Frozen TV Dinners
Americans dined on TV dinners from Swanson’s during the ‘60s and ‘70s. Parked in front of a TV while eating a balanced meal on a wobbly TV tray was quick, convenient and efficient. These pre-packaged meals freed up time in the kitchen, so families could spend some “quality” time together while watching Mary Tyler Moore, Happy Days, or Bonanza. The days of making dinner from scratch were declining with the arrival of frozen dinners and the microwave.
The internet age has allowed companies like Grubhub and Blue Apron to thrive by delivering food to our doorstep. Grubhub will bring you a meal from your favorite restaurant whether you’re buying a sandwich or several entrees. Blue Apron will deliver fresh ingredients, so you can prepare and cook your items when it’s fitting for your schedule.
Of course, you can still make home-made meals by shopping for your favorite items and cooking them to your liking. You can choose from thousands of ingredients as you roam the aisles of your local supermarket. Cooking your own meals is rewarding especially if you have the time and desire.
Mutual funds are packaged products allowing you to own thousands of individual securities with the purchase of a few funds. The fund manager will do the “cooking” for you so you don’t have to worry about the ingredients, the only thing you must do is decide which funds are best suited for your situation. A Certified Financial Planner® can help you find the right mix of assets to help you reach your goals.
Over the past twelve months there have been 755 companies that generated a return of 25% or more. A few of the companies in this group include AeroVironment, Hexcel, Match Group, and Zoetis. If you bought 100 shares of each of the 755 companies, it would’ve cost $6.7 million. Jim Cramer recommends allocating an hour per week of research for each company you own, which, in this case, isn’t mathematically possible.
Finding the right investment ingredients to generate positive returns can be tough. In 2017, about 9% of the companies on this list had a negative return; in 2016, 26% of the companies were in the red. In 2008, 327 of the companies were down 25% or more. Several of these 2008 losers turned into winners a few years later but I doubt investors stayed the course to enjoy the good times. For example, Crocs was down 96% in 2008 while year-to-date it’s up 47%; over the past 10 years it has generated an average annual return of 7.21%.
A better alternative for most investors is to purchase low-cost mutual funds diversified throughout the world. By holding a basket of five mutual funds you’d own more than 13,500 companies. The following five mutual funds managed by Dimensional Funds generated a one-year return of 16.51%. The five-year average was 11.57%. More importantly, this portfolio will allow you to live your life without trying to find the right stock at the right time. Here are the funds:
DFSCX: DFA US Micro Cap Portfolio.
DUSLX: DFA US Large Cap Growth Portfolio
DFSTX: DFA US Small Cap Portfolio
DISMX: DFA International Small Cap Portfolio
DFIEX: DFA International Core
As you create your investment portfolio, look to mutual funds to achieve your goals. A financial plan is your recipe and the funds are the ingredients. Your plan and portfolio will be based on your financial goals and dreams. Furthermore, it will allow you to focus on more important things you enjoy doing like cooking.
Life itself is the proper binge. ~ Julia Child
June 18, 2018
Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.
Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.
 Morningstar Office Hypothetical Tool