Tag: New Year

22 Ideas for 2022

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Happy New Year! It’s hard to imagine it’s 2022, but here we are. Below are twenty-two ideas you can incorporate to make next year your best investment year ever!

  1. Create a spending plan so you can spend with confidence. Review last year’s bank and credit card statements to see if there are opportunities to increase spending or reduce expenses.
  2. Develop a financial plan. A well-constructed financial plan prioritizes and quantifies your goals and aligns your investments to your objectives, so your assets are working in concert for your benefit.
  3. Max out your 401(k) contributions. The maximum contribution jumps to $20,500 in 2022. If you’re 50 or older, you can add another $6,500 to your account.
  4. If you’re a high-income earner ($129,000 if single, or $204,000 if married), consider a Roth 401(k).
  5. Fund your IRA. The maximum contribution for an IRA is $6,000, and if you’re 50 or older, you can deposit another $1,000.
  6. Do you own a professional organization like a law practice, CPA firm, medical practice, architectural firm, etc.? If so, consider incorporating a cash balance pension plan. It will benefit older employees looking to contribute significant amounts of money to a retirement plan.
  7. Consider adding a profit-sharing plan to your 401(k) if you own a business. It will give you the flexibility to make additional contributions to your retirement account.
  8. If you’re self-employed, open a SEP-IRA or solo 401(k) plan.
  9. Give money away. The IRS allows you to give $16,000 per person per year without tax consequences to either party. For example, if you’re married and have ten kids, you can give away $320,000 every year. If you decide to give more money, it will apply to your lifetime gift tax exemption of $11.7 million if you’re single or $23.4 million for married couples.
  10. Give more money away. Consider donating assets to groups or charities you support. Currently, you can deduct 100% of cash donations from your adjusted gross income. In addition to donating cash, you can give appreciated assets like stocks or real estate.
  11. Open a Health Savings Account if you participate in a high-deductible medical plan. The maximum contribution for 2022 is $3,650 for individuals or $7,300 for couples. If you’re 55 or older, you can add another $1,000.
  12. Review your risk level. How much risk are you willing to accept to achieve your investment goals? A risk assessment will gauge your risk level and assess your portfolio’s holdings. You may be surprised by your results.
  13. Review your beneficiaries. Did you have any life events in 2021 – birth, marriage, divorce, death? If so, update your beneficiary information for your retirement accounts, life insurance policies, wills, trusts, and so on.
  14. Update your will or trust. Is it time to make changes to your estate plan? Does your will or trust need a refresh?
  15. Create an estate plan. If you don’t have a will or trust, there is no time like the present to create one. An estate plan can protect you and your family from several financial calamities.
  16. Review your insurance policies. If you have a mortgage, children, a non-working spouse, then insurance is a must. A term policy will satisfy most family situations. And, yes, a non-working spouse needs life insurance.
  17. If you’re 55 or older, consider getting a quote for long-term care insurance. A long-term care policy can protect your family assets and offset the cost of an assisted living facility.
  18. Invest for growth. If inflation rises and interest rates remain low, equities will perform well.
  19. Invest for safety. If you are worried about a stock market correction from rising inflation or interest rates, invest in short-term bonds or cash. Your money won’t grow, but it will be available if you need it.
  20. Diversify your assets. Allocating your assets across stocks, bonds, cash, and borders will give your account exposure to thousands of securities spread out across the world.
  21. Rebalance your accounts. January is an excellent time to rebalance your portfolios to your intended asset allocation target. Rebalancing once per year is sufficient for most investors.
  22. Watch, listen and read. Consuming investment information through videos, webinars, podcasts, blogs, or books can improve your investment results. As Charlie Munger said, “In my whole life, I have known no wise people over a broad subject matter area who didn’t read all the time – none, zero.”

I hope this list helps you improve your investment results, and I pray that you and your family receive much peace, love, and joy in 2022.

To the person who does not know where he wants to go there is no favorable wind. ~ Seneca

December 27, 2021

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.

Ten Ideas for 2021

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This year felt like a decade. We are twenty days from the start of a new year, and it can’t get here fast enough. I’m expecting next year to be much better because it can’t get much worse – right? It’s been a wild ride for investors this year, but if you stayed the course, you probably made money. The NASDAQ, S&P 500, and Dow Jones are solidly in the green, despite falling more than 30% in March and April. The NASDAQ is leading the major US indices this year, rising 38%.

It took courage to remain invested, and even more to buy stocks at the low. As we approach the new year, what should you do now? Here are ten ideas.

  1. Review your financial plan and investment goals. Are you still on track? Do you need to make any adjustments? Last January, we helped clients review their financial plans. Several reached their goals, so we reduced the risk in their portfolios and adjusted their goals. We also encouraged our clients to remain invested during the March decline because it did not impact their long-term goals. Our financial planning process helped clients navigate the uncertainties of 2020.
  2. Review your asset allocation. Are your assets appropriately allocated? January is an ideal time to rebalance your accounts to ensure your risk level aligns with your long-term goals.
  3. Lock in profits. If you own a winning stock or two, consider selling some shares to defer your tax payment to 2022.
  4. Maximize your company retirement contributions. You’re allowed to contribute $19,500 to your 401(k) or 403(b) plan, and if you’re fifty or older, you can add $6,500 for a total of $26,000. Note: If you turn fifty in 2021, start your catch-up additions on January 1. You do not need to wait until you’re 50 to start contributing. For example, if your birthday is on December 31, 2021, you can increase your contributions on January 1, 2021.
  5. Maximize your SEP-IRA contributions. Do you own your own business? If so, you can contribute $57,000 or 25% of your income (whichever is less) to a SEP-IRA
  6. Contribute to a Roth 401(k) or 403(b). Regardless of your income, you can contribute to a Roth 401(k), and your Roth contributions and earnings will grow tax-free.
  7. Fund your IRA’s. The maximum contribution is $6,000, or $7,000 if you’re fifty or older.
  8. Open a health savings account (HSA) if you belong to a high-deductible healthcare plan. Families can contribute $7,200, individuals $3,600. If you’re 55 or older, you can deposit an extra $1,000.
  9. Open a donor-advised fund (DAF). A DAF is an excellent way to fund charitable donations. You can make significant contributions today and distribute the funds at a later date. If you want to donate to charities, but you’re not sure who should benefit from your generosity, this account is an excellent choice. In addition, you’ll receive a nice tax deduction.
  10. Buy stocks. In a zero-interest rate world, it’s near-impossible to create wealth if you only invest in cash or bonds; you need to own a basket of quality stocks. The Dow Jones has risen 256% this century, or 7.15% per year. If you invested $10,000 on January 1, 2000, it would be worth $35,670 today. A similar investment in bonds is worth $14,470.

Creating generational wealth requires optimism, wisdom, patience, courage, and luck. To increase your odds of success, consider completing a financial plan. According to one study, individuals who finish one have three times more assets than those who do little or no planning.[1] It will guide you through rising markets, falling markets, good economies, bad economies, greed, fear, doubt, and anxiety; it’s a financial GPS.

Hope springs eternal, and I’m optimistic 2021 will be a year of joy and celebration. After all, the Roaring Twenties started not long after the Spanish Flu pandemic ended.

“Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence” ~ Helen Keller

December 11, 2020

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 source: YCharts

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

21 Predictions for 2021

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It’s the season of Wall Street predictions, so I’m throwing my hat into the ring to offer 21 projections (guesses) for 2021. If I predict all 21 correctly, I’m sure to garner immense fame and fortune. I may even be herald as the next great futurist with book deals, movie offers, and television appearances to follow. If I’m wrong and all my ideas fail, there’s no downside because most forecasters are wrong about the future. If you need proof, look no further than 2020. How many experts, gurus, wizards, pundits, and pontificators correctly predicted a global pandemic, a stock market crash, working from home, or the rise of Peleton? I will tell you – none.

Here are my 21 predictions for 2021.

  1. The 100-year average annual return for the S&P 500 has been 10%, so the stock market will earn 10% next year.
  2. The current inflation rate is 1.18%, well below the 106-year average of 3.22%. Inflation will stay below 2% for the first half of the year before rising above 2.5% during the second half as we emerge from our COVID quarantines.
  3. Pfizer, Moderna, and other pharmaceutical companies will distribute the COVID vaccine globally, and global economic activity will escalate in the second half of 2021.
  4. The yield on the 10-year US Treasury note is .95%, far below the 58-year average of 6.02%. The rate will rise above 3% as inflation returns.
  5. Small-cap stocks will outperform large-cap stocks. For the past six months, the small-cap index has outperformed the NASDAQ and S&P 500; this trend will continue.
  6. International stocks will outperform US stocks. Since June, they have bettered the NASDAQ and S&P 500.
  7. Long-term bonds (20+ years) will deliver negative returns next year as inflation returns and interest rates rise. The iShares 20+ Year Treasury Bond ETF (TLT) is down 2.5% since June. If interest rates 1%, the price of a 20-year bond will fall approximately 15%.
  8. Working from home stocks (DOCU, PTON, ZM, etc.) will fall in price as we return to our offices and leave our homes, and investors focus on valuation metrics like earnings and cash flow.
  9. The US Gross Domestic Product growth rate will rise above 5%, well above the 73-year average of 3.16%.
  10. Prices for vacation homes will continue to surge as families escape big cities like Los Angeles, San Francisco, Chicago, and New York. Ranches, beach homes, and mountain cabins will remain popular investments. My home town of Austin, Texas, will be a significant beneficiary of this trend.
  11. Companies will allow their employees to work from home or anywhere, further depressing corporate real estate valuations like office properties.
  12. Bitcoin will replace the US Dollar, the Euro, the British Pound, and the Yen as the global currency. Not really, but it will remain a volatile alternative asset class similar to gold, oil, or timber.  PayPal and Square will expand their Bitcoin offerings, so Bitcoin’s price should continue to rise.
  13. The unemployment rate will fall below 5%. It currently stands at 6.7%, and the 72-year average has been 5.77%.
  14. US public debt will climb above $30 trillion as Washington pumps more stimulus money into the economy. The current balance is $26.48 trillion. The increase in debt will have little impact on interest rates or the stock market.
  15. Merger and acquisitions will be robust next year as corporations look to expand their offerings. Low-interest rates and large cash balances will fuel the M&A boom. Apple will lead the way as they sit on $193 billion in cash and short-term investments.[1] If Apple wanted to, they could even buy a few countries like Hungary, Morocco, or Costa Rica.
  16. A new Roaring Twenties will start during the second half of 2021.
  17. Formal dress wear, high-end clothing, and custom outfits will make a comeback as people will tire of wearing yoga pants, sweats, and slippers. No one will be happier than my dad when this happens.
  18. Charitable donations and volunteerism will rise as people reach out to those economically stranded due to the pandemic.
  19. National park attendance will mushroom next year as people explore our great nation.
  20. The Baylor Bears men’s basketball team will win their first-ever NCAA championship under the leadership of Scott Drew – the Wizard of Waco.
  21. 2021 will be a good year because my mom says good things happen in odd years, and I never bet against her or her wisdom. My prayer is that 2021 will be less odd than 2020.

I was a peripheral visionary. I could see the future, but only way off to the side. ~ Steven Wright.

December 4, 2020

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 are predications and guesses only, and actual events may vary.

Data provided by YCharts as of 12/4/2020,

[1] https://www.cnbc.com/2020/07/30/apple-q3-cash-hoard-heres-how-much-apple-has-on-hand.html, Jessica bursztynsky, July 30, 2020

New Year’s Resolutions

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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

A New Year

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2018 was less than kind to investors as all major asset classes finished in negative territory. Cash was the best performing asset for the first time since 1994 and only the 10th time since 1926.

Diversification is still vital for investors to obtain and maintain wealth. A mix of stocks, bonds and cash based on your goals and risk tolerance is recommended. In a “normal” market stocks outperform bonds and cash. Stocks have risen about 75% of the time over the past 100 years, but, on occasion, they drop in value like they did last year.

Investors question the wisdom of owning bonds and cash during a rising market. From March 9, 2009 to October 1, 2018, the market rose 307% or 15.7% per year! It was a great bull run. When stocks are rising 15% per year who wants to own bonds paying 2%? But when stocks fall, bonds don’t look so bad. During the 4th quarter the Dow Jones fell 12.4% while long-term bonds rose 4.6%.

Rather than trying to time the market and move in and out of stocks with precision, focus on your goals and asset allocation. Here are a few suggestions to get you started.

  • Write down your goals. What do you want to achieve in 2019 – financially, personally, professionally? If you write down your dreams, they become goals.
  • Do you have any immediate financial needs? If so, attack these items first. Don’t let them fester. It’s not possible to pursue your financial dreams if something is holding you back. A boat can’t leave the harbor if it’s tied to a dock.
  • Create a financial plan. Your plan will help you quantify and prioritize your goals. It will also determine your asset allocation and risk tolerance.
  • Develop a spending plan. Do you know where your money is going? A budget will help you create wealth over time by redirecting your spending to savings.
  • Diversify your assets. As I mentioned, stocks, bonds and cash are essential to your long-term investment success. Adding international and alternative investments to your portfolio will also help your results.
  • Rebalance your accounts. January is a great time to rebalance your accounts and return them to your original asset allocation. If you didn’t make any changes to your accounts last year, it’s possible your equity exposure is below your target allocation because of the market drop.
  • Payoff debt. Do you have car loans, credit card debt, student loans or a mortgage? If you have assets to pay off these debts, do it today! Reducing your debt level is freeing financially and emotionally. In addition, you’ll save thousands of dollars in interest payments over the life of your loan. Let’s say you owe $30,000 on a car loan with a 4% interest rate. If you paid it off, you’d eliminate your $552 monthly payment and save over $3,100 in interest payments. Can you find a better way to spend $552 per month?
  • Establish an emergency fund. The goal is to reach three to six months of expenses in short-term savings like CD’s or T-Bills. For example, if your monthly expenses are $10,000, then try to save $30,000 to $60,000. I’ve run several marathons and the hardest part has always been the first day of training. Once I started, however, the training became easier.
  • Give money to groups or organizations you support. Giving will loosen your grip on your money, help others, and make you happier.
  • Health is wealth. January is a great time to start working out. Invest some time in walking, hiking, biking, running, climbing, skiing, swimming, lifting, or anything that gets you moving.

Focus on the future. Don’t let last year’s lousy market hold you back. The Baylor Bears won 1 football game in 2017 finishing with a dismal record of 1-11. However, they didn’t let the disappointment of their horrible season ruin their plans for 2018. Rather, they trained with a process and a purpose, concentrating on those items they could control. How did they do in 2018? They won 7 games and beat Vanderbilt in the Texas Bowl – quite a turnaround.

A new year gives you 365 new opportunities – so get going!

Let your eyes look straight ahead; fix your gaze directly before you. ~ Proverbs 4:25

January 2, 2019

Bill Parrott is the President and CEO of Parrott Wealth Management firm 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 to help our clients 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’m Proud of You!

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Well done!  Bravo!  I’m proud of you for staying invested in the stock market for the entire year.  Despite political unrest, nuclear threats, fires, floods, and hurricanes you didn’t waiver.  Your resilience has paid off handsomely and you’ve been rewarded with outsized gains.

It was a stellar year for investors.  The Dow Jones Industrial Average returned 25.5% and the S&P 500, 19.8%.   A balanced portfolio consisting of 60% stocks and 40% bonds produced a one-year gain of 14.8%.

Here are some highs (and lows) that made 2017 special:

  • Donald J. Trump was inaugurated as the 45th President of the United States.
  • North Korea tested multiple missiles.
  • 1 Million women marched on Washington D.C. for women’s rights.
  • Star Wars: The Last Jedi, Beauty and the Beast, and Wonder Woman dominated the box office.
  • The U.K. filed Article 50 to leave the European Union.
  • SpaceX launched over a dozen rockets.
  • The total solar eclipse mesmerized viewers.
  • Hurricane Harvey destroyed a large swath of Houston, Texas.
  • Hurricane Irma terrorized the Caribbean doing the most harm to Puerto Rico.
  • The Houston Astros won their first ever World Series, beating the Dodgers in 7 games.
  • The New England Patriots won the Super Bowl – again.
  • The California Wildfires torched over 1 million acres.
  • The horrific, senseless tragedy in Las Vegas.
  • Leonardo da Vinci’s painting, Salvator Mundi, sold for $450 million.
  • The International Olympic Committee banned Russia from the 2018 Winter Olympics.
  • The Federal Reserve raised its benchmark interest rate.
  • Congress passed the Tax Cuts and Jobs Act.
  • Bitcoin is at the center of the crypto currency craze.
  • Prince Harry is engaged.
  • Always Dreaming won the Kentucky Derby.

As we move towards 2018 I’d encourage you to follow your financial plan and stay invested.   One of the best ways to create long-term wealth is to own quality stocks from around the world.  A balanced portfolio of low cost mutual funds will give you the exposure you need to participate in the upward trend of the stock market.  Furthermore, a buy and hold strategy will allow you to enjoy the market’s historical returns.

Give yourself a pat on the back and celebrate your good year!  Well done! Bravo! Encore!

The more you praise and celebrate your life, the more there is in life to celebrate. ~ Oprah Winfrey

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

December 29, 2017

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog.  Investments are not guaranteed and may lose value.