Same As It Ever Was

Bill Parrott |

Election day has come and gone, and pollsters once again missed their mark. In 2016, they forecasted a Clinton landslide, and she lost. This year, Biden was projected to win by double digits, and a blue-wave would overtake the House and Senate. The election is not officially over, but it won't be a double-digit victory, and we did not experience a blue-wave. Same as it ever was.

In 1948, Thomas Dewey was declared a winner over Harry Truman by the Chicago Tribune. They were wrong. Harry Truman famously held up their newspaper with the headline: "DEWEY DEFEATS TRUMAN."[1]

In 1946, Darryl Zanuck, movie producer at 20th Century Fox, said, "Television won't last because people will soon get tired of staring at a plywood box every night."[2] Have you binged on Netflixed lately?

Decca Recording Company refused to sign the Beatles in 1962 because "We don't like their sound, and guitar music is on the way out."[3] They probably had a hard day's night by not signing the Beatles.

Ken Olson, president, chairman, and founder of Digital Equipment Corporation, said, "There is no reason for any individual to have a computer in his home."[4] Can you imagine working from home without a computer during the pandemic?

The San Francisco 49ers were a pre-season favorite to win Super Bowl 55, but since they started playing actual games, they will finish in the middle of the pack, at best.

Forecasting anything is challenging, especially in the short-term.

It will snow in Colorado this year, but who knows when it will start, how much will accumulate, and when it will end. No one knows if it will snow on December 7 in Estes Park, but it may.

Trying to predict the direction of the stock market may be the most challenging to forecast. Fortune Magazine told readers last week to "Buckle up, investors: it might be a rough few days." One Wall Street veteran said, "The S&P 500 'could easily dip into correction territory on Monday; it wouldn't be surprising if that happened.'"[5]  What happened? The Dow Jones rose 5.08% or 1,346 points.[6]

The stock market has averaged 10% per year for the past 100 years regardless of who wins the Super Bowl, snows in Colorado, or occupies the White House.

The bottom line is that no one knows what will happen today, tomorrow, next week, or next year.

As an investor, what can you do if no one can predict the future? Here are my suggestions.

  1. Invest according to your goals. A financial plan can help you quantify and prioritize your goals. Are you saving for college or retirement? Do you want to buy a new car or a vacation home? Your goals will determine your asset allocation. If you need your money in one year or less, invest in cash. If your time horizon is five years or more, invest in stocks.
  2. Invest for growth. For the past twenty-five years, my asset allocation has been 75% stocks, 25% bonds regardless of market conditions. When stocks rise, I rebalance my portfolio to buy more bonds. When they fall, I sell bonds to buy stocks. I don't care what the stock market does today because I don't need my money for another fifteen years or so. And, on some days, I can't remember if the market was up or down.
  3. Don't time the market. After the market correction in March, several investors sold stocks and parked their money in cash, missing a 50% rebound in stocks. Last week, I fielded a few calls to see if we should sell stocks before the election and repurchase them after it was over. I told them to stay invested, thankfully. Investing is not a binary event. Moving from stock to cash and back is a loser's game.
  4. Save early and invest often. The amount of money you save will significantly impact your wealth more than trying to time the market. Investing $1,000 per month at 7% will be worth $1.2 million in thirty years. The more money you save today, the larger your account balance will be tomorrow; it's simple math.
  5. Invest in a globally diversified portfolio of low-cost funds. Global exposure will give you access to large, small, and international companies. A diversified portfolio works well over time because you never know when, where, or why which markets will move.

Trying to predict the future is a waste of time and energy, so don't do it. Rather than worrying about what will happen tomorrow, live for today, enjoy your life, love your neighbor, and count your blessings.

Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. ~ Matthew 6:36

November 5, 2020

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

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







[4] Ibid

[6] YCharts – DJIA, 10/30/2020 – 11/4/2020