My College Experience

I attended the University of San Diego, a gorgeous campus with sweeping views of the Pacific Ocean, Mission Bay, San Diego Bay, downtown San Diego, Coronado, and so on. US Navy jets routinely flew over our school from Miramar or Fighter Town, USA. The weather on campus was pegged at 75 degrees – year-round.

During my tenure at USD, I played football, joined a fraternity, and lived on the beach, so you can imagine how I spent most of my time. Hint: It was not in the library. I majored in Business Administration, an ideal degree for those pining for a middle management job, not that there’s anything wrong with that. My classes did not light a fire in my soul or arouse academic curiosity. I wasn’t a motivated student, and nor were several of my roommates.

In the last semester of my senior year, I enrolled in an investment course. I was hooked. My professor was Dr. Dennis Zocco, and I was mesmerized by his teaching and knowledge. He dressed well, wore a big gold watch, and introduced me to the world of finance. He developed a software program called INVESTOR that allowed us to invest in a portfolio of stocks, bonds, and alternative assets. I took his course during the fall of 1987, so we had the opportunity to experience Black Monday from the safety of a classroom – thankfully.

After graduation, I devoured investment books learning what I could about Buffett, Lynch, Graham, and other Wall Street legends. I couldn’t get enough.

My first adult investment was the Franklin Utility Fund in 1987, after the crash. My initial investment was $150 and $25 per month. I stayed invested in the fund for a while before I sold it to buy individual stocks. In hindsight, I’m not sure that was a wise decision. The utility fund has averaged 9.3% per year since November 1987, and If I remained in the fund, my investment would be worth $73,580 today. The broker who opened my account earned a $6 commission before taxes. I don’t have an investment minimum at my firm because of his actions. He set an excellent example, answered my questions, and followed up with me often.  

John Wooden said, “It’s what you learn after you know it all that counts.” My real education started once I graduated from college. I had found my passion and calling, and I wanted to learn more. A former roommate’s father managed an investment office, and he told me if I passed the series 7 exam, he would offer me a job. I sequestered myself in a cubicle in the library of my Alma Mater and tore through the study material. I passed the exam, he offered me a job, and thirty-two years later, all is well.

It doesn’t take much to spark a wildfire. A small match can burn hundreds of thousands of acres, and I’m thankful my fire was lit in my final semester.

Learning never exhausts the mind. ~ Leonardo da Vinci

August 23, 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.

Friday the 13th

The Friday the 13th movie series has, so far, produced twelve scary movies. In 1984 it was Friday the 13th: The Final Chapter, followed by Friday the 13th: A New Beginning one year later. The Final Friday movie appeared in 1993, but three more films followed it, so I don’t believe Jason will ever die.

The movie franchise has been highly profitable. The budget for the series cost $80.9 million, and the films generated more than $468 million worldwide —a value play.[1]

In honor of this frightening movie series, here are thirteen terrifying thoughts that can derail your financial success.

  1. You don’t have a plan. If you don’t know where you’re going, how will you know when you’ve arrived? The plots for the Friday the 13th movies are simple, but the directors and actors still followed a script.
  2. You don’t have a budget. Do you know how you’re spending your money? Do you track your expenses? It’s difficult to create wealth if you spend more than you earn. A budget can help you avoid unpleasant surprises.
  3. You’re not contributing to your company 401(k) plan. A company retirement plan is an efficient way to create wealth because your contributions are automated. Every pay period allows you to invest in a diversified portfolio of stocks regardless if the market is up, down, or flat.
  4. You’re not matching the match. If your company offers to match your contribution up to 3%, you should at least contribute 3% to your retirement plan.
  5. You don’t own stocks. Stocks create wealth. Since 1926, they have generated an average annual return of 10% per year. It is startling when stocks fall, but they typically recover quickly. In fact, the three major indices are trading at all-time highs despite decades of volatility and corrections.
  6. You’re cash-rich. A significant cash position can be an anchor for the growth of your portfolio. After establishing an emergency fund, invest the remainder of your cash into stocks. The US T-Bill is a proxy for cash, and since 1926 it has averaged 3% per year, but so has inflation, so your net return is zero.
  7. You’re an active trader. Trading aggressively is a fast way to get killed in the market. In addition to rapidly moving from one stock to another, you might incur significant fees or taxes.
  8. You try to time the market. Somebody, somewhere, is saying the market will crash. I started my career in 1989, and a senior broker at a prestigious investment firm told me to buy silver because stocks would crash. The Dow Jones was 2,500 at the time, and it has since soared 1,333%, while silver increased 387%.[2] Trying to time the market is pointless.
  9. You procrastinate. The best time to start investing was yesterday, and the second-best time is today. Don’t wait! For example, if you start investing $500 per month at age twenty-five, it may be worth $3.16 million at age sixty-five. If you waited ten years, it would be worth $1.13 million, a difference of $2 million!
  10. You worry about politics. Since 1789, the stock market has returned 9.1% per year. When a Democrat controls the White House, the market has returned 8.8% per year. When a Republican occupies the White House, the return has been 8.6% – a difference of 0.20%.[3]
  11. You take advice from talking heads.  Commentators and financial experts do an excellent job of reporting the news, analyzing stocks, updating economic conditions, but they’re not talking to you directly. They aren’t familiar with your financial situation, nor do they know your hopes, dreams, or fears. Do your homework before reacting to a news story.
  12. You try to keep up with the Joneses. If you try to spend like your neighbors, you could end up in a poor house. Your neighbor will not support you in retirement, so don’t worry about the size of his boat.
  13. You die with millions of dollars in the bank. Of course, no one wants to run out of money, but if you pass away with millions of dollars in your bank account, then you’ve short-changed yourself and others. If your wealth exceeds your wildest dreams, consider helping others like your church, favorite charity, or loved ones. You can’t take your wealth with you, so if you donate it to others while you’re alive, you’ll have the opportunity to experience the joy of giving.

As I mentioned earlier, stocks are trading at all-time highs. The long-term trend for stocks is up, so don’t fear a correction. If you follow your plan, invest often, start early, buy stocks, then good things could happen.

Happy Friday, the 13th!

“Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also. ~ Matthew 6:19-21

August 13, 2021

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

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


[1] https://en.wikipedia.org/wiki/Friday_the_13th_(franchise), website accessed August 13, 2021

[2] Ycharts – June 1, 1989 to August 13, 2021

[3] Fidelity Investments Stock Returns and Elections by Jurrien Timmer, Director of Global Macro, Fidelity Management & Research Company. Report accessed, July 24, 2020

I Am the Greatest!

Muhammad Ali repeatedly let everyone know he was the greatest. And he was. Who is the greatest Olympian of all time? Allyson Felix. Other GOATs include Michael Jordan, Tom Brady, Cal Ripken, and Steffi Graff.

My friends and I played sports every day – football, baseball, basketball, golf, volleyball, tennis, Wiffle ball, etc. We were a competitive bunch, each one claiming to be the greatest at whatever sport we were playing. Our aggressive style of play was a combination of the king of the hill and survival of the fittest. We weren’t humble.

My firm receives several inquiries a week from people seeking help with currency conversions, Social Security benefits, investments, or financial planning. Most times, they want a quick answer to a unique situation. If they’re looking for a long-term relationship, they often ask why they should hire me as their financial planner. It’s a valid question, of course, but I don’t know how to answer it. I don’t want to brag or toot my own horn, and I don’t feel comfortable telling someone I am better than any other planner in Austin or elsewhere.  

Last year, I was the president of the Financial Planning Association of Austin, and I spent significant time with several planners and advisors. I was fortunate to get to know them as friends, not competitors, and I was amazed at their knowledge about our industry and the level of service they provided their clients. Our association is a collection of two hundred individuals working together to advance our profession. We collaborate on several projects, and if someone is not a good fit for me, I will refer them to another firm and vice versa.

However, I understand that prospective clients want answers; they want the truth, so here are a few questions you can ask a financial planner or investment advisor.

  1. How long have you been in the business? Experience matters, but don’t discount youth. I’ve been in the investment business for thirty-two years, and I have learned much on my journey. However, I’m thankful I started my career in my early twenties, and I was blessed to work with exceptional mentors and colleagues.
  2. How do you get paid? A planner’s fees should be fair and reasonable, and they should disclose all their charges. The industry average is about 1% of the assets they manage. For example, if you invest $1,000,000, your fee will be $10,000. Our fees start at 0.50% and go down as your assets grow. As a reminder, the fees you pay your advisor do not include mutual fund expenses or commissions.
  3. Are you a fiduciary? Registered investment advisors, including us, are fiduciaries. We are legally bound to act in your best interest. We must put your interest first and disclose any conflicts of interest.
  4. What designations do you hold? Most registered investment advisors are Certified Financial Planners (CFP)™ or Chartered Financial Analysts (CFA). We earn these designations after studying for years and passing rigorous exams. Individuals who hold the CFP designation must complete thirty hours of continuing education every two years.
  5. How do you invest your own money? Advisors and planners should eat their own cooking. What do they own? How do they allocate their assets? How they invest their money will tell you much about how they will handle yours.
  6. Who is your custodian? Most advisors use third-party custodians like Schwab or Fidelity to manage your money. Your advisor should not act as your trustee and custodian.
  7. Have you been fired, suspended, or sanctioned because of any legal activity? Advisors and planners are required to disclose any disciplinary actions.
  8. How often will we meet to review my account and goals? Your advisor should meet with you as often as you want or need. We offer quarterly meetings, and we’re available at any time.

As I mentioned, there are many excellent advisors, so you need to find one you’re comfortable working with and who puts your interest first.

Here are two resources to help you find an advisor, and if you can’t find one, give me a call.

Happy Searching!

“I am the greatest; I said that even before I knew I was.” ~ Muhammad Ali

August 8, 2021

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

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

Variants

The Delta Variant is throwing a wrench into the economic recovery as COVID cases spike. Companies like Microsoft, Wells Fargo, Blackrock, and Amazon are delaying returning to the office for their workers. Labor Day was a return date for some employers, but it won’t occur until January 2022. Officials canceled the New York Auto Show scheduled for August 20, and Comic-Con postponed its in-person event until 2022.  Austin raised its COVID risk level to stage 5 – the highest level.

Global COVID cases now exceed 200 million, and they do not appear to be slowing down. COVID incidents in California, Texas, Florida, and New York continue to climb.

When COVID arrived and global economies shut down, the S&P 500 fell more than 35% as investors sold stocks. The market quickly recovered, but people were left scarred over the speed and severity of the drop.

The market continues to perform well despite fears over the Delta Variant. It has been volatile lately, and the S&P 500 dipped about 3% in July – not a significant pullback, but enough to cause concern with investors. I believe our elected leaders will not shut down the economy again, but people may be cautious about venturing out. And if consumers are nervous, they won’t spend money which may cause stocks to stall or sell-off. What can you do if you’re concerned about another market sell-off due to COVID? Let’s explore a few ideas.

  1. Buy bonds. Bonds are not an attractive investment from an income perspective, but they will provide safety if stocks fall. Bonds and stocks are negatively correlated, so when one rises, the other falls. When stocks dropped in July, long-term treasury bonds climbed 4.4%. When the S&P 500 crashed in March 2020, bonds rose 36%. Many advisors, including me, have panned bonds because of low yields, but you won’t find a better investment than bonds to hedge your stock holdings.
  2. Sell stocks. Since the market bottom on March 20, 2020, the S&P 500 is up 92%, so you probably have significant gains. If you’re worried about a pullback, sell stocks and park your proceeds in cash. Reducing your stock exposure lowers your risk level.
  3. Buy the dip. If you’re sitting on cash waiting for a correction, you can buy quality companies at lower prices when the market falls. I recommend creating a list of companies you want to buy, so when stocks fall, you’re ready to pounce.
  4. Rebalance. Rebalancing your accounts will keep your risk tolerance intact. If you have not rebalanced, your equity exposure is probably higher than usual. For example, if your allocation was 60% stocks, 40% bonds five years ago, then it’s 75% stocks, 25% bonds today – too much risk! Rebalancing your accounts once or twice per year is recommended.
  5. Stay put. The market rises more than it drops. For the past 100 years, stocks have risen three-quarters of the time, and it has averaged more than 10% since 1926. Trying to time the market because of what might happen is not a wise investment strategy. Investors who liquidated their holdings in March 2020 missed significant gains. A buy and hold strategy is still an excellent way to grow, or maintain, your wealth.
  6. Follow your plan. A financial plan can calm your nerves. During the COVID correction, we regularly monitored our client’s financial plans and investment portfolios. Though the market fell sharply, it did not impact our client’s financial goals. We recommended they stay invested.

I’m frustrated with the spike in COVID, and I don’t want to work from home or wear a mask. My heart aches for those infected with the horrible disease, but I’m hopeful it will pass shortly. In the meantime, be safe, and be patient!

To lose patience is to lose the battle. ~ Mahatma Gandhi

August 5, 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.

Ready. Set. Go.

The Olympics are off and running and swimming and jumping and rowing and so on. The Olympics are extraordinary because it brings the world together. We have the opportunity to witness amazing feats from incredible athletes – young and old. I’m always astounded at how fast athletes run or how high they jump. As viewers, we see the final results as athletes pursue gold. However, we rarely see their years of training, struggles, or setbacks.

My first experience with the Olympics was the 1976 Montreal Games. I sat in my parent’s office eating McDonald’s, watching a small colored TV. I was enamored with Bruce Jenner winning the decathlon, Alberto Juantorena winning the 400 and 800-meter races, and Edwin Moses setting a world record in the 400-meter hurdles. My grandmother donated a few dollars to the US Olympic Committee, and she gave me a yearbook listing the members of the US team and their results from the events.

Olympic athletes are naturally gifted, but they must train for several years or decades to sharpen their skills. Usain Bolt won eight Olympic gold medals, and he holds the world record for the 100 meters with a blistering time of 9.58 seconds. He probably trained for thousands of hours to run 100 meters in less than ten seconds.

What can investors learn from Olympic athletes? Let’s take a look.

Ready

Investors must prepare to succeed. Investing is a life-long journey, and there are no shortcuts. To get ready for your financial future, you need a plan. A financial plan will guide your steps as you get closer to the finish line – whatever your goals may be. It will keep you focused on your goals and help you avoid distractions or pitfalls. Can you imagine Sydney McLaughlin or Simone Biles training without a plan? I can’t.

Set

After your plan is complete, you’re set to launch.  If you completed your plan correctly, it should set you up for a lifetime of success. However, because it’s finished doesn’t mean you can file it away, never to review it again. It should be checked regularly and adjusted as needed. Athletes monitor, review, and modify their training based on results and feedback, and we should do the same.  

Go

It’s go time. You’re ready to run. For your plan to work, you must follow the recommendations. You need to act. If Katy Ledecky always trained but never raced, she would not have shattered world records or won multiple gold medals. To cross the finish line, you need to leave the blocks.

A key factor to an athlete’s success is their coach. Most elite athletes work with coaches who help them reach their goals. Coaches act as mentors, accountability partners, or confidants. Likewise, trusted professionals can assist you in reaching your goals. A financial planner or advisor can organize and quantify your finances. In addition, your team may include a CPA, attorney, mortgage broker, insurance agent, real estate agent, or banker.

Unlike Olympic athletes, you’re not competing against others to achieve financial success. Everybody can get a retirement medal. You don’t need to keep up with the Joneses or retire with more money than your brother-in-law. In fact, if you try to spend money like your neighbors, you could lose the retirement race. Focus on your goals – not your neighbors.

You’re ready to perform; I know you can do it! It’s time for you to run for retirement gold.

Citius – Altius – Fortius. ~ Olympic Motto

August 4, 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.

Do You Make These Investment Mistakes?

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

Do you make these investment mistakes?

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

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

Happy Investing!

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

July 21, 2021

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

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


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

[2] Dimensional Fund Advisors 1926 to 2020

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

[4] Ibid.

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

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

[7] DFA 2021 Matrix Book

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

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

I’ll Do It Tomorrow

Why do it today when you can do it tomorrow? Have you ever delayed starting a diet? An exercise program? Yardwork? House cleaning? The list goes on and on; we have all procrastinated about something. As Wimpy says, “I’ll gladly pay you Tuesday for a hamburger today.”

According to Merriam-Webster, procrastination means to put off intentionally and habitually, putting off something that should be done. The keyword in the definition is intentional because we decide not to act. It’s deliberate. For example, I should have mowed the lawn on Saturday, but I put it off until Sunday. I procrastinated.

Procrastinating on certain things is not life-altering. Delaying my lawn mowing by one day will not impact anything in my life. Waiting to wash my car is no big deal. However, habitually delaying dieting, exercising, or investing can have negative consequences.

The best time to start investing was yesterday; the second-best time is today. Starting your investment program is essential if you want to create wealth, regardless of your current situation. If you’re waiting for perfect timing, you’ll never start.

The Fidelity 500 Index fund (FXAIX) is one of the largest mutual funds in the world, with $343 billion in assets. It is a perennial performer, and since 1990 it’s generated an average annual return of 10.4%. A $10,000 investment is now worth $231,000, but if you delayed your purchase until 2000, ten years later, your $10,000 only grew to $44,500, a difference of $186,500.[1]

Becoming a millionaire is still a goal for many – a 25-year old only needs to save $380 per month to reach the milestone by age 65, but a 35-year old must save $819 monthly. If you wait until your 55, you need to save $5,777 per month or more than fifteen times the amount of a 25-year old.

How can you create wealth and avoid procrastination? Let’s explore a few ideas.

  • If you have access to a 401(k) or 403(b), sign up today. Your investment will automatically deduct from your paycheck, making it easy for you to save and invest. Every pay period, you’ll contribute to your retirement account. How much should you invest? At a minimum, match the match. For example, if your company offers a 5% match, you should contribute the same percentage, so your total investment amount is 10% of your pay.
  • If you struggle with saving money, open a savings account and set up a monthly draft from your checking account. The automatic savings program will grow over time while allowing you access to your money if you need it.
  • Open an IRA. You can automate your IRA investment program as well. The maximum contribution for individuals under 50 is $6,000, and those 50 or older can add another $1,000.
  • Invest for growth by opening a brokerage account and dollar cost average into a mutual fund. Investing monthly into a mutual fund or two will grow over time. Investing in a taxable account allows you to access the money at any time, for any reason.
  • Set financial goals, write them down, commit them to paper, and review them often. Do you want to retire early? Buy a second home? Travel the world? Your written goals will motivate you to keep moving.
  • Work with a Certified Financial Planner™. A financial planner can serve as your accountability partner, gently pushing you towards your goals, like a coach. Sharing your goals with others is another motivating factor.
  • Reward yourself. When you achieve a goal, celebrate – enjoy the fruits of your labor. Rewarding yourself for doing well will give you the courage to keep moving forward.

In 2009, I decided to run the Boston Marathon; however, to run the race, I needed to qualify, meaning I had to run another marathon or two before Boston. I committed my goals to paper and set a timeline for my journey. Once I identified my qualifying races (Austin and Los Angeles), I started running. I didn’t wait. And, to be clear, when I started running, I was not in marathon race shape, so I set daily, weekly, and monthly goals to improve my performance. I ran the Austin marathon in 2010 and qualified for Boston with a time of 3:25. A month later, I ran the Los Angeles marathon for backup. In 2011, I finished the Boston Marathon with a time of 3:22. If I delayed my training or waited until I was in better shape before running, I never would have run the Boston Marathon.

Don’t delay; start today! I know you can do it!

 “The miracle isn’t that I finished. The miracle is that I had the courage to start.” – John Bingham

July 13, 2021

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

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


[1] YCharts

Financial Independence

As we approach Independence Day, I pondered what it means to be financially independent. Warren Buffett and Charlie Munger are still working; are they financially independent? What about Whitney Wolfe Herd or Robert Johnson or Jeff Bezos? If billionaires are still working, does it mean we need several billion dollars to be independent? I doubt it, but let’s crunch some numbers to find out.

Other terms for independence include self-reliance, autonomy, and freedom. Self-reliance stands out because if I’m financially independent, I rely on myself[1] to make ends meet, not a job, government assistance, or family support. If I retire from my vocation to take a less stressful job as a cabana boy at a beach club to cover my expenses, I’m not independent; I just changed jobs.

Retiring from your day job requires courage and financial assets. How much do you need to retire comfortably? The answer varies greatly, but, at a minimum, you need enough money to cover your living expenses. For example, if you spend $100,000 per year, you need enough assets to generate income to cover your costs. To produce an annual income of $100,000, you will need about $2 million to $2.5 million in assets. If your account balance is $2.5 million and you need $100,000 to live, then you’re financially independent. If you’re curious about your specific number, multiply your expenses by 20 or 25.

To start your journey towards financial independence, calculate your annual spending. Where does your money go? How much do you spend? After reviewing your expenditures, can you reduce or eliminate items from your budget because the less you spend, the less money you need to save.

What can you do if you’re not financially independent? If you’re short of your goal, reduce your spending, increase your savings, and allocate more money to stocks. Let’s say you’re forty, and your goal is to become financially independent at age sixty. After calculating your expenses, you determined you need $5 million. If your current account balance is $1 million, you need to save $1,845 per month to reach your target. Of course, you can retire whenever your account balance touches $5 million, regardless of your age.

Saving money is your best investment strategy, and the more you can save, the better. Contributing to your company retirement plan, an IRA, and a brokerage account provides several income distribution options when you’re ready to stop working. Automating your savings plan allows you to manage your cash better, eliminating human error and emotions.

Investing in stocks eclipses bonds and cash. For the past five years, stocks produced a return of nearly 100% compared to 4% for bonds and .06% for T-Bills. Since 1926, stocks generated an average annual return of 10.3% compared to 3.3% for U.S. T-Bills.[2] If you want to achieve financial independence, you must own stocks.

However, don’t kill yourself by chasing financial independence. Life is to be enjoyed and shared with others, don’t live like a pauper. What’s the point of becoming independent if you’re living in the middle of nowhere eating SPAM® every day? Instead, set a reasonable goal and timeline that allows you to live for today and dream for tomorrow.

If you live for having it all, what you have is never enough. ~ Vicki Robin

July 1, 2021

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

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


[1] In a human sense, not a spiritual one. I am the vine; you are the branches. If you remain in me and I in you, you will bear much fruit; apart from me you can do nothing. ~ John 5:15

[2] DFA Matrix Book 2021

Are You Rich?

Bill and Melinda Gates shocked the world by announcing their divorce after twenty-seven years of marriage. Likewise, Jeff Bezos and his ex-wife, MacKenzie Scott, divorced two years ago after a quarter of a century of marital bliss. Collectively, these four are worth $380 billion, so it’s true, money can’t buy love.

Globally, more than 3 million people died from COVID. At the pandemic’s peak, 15% of our population were unemployed, numbers not seen since the Great Depression. And, nearly 100,000 businesses closed their doors forever.[1]

Closer to home, my dad had successful bypass surgery; my uncle endured a marathon cancer surgery. A college classmate lost his dad a few weeks ago, a friend from high school told me he was a recent cancer survivor, and a dear friend lost his life to COVID.

I recently switched cardiologists for insurance reasons, so I updated my vital signs. My doctor ran a battery of tests, checking me from head to toe, inside and out. Thankfully, no issues. I look like a Volkswagen, but I run like a Porsche.

My net worth calculates to the penny and updates in real-time. Several apps inform me of changes to my investments. In addition, I have spreadsheets from here to Mission Beach that calculate multiple financial scenarios. My HP 12c rarely leaves my side. I use professional financial planning software to determine my fate. My money never sleeps.

I’ve been in the investment business for thirty-plus years and have seen thousands of accounts from a few dollars to hundreds of millions. And, for the most part, the accounts are the same, save for a few zeros, and the goals are similar – people want to make money and avoid losses; they want wealth without risk. We want to be rich.

What does being rich mean? I can calculate your net worth to tell you if you’re rich or not based on worldly data, but does it matter if you’re in poor health or have tattered relationships? I don’t think it does. Also, if you’re losing sleep because of your investments, you own the wrong assets. If you’re worried a market correction will ruin your life, your allocation to stocks is too high. Maybe it’s time to redefine the definition of wealth.

I am rich because I’m healthy with a loving wife, a beautiful daughter, a supportive family, great friends, and a couple of crazy pets.

What’s your definition?

Do not wear yourself out to get rich; do not trust your own cleverness. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle. ~ Proverbs 23:4-5

May 4, 2021

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

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


[1] https://fortune.com/2020/09/28/covid-buisnesses-shut-down-closed/, September 28, 2020 by Anne Sraders and Lance Lambert

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.