5 Covered Call Ideas

Writing options on stocks you own, or want to own, is an excellent way to generate income and reduce risk. Below are five stock and options ideas.

Advanced Micro Devices

Symbol: AMD

Price: $63.96

Strike Price: $67.50

Expiration: 1/20/2023

Premium: $1.06

Option Income (1,000 shares): $1,060

Stock Return: 5.53%

Option Return: 1.66%

Total Return: 7.19%

Annualized Return: 218.76%

AstraZeneca

Symbol: AZN

Price: $70.80

Strike Price: $75

Expiration: 2/17/2023

Premium: $0.88

Option Income (1,000 shares): $880

Stock Return: 5.93%

Option Return: 1.24%

Total Return: 7.18%

Annualized Return: 65.47%

The Walt Disney Company

Symbol: DIS

Price: $93.92

Strike Price: $110

Expiration: 03/17/2023

Premium: $1.38

Option Income (1,000 shares): $1,380

Stock Return: 17.12%

Option Return: 1.47%

Total Return: 18.59%

Annualized Return: 99.79%

Expedia Group

Symbol: EXPE

Price: $94.11

Strike Price: $115

Expiration: 04/21/2023

Premium: $3.04

Option Income (1,000 shares): $3,040

Stock Return: 22.2%

Option Return: 3.23%

Total Return: 25.43%

Annualized Return: 90.11%

Eli Lilly and Company

Symbol: LLY

Price: $362.94

Strike Price: $400

Expiration: 02/17/2023

Premium: $2.30

Option Income (1,000 shares): $2,300

Stock Return: 10.21%

Option Return: 0.63%

Total Return: 10.84%

Annualized Return: 98.96%

Options trading involves risk and is not suitable for every investor. Your returns could differ significantly from those posted in this blog, and you could lose money. Do not use margin or leverage to trade options. Please refer to the Characteristics and Risks of Standardized Options to learn more about options trading and writing – https://www.theocc.com/. We have no affiliation with the OCC or the Options Industry Council.

Price and return data is from January 8, 2023, and is subject to change without notice. Data sources: Value Line, YCharts, TD Ameritrade and Yahoo! Finance

Bill Parrott is the President and CEO of Parrott Wealth Management – www.parrottwealth.com

Rising From The Ashes

The Phoenix, a Greek mythical character, is considered an immortal bird that rises from the ashes of its predecessor.[1]  Of course, it is a myth, but the image of one rising from the ashes to get a new lease on life is powerful. We all want a second shot or do-over, especially with investing.

It has been a challenging year as most asset classes have traded in negative territory, there have been few places to hide, and diversification has not worked. Stocks and bonds reacted negatively to rising interest rates as the Federal Reserve tried to control inflation, and the rate increase was too much to bear for investors.

Are you ready to rise from your investment ashes? Here are a few suggestions to help you soar to new heights.

  • Complete a financial plan. Your plan will help guide your future and quantify your goals, giving you a path to follow. More importantly, it validates your success and can bring you financial peace. Our clients with financial plans appeared more relaxed and better prepared to handle the market’s turbulence this year than those without one.
  • Rebalance your account. If you did not make any changes to your investment portfolio this year, it is probably out of whack from your original allocation. As a result, you may enter 2023 positioned incorrectly, either too conservative or aggressive. Rebalancing your portfolio realigns it to the proper risk level and tolerance. January is a good time to rebalance because all your 2022 dividends and capital gains will have been credited to your account.
  • Review your holdings. Do you have the correct investments for the new year? Will your current portfolio allow you to reach your goals? Use the final few weeks of the year to examine your holdings.
  • Adjust your goals. Is it time to review your goals like spending, retirement date, college funding, or major purchase? Use the coming year to set new goals or update old ones.
  • Buy stocks. The S&P 500 is down 16% for the year, and the last time it had two negative years in a row occurred more than twenty years ago, and since 1941, it only happened twice, and the average gain following a negative year was 25.3%.[2]
  • Buy bonds. Bonds are producing income again after a long hiatus. It’s now possible to buy bonds yielding 3%, 4%, 5%, or more. The one-month US Treasury Bill yield soared 7,720% this year, rising from 0.05% to 3.91%. Will it rise another 7,700% next year? Doubtful. If it did, the yield would increase to more than 300%!

I know it was a tough year, but markets always rebound. The carnage in stocks and bonds can create opportunities for next year, so use the market’s decline to strengthen your portfolio.

In order to rise from its own ashes, a phoenix first must burn. ~ Octavia Butler

December 5, 2022

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

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


[1] https://www.greekmythology.com/Myths/Creatures/Phoenix/phoenix.html

[2] Dimensional 2022 Matrix Book – 1941 to 2021

Stay The Course

Stay the course is boring financial advice, and people hate it, especially when stocks fall. Doing nothing is challenging; it’s hard, and it feels like a cop-out. When stocks fall, clients want action; they want to rearrange the deck chairs and take control of the situation, but it could do more harm than good.

Most financial planners recommend a buy-and-hold strategy when managing money which is simple when stocks rise but challenging when they fall. It’s a popular recommendation because stocks rise about three-quarters of the time, and no one can time the market.

Pilots set their coordinates for their final destination and rarely diverge from their route unless necessary. They will change course to avoid storms or turbulence, but, for the most part, they keep the nose of their plane headed toward their target. This past summer, my wife and I drove thousands of miles visiting several national parks. Each day we’d set our GPS for the next park, and we did not deviate from the directions and arrived safely each time.  

I’ve gotten in trouble whenever I ignore a trail map while hiking, biking, or skiing. When my daughter was about ten, we went skiing at Crested Butte, and I decided to take her on an unmarked shortcut back to the ski lift. It did not go well. We got stuck in waist-deep powder and could not move. We had to forge our path; it took a long time before we could return to the trail. It was a scary ordeal.

A financial plan will help guide you to your destination by quantifying your goals, assessing your risk tolerance, and measuring your time horizon. It will lead you through a perilous market and treacherous economy. When markets are falling, and clients are worried about losing money, a financial plan can bring peace. The likely recommendation from the advisor is to remain calm and stay the course because of the plan.

Investors have liquidated nearly $100 billion from growth-equity mutual funds over the past year, likely transferring the money to a money market fund or savings account.[1] This strategy might be safe in the near term, but it could prove disastrous over time. The report ended on September 30, 2022, and since then, the Dow Jones has risen nearly 13%, its best monthly performance in more than 35 years! To get above-average returns, you need to stay in the market. As I’ve told clients, “If you’re not on the plane when it takes off, you’re not getting on.” Selling from a position of fear is not wise. If your plans change, then alter your investment strategy. However, if you don’t need your money and your goals remain intact, stay the course!

I recently met with an individual who is interviewing several financial advisors. He is looking for one who can trade the hottest and most popular sectors, in this case, energy and commodities. I informed him that we select a buy-and-hold portfolio based on his financial goals and do not trade sectors or chase securities. I then showed him a 10-year chart of how the Dow Jones Industrial Average destroyed commodities. He was not impressed and is convinced that there is an advisor out there somewhere who can time the market. I wished him well.

It’s a difficult market; returns stink, but stocks recover. Be patient, follow your plan, and stay the course.

What kind of man would live where there is no daring? I don’t believe in taking foolish chances, but nothing can be accomplished without taking any chance at all.” — Charles A. Lindbergh

October 28, 2022

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

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


[1] YCHARTS Fund Flow Report – 9/30/2022

How To Survive A Stock Market Crash

The first rule for surviving a stock market crash is not to panic, and the second is not to sell on the day of the correction. Markets typically rebound after a sharp sell-off as investors hunt for bargains, so wait before liquidating your portfolio. For example, two days after the 1987 crash, the S&P 500 jumped 15%, and the Dow Jones climbed nearly 20% from December 1929 to March 1930, following Black Tuesday, October 29, 1929. You probably won’t recover all your losses, especially if you bought stocks the day before the correction, but it will help.

The S&P 500 has fallen 23% this year, and the NASDAQ is down 31%. Will markets fall another 25% or 30% from here? It could, I guess, but no one knows for sure, especially the experts. It would be one of the worst corrections in history if it did.

One popular money manager said, “We’re being forced to choose between two overpriced assets. That is not always a terrific choice to make because there is a third choice, and that is, don’t play the game and hold money in cash.” He also recommended investors buy commodities for the next ten or twenty years and encouraged investors to sit in cash until stocks fell. His comments occurred in 2010. How did his prediction turn out? Since 2010, the S&P 500 soared 204%, while commodities dropped 9%.[1]

A famous economist said, “US stocks will fall, and the government will nationalize more banks.” He predicted a correction in 2009 after The Great Recession, where stocks dropped 53%. The S&P 500 has climbed 343%, and the government has not nationalized more banks since his comments.[2]

A prominent author wrote books about a depression starting in 2009 and a stock market crash in 2011, and neither happened. The market climbed more than 300% since 2009 and rose 2.1% in 2011.[3]

The S&P 500 is up 151% this century despite numerous corrections. The index dropped 46% from 2000 to 2003, 53% from 2007 to 2009, 30% during COVID, and it’s currently down 23%. Most investors consider a correction or crash a one-day event like October 19, 1987, or October 29, 1929. However, stocks routinely fall 10% or 20%, and the market usually finishes in negative territory about once every four years. The last down year occurred in 2018 when the S&P 500 fell by 4.4%.[4]

In the twelve months preceding Black Tuesday, October 29, 1929, the S&P 500 soared 58%, and from September 1926 to August 1929, it generated an average annual return of 40.3%. The S&P 500 rose 167% during the preceding five years and was up 35% through August before Black Monday, October 19, 1987. After the correction, the S&P started to recover, and by January 1990, it erased all its losses by rising by 57%.[5] Before this correction, the market was up 81%. Despite a crash, you may still have significant capital gains if you have been a long-term investor. 

Corrections are scary, violent, and short-lived, so here are a few suggestions to help you survive a stock market crash.  

  • Buy US T-Bills. The one-year US T-Bill currently yields 4.2%, and it’s guaranteed if you hold until maturity.
  • Fortify your emergency fund. We recommend an emergency fund covering your household expenses for three to six months. If you’re concerned about a further drop in the market, extend the duration to twelve to eighteen months.
  • Diversify your assets. A balanced portfolio of stocks, bonds, and cash will soften the blow of a market drop. During market drops, bonds perform well. In 2008, long-term US government bonds rose 25.9%, while stocks dropped 45%.
  • Buy stocks. Buy stocks if your time horizon is three to five years or more. According to Dimensional Funds, the 5-year average cumulative return after a 20% decline is a 72% gain.
  • Rebalance your portfolio. If you rebalance your portfolio, you can buy investments at lower prices. Rebalancing your accounts keeps your risk level and asset allocation in check.
  • Eliminate margin. One way to lose more money than you intended is to use leverage. If you margin your securities, eliminate it. Margin will make a bad situation worse.
  • Think long-term. You may own your investments for years, maybe decades, before you need the money, so think generationally.
  • Markets recover. The stock market has always recovered! It may take time, but they eventually rebound as they did in 2020, 2018, 2008, 2002, 2001, 2000, 1990, 1981, 1977, 1974, 1973, 1969, 1966, 1962, 1957, 1953, 1946, 1941, and 1929.

Stock market corrections come and go, and the market is a long-term wealth creation machine occasionally interrupted by short-term pullbacks. Do not fear a downdraft. Instead, use it as an opportunity to buy excellent companies or funds at enhanced prices.

I’ve done a lot of thinking about fear. For me the crucial question is not how to climb without fear-that’s impossible- but how to deal with it when it creeps into your nerve endings. ~ Alex Honnold

September 26, 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.


[1] https://www.cnbc.com/2010/11/11/have-cash-wait-for-stocks-to-fall-jeremy-grantham.html, Michelle Lodge, November 11, 2010

[2] https://www.cbsnews.com/news/nouriel-roubini-misses-another-prediction/, Larry Swedroe, May 20, 2011

[3] The Great Depression ahead, 2009 and the The Great Crash Ahead, 2011, both written by Harry Dent

[4] YCHARTS

[5] Dimensional Fund Advosrs Returns Web

Investing Is Easy

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

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

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

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

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

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

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

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

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

September 21, 2022

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

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

Real Estate Is Crashing!

According to Zillow, the value of my home fell 6.2% last month. I was shocked because I thought real estate always went up, especially in Austin, Texas, the home of Longhorn football, BBQ, live music, and weekend bridal shower parties. Is it time to panic and sell my home?

The recent housing data is terrible, as housing starts have fallen 20% from the April peak, and existing home sales are down 26% from January. Mortgage rates increased 84% from last year, and the current 30-year rate is 5.13%. The combination of rising interest rates and inflation is making homes less affordable.

Real estate is volatile but not as visible as stocks because homes don’t trade on a public exchange. However, Zillow and a few other real estate sites now post estimated home values and recent price changes, so you can track your home value if you want. The Case Shiller Home Price Index compiles valuation data from several markets, including a national average. Since 1987 the index has risen 304% despite a 20% correction during the Great Recession from 2007 to 2009.

Should I sell my home? Of course not. I don’t care the value fell by 6.2% last month because it has soared 109% since 2013, and I’m not moving for several years, and I know it will rebound as most homes did from the previous recession. I will not panic and make a poor financial decision because the price dropped, and if I ask most people if I should sell my home because the price has fallen, they would tell me I’m crazy because real estate always rises. In fact, they would consider it foolish and unwise.

Yet, when stocks fall, people panic and sell their holdings, moving to cash to avoid a further meltdown. The S&P 500 lost 8.25% in June, and investors sold billions of equities. What happened in July? The S&P 500 surged 9.25%. Since 2018, the index incurred seven monthly drops of 6% or more, and each time it recovered. In December 2018, it crashed by 9.03% but climbed 17.2% over the next four months, and over the past decade, the S&P 500 jumped 255%.

I’m not sure why people panic and sell stocks when they fall, but they do. Stocks and real estate are growth assets, creating generational wealth if you hold them through all market cycles. If people treat stocks like homes, fewer people will sell them when they fall, and some might even buy the dip. I believe real estate investors do well because they own their home for decades, don’t track the value daily, or panic if it drops. Also, it is a hassle to move from one home to another. I believe that real estate returns would be considerably less if you could buy or sell a house with a click of a mouse as they do with stocks.

Investors relish real estate because most have made money over time, especially if they live in a desirable location like Bend, Oregon, or Alpine, Wyoming. However, since 1990, the S&P 500 has trounced the Case Shiller Home Price Index by 1,903%.

Here are a few suggestions to help you improve your stock market returns.

  • Treat your stock holdings like real estate, and own them for decades.
  • Review your investment accounts annually.
  • Rebalance your accounts as needed.
  • If you don’t need the money for three to five years or more, buy stocks when they fall.
  • Analyze your stock holdings on weekends so you can’t trade them instantaneously.
  • Document the reasons why you want to buy or sell your equity investments.
  • If you want to sell stocks during a market selloff, wait a few days because they could rebound.
  • Since 1926, stocks have averaged a 10% annual return, but it has not been in a straight line. Incorporate a buy and hold mentality so you can capture the long-term return from stocks

I know my home will recover because everybody is moving to Austin, so it’s only a matter of time before it starts to rise again. In the meantime, I will continue to mow the lawn, vacuum the house, and pay my property taxes.

Location, location, location. ~ Anonymous

August 24, 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’m a California transplant by way of Connecticut living in Austin.

Have Stocks Bottomed?

Have stocks bottomed, or is this a bear trap? Since Mid-June, the Nasdaq has risen by more than 20%, which, by definition, is a bull market. However, the tech-heavy index is still down 16% on the year. On August 10, The Wall Street Journal declared a new bull market had arrived. [1] I hope they are right.

No one likes losing money, but some of the best market moves occurred during bear markets as sophisticated investors exploited anxious investors. For example, the Nasdaq has had a dozen moves where it climbed 3% or more this year and has made three runs where it jumped by more than 12%. Will this time be different? Have stocks bottomed?

The Nasdaq produced a measly 2.6% return from 2000 to 2014. From 2000 to 2002, during the Tech Wreck, it crashed by 75%, and during the Great Recession, it fell by 51%. A few months after the Tech Wreck began, the Nasdaq snapped back by 23% in April 2000 but fell 61% over the next 18 months before rallying again in April 2001. The index appeared to bottom in October 2001 when it climbed 35% but lost another 43% the falling year. The market recovered 150% from 2002 to 2007 but was still down 31% from January 2000, and it would not breach that level until 2014. The bear market lasted more than fourteen years, but the Nasdaq still delivered several significant up moves as it tried to recover.

Is the current rebound a bear trap or a bull market? I don’t know, but I do know that if you try to time the market by jumping in and out, you will eventually lose money regardless of the market’s direction. Typically, investors sell stocks as they fall and repurchase them after they have risen significantly. If they do the opposite, they might make some money.

Here are a few steps to help you become a better investor during bear markets.

  • Develop a financial plan. It will keep you focused on your financial goals. I’ve noticed that individuals with a plan are less likely to panic and liquidate their investments when markets sour. Instead, they look for buying opportunities as stocks fall.
  • Create three different investment buckets to meet your short, intermediate, and long-term needs. If you need money in one year or less, buy US T-Bills, and if your time horizon is three to five years, consider a mix of cash, bonds, and stocks. If your timeframe is five years or more, buy stocks.
  • Buy the dip. It is challenging to buy stocks as they fall, but the market has always recovered. Identify quality companies or funds you want to own if the price drops.
  • Rebalance your accounts. Our rebalancing software screens our models weekly, and if it finds portfolios that are off-kilter, it will rebalance them back to their original allocation. Rebalancing removes emotion from the buy and sell decisions because it is automated. In June, our models sold bonds to buy growth funds, which, so far, has proved correct. If you rebalance regularly, it will keep your risk level and asset allocation in check.

Media pundits and Wall Street experts love to call tops and bottoms, but it is impossible. Ignore people with megaphones on big stages telling you to buy or sell because they can lead you to financial ruin because they know nothing about your financial hopes, dreams, or fears. Focus on your goals, think long-term, and good things will happen.

The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has. ~ Jack Bogle

August 15, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so you can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. My asset allocation is approximately 75% stocks and 25% bonds and cash, where it has been for the past thirty years or so.


[1] https://www.wsj.com/articles/global-stocks-markets-dow-update-08-10-2022-11660116855, Sam Goldfarb, August 10, 2022

An Investment Black Hole

The James Webb telescope recently sent stunning pictures of our, or someone’s, galaxy. They were the first photos viewable to the public, and according to Al Jazeera, “The dawn of a new era in astronomy.” The telescope opens a new vista for professional and amateur astrologists alike. In addition to brilliant stars and stunning nebulas, James Webb could shed new light on black holes.

Investing now probably feels like you’re throwing money into a black hole as the Dow Jones and other indices descend into the abyss. If you contribute to a 401(k) plan or invest monthly, you’re likely frustrated because you’re throwing good money after bad. The year is half over, and you have nothing to show for your efforts to save money.

The Vanguard Balanced Index Fund (VBAIX) is down 16% for the year, so if you’re contributing to this fund monthly, you’re down too. The fund launched thirty years ago, and if you sold it during the previous down drafts, you missed an 896% return. It generated an average annual return of 8.05%, and a $10,000 investment is now worth $99,630!

Does it make sense to keep investing as stocks plummet? It does. To get the biggest bang for your buck, investing as the market craters will pay huge dividends in the future because you’re buying more shares at lower prices, and when the market rebounds, you will prosper. As a comparison, you’re purchasing fewer shares at higher prices when stocks rise as they did last year. You should welcome lower prices if your time horizon is three to five years or more.

I’ve talked to several people lately who said if they had sold their investments in January, they could have bought a car, boat, plane, house, etc. I get it. However, it’s not healthy to look in the rearview mirror and say shoulda, coulda, woulda. It doesn’t do any good to look over your shoulder and wonder what could have happened if you timed the market perfectly. It might not look, but if you buy stocks when others are selling, you may be able to buy two cars or boats or planes or houses in the future. The volatility in the market is what produces generational wealth.

A friend recently liquidated his holdings inside his 401(k) and moved the assets to cash though he doesn’t need the money for several years. As a result, he runs the risk of running out of money in retirement. A safe investment today can cause more trouble tomorrow.

The James Webb telescope is 1 million miles from Earth, orbiting the sun.[1] Scientists risked much to build, launch, and deploy it, and we could not enjoy the breathtaking pictures if they decided to play it safe. It required more than thirty years to build the telescope.[2] I’m not a rocket scientist, but I bet they experienced frustration, delays, setbacks, and red tape over the past three decades, and, thankfully, they did not give up on their dreams.

Venturing into the unknown is frightening, especially if you’re experiencing doubt and frustration. A down market is an opportunity for the brave investor to buy quality investments when they are out of favor, and it doesn’t take a large telescope for you to see it’s better to buy low and sell high.

Onward and upward.

Black holes are where God divided by zero. ~ Albert Einstein

July 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 mentioned I’m not a rocket scientist, but my uncle is!


[1] https://webb.nasa.gov/content/about/orbit.html

[2] https://www.space.com/james-webb-space-telescope-budget-timeline-scale

Buy, Buy or Bye, Bye?

My wife is an extraordinary shopper. She can hunt bargains with the best of them, whether at a grocery or clothing store. If there is a discount to be found, she’ll find it. She is also patient and willing to buy straw hats in the winter.

An ideal time to buy stocks is when they are on sale, trading at a discount, or offered at a lower price, because who doesn’t love a bargain? Apparently, many people don’t because the market is down considerably this year, and there are few signs of buyers. In reality, when stocks fall, most investors sell, and they do not buy. Wall Street is the only place no one shows up when there is a sale.

To buy stocks as they fall requires patience and courage. It’s not easy to buy while others are selling. It’s a contrarian strategy. Also, if you buy stocks when they’re down, they might not recover for several years. If you purchased Microsoft after the Tech Wreck in 2000, it took more than sixteen years for the price to recover, but if you bought it and held on, you’re up more than 300% on your investment!

To acquire great companies in a bear market requires foresight, homework, and a shopping list. Identify a few names you want to own so that you can pounce when they fall into your buy zone.

I recently used Value Line’s search engine to screen for stocks with pristine balance sheets, and I found more than fifty companies. Some names include Pepsi, FedEx, McDonald’s, Walmart, Pfizer, Tractor Supply, and Fastenal. These companies are down this year but still up over the past three, five, and ten years. In addition to buying great companies at lower prices, you may generate above-average income. The average dividend yield is 2.43% if you buy these stocks today. Last year, they rose an average of 29% – same companies, different year. Besides the market falling, not much has changed for these stocks.

Like the tide, stocks rise and fall regularly, so don’t be shocked when they’re down. In fact, stocks drop about once every four years. The Dow Jones fell 10% or more often over the past decade, including a 37% correction in March 2020. If you had the wisdom and fortitude to buy stocks during the initial phases of COVID when stocks traded near their lows, you’d be up 56% today, but if you waited until they rebounded, you only gained 1.3%.[1] Walter Deemer, a retired institutional market analyst, said, “When the time comes to buy, you won’t want to.”

Of course, stocks could fall further as several experts predict, but if your time horizon is three to five years or more, it’s a good time to buy.

A few names on my shopping list include Garmin, Tractor Supply, and Starbucks. What’s on your list?

Happy buying!

Always buy your straw hats in the winter. ~ Benjamin Graham

June 17, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so 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] YCHARTS

Pay Me Now or Pay Me Later

FRAM oil filter ran a series of commercials in the 1970s and 1980s with the tag line, “Pay me now, or pay me later.” The message was clear. You could spend a few dollars today to change your oil filter or put it off and pay thousands to repair your engine. Small actions today can have significant implications for tomorrow.

As global stock and bond markets fall, investors are making short-term moves that could impact their financial future. Liquidating your holdings may feel good in the near term, but is it a wise move? A client recently capitulated and moved their assets to cash, and, as a result, their long-term success rate for retirement dropped below 30%, meaning there is a 70% chance they could run out of money.

Since 2000, the Dow Jones has averaged 8%, despite trading in negative territory 30% of the time. The index fell 37% in 2008, 22% in 2002, and it’s down 18% this year. It also soared 32% in 2013 and 2019. If you sell during the down years, you could miss the up years. My job would be easier if stocks and bonds always went up, but it’s not how markets and capitalism work. To enjoy significant gains, you must endure a few years of pain. In fact, most investors build generational wealth during bear markets.

The market is unpredictable minute to minute, hour to hour, and day to day, but it has climbed higher over decades. Time wins, and staying put is a superpower. Our superpower is the financial plan because it gives us the confidence to provide advice rooted in facts, not opinion or emotion. During times of duress, we routinely scan our client’s financial plans to ensure they are still on track to meet their short and long-term goals. Despite the recent volatility, their plans are still standing strong.

Emotions run hot when stocks fall, and media outlets stoke the fire of fear. In my office, I have CNBC playing in the background, and despite more than thirty years in the business, I sometimes want to curl up into a little ball and hide under my desk because they make it sound like the end of the world is near.

 The US Index of Consumer Sentiment recently touched 50.2, the lowest print in 70 years! Investors are more worried now than they were during the Great Recession, the Tech Wreck, Desert Storm, Black Monday, the 1970s inflation spike, Watergate, Vietnam, the racial riots in the 1960s, the assassinations of JFK and MLK, the Cuban Missile Crisis, the Korean War, and the Cold War. Are things that bad? I don’t believe they are, and since 1952, the Dow Jones has risen 10,980%![1]

Here are a few suggestions to help you navigate the market.

  • If you need money in one year or less, buy T-Bills.
  • Establish an emergency fund to cover nine to twelve months of expenses.
  • Buy stocks if your time horizon is three to five years or more. And, if you retire at age 65, you may live for another thirty to thirty-five years. One of my mom’s aunts recently passed at age 103!
  • Create a written financial plan outlining your hopes, dreams, and fears. A financial plan will keep you focused on your future.
  • Ignore experts pontificating about the future of stocks, bonds, interest rates, or inflation. No one knows what’s going to happen tomorrow.
  • Get outside, take a trip, volunteer, visit a friend, start a hobby, mentor a child, because this too shall pass.

However, no one knows the day or hour when these things will happen, not even the angels in heaven or the Son himself. Only the Father knows. ~ Matthew 24:36

June 18, 2022

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

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


[1] YCHARTS