 13, 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.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than 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.washingtonpost.com/world/2019/05/24/mount-everest-has-gotten-so-crowded-that-climbers-are-perishing-traffic-jams/?utm_term=.6d6dd10799e9, May 25, 2019 by Siobhan O’Grady

[2] https://www.nepalsanctuarytreks.com/how-long-does-it-take-to-climb-mount-everest/

[3] file:///C:/Users/parro/Downloads/Timing%20Isn%E2%80%99t%20Everything.pdf, July 2019

The Trailhead

I just returned from Colorado where I spent a week riding horses and hiking in the Rocky Mountain National Park. One of my hikes was to the summit of Estes Cone. It’s considered a strenuous hike with an elevation gain of 1,800 feet or 551 feet per mile.[1]

Most trails are well marked from the beginning including the trail for Estes Cone. The trailhead for our hike was the Longs Peak trailhead. Longs Peak is the ultimate hike in the park and someday I’ll hike it, maybe. Our group was initially stuck at a fork in the road before we referenced our trail map. After a brief detour, we were back on the trail.

The trailhead is often the best place to start when you go hiking.  It would be helpful if there were financial trailheads for individuals who want to save money, create a budget or pay off debt, but there isn’t, at least not one for everybody. Even though there isn’t a single map for financial success, others have left clues and markers to help you reach your financial goals. Here are a few suggestions.

Start. Hikers start at the trailhead because it’s usually the lowest point on the trail. Start by setting a few short-term goals like opening a savings account, paying off a credit card, or creating a budget. It’s okay to start small. A little nudge might be all you need to get moving.

Orient. When hikers reach the trailhead, they orient their compass to the summit and trail map. The map and compass will guide them to their goal. Likewise, your financial goals will help you orient your path. Well defined goals are needed for financial success.

Gear. Hikers love gear – shoes, packs, knives, poles, etc. These items are essential for a successful hike. Investors need quality gear as well. Financial software can make your life easier. Today you can find software for any scenario like financing college, paying off your mortgage, buying life insurance, or leasing a car.  These tools will help you get your financial house in order.

Guide. Our hike was led by one of the ranch hands where we were staying. He knew the trail and led us to a successful hike. We could have hiked without a guide, but it may have taken us longer to reach the top. To increase your chance of obtaining your goals consider hiring a Certified Financial Planner® who can help you guide your financial steps. A CFP® professional is trained to handle a multitude of investment and planning scenarios.

Valleys. Some trails will take you through a valley before you reach the summit. When you enter a valley, it might not feel like you’re going to reach your goal, but if you stay on the trail and follow your map, you’ll reach the summit. Markets will take you deep in the valley at times in the form of corrections or pullbacks. During these down days stay true to your financial path and don’t panic. Market corrections are normal and short-term in nature.

Obstacles. Trails can be besieged with rocks, trees, shrubs or water. If you’re not paying attention to your steps, you can trip and tumble. A hiker in our group referred to this as the “tuck and roll.” Staying focused on your financial goals is paramount so don’t get distracted by taking your eyes off your goal.

Rest. It’s okay to stop on the trail to catch your breath, drink some water, grab a snack and check your bearings. In fact, it’s recommended. It’s also recommended to review your accounts often to make sure they’re performing to your satisfaction. Reviewing your asset allocation, risk level, and performance will help you stay invested for the long haul.  Adjust your portfolio as needed so you can stay focused on your financial goals.

Peaks. The summit is the goal for hikers. The summit for Estes Cone is 11,006 feet. Your summit may be a financial goal you’ve reached. Your peak, or financial goal, will keep you moving forward. If you’ve reached your summit, celebrate.

Hiking is a great activity, particularly in a national park. The challenges of a mountain make for great adventure.

Investing is challenging, but with the right tools and resources you will have an opportunity to reach your financial summit. Climb on!

The mountains are calling, and I must go. ~ John Muir

July 2, 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.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than 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.

 

 

 

[1] http://www.rockymountainhikingtrails.com/estes-cone.htm