Matson & Cuprill - October 2017

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October 2017

Dan Cuprill’s

FINANCIAL PLANNING & COACHING FOR THE OVER-TAXED

Should You Be Spooked by the October Effect?

GHOSTS OF OCTOBERS PAST

J.P. Morgan-led group, the Panic of 1907 remained just that. BLACK TUESDAY, THURSDAY, AND MONDAY, OCTOBER 1929 The economy wasn’t so lucky 22 years later. Because so many more people were involved in the stock market by 1929, this crash was especially devastating. It left several “black” days in the history books, each with their own record-breaking money losses. BLACK MONDAY, OCTOBER 1987 Nothing says Monday like a financial meltdown. Black Monday began in Hong Kong and spread west into Europe, hitting the U.S. after other markets had already rapidly declined. Automatic stop-loss orders were blamed for the Dow’s 22 percent drop. Fortunately, the Fed and other central banks intervened, and the market recovered from the drop pretty rapidly.

More importantly, the catalysts for both the 1907 panic and the 1929 crash took place in September, with the events simply hitting in October. Rather than being a statistically sound phenomenon, the so-called October Effect is more of a psychological expectation. Historically, the majority of investors have lived through more bad Septembers than Octobers. But the real point is that financial events don’t cluster at any given point. The worst events of the 2008 financial meltdown happened in the spring, and stocks tend to fall more in November and December due to year- end rebalancing. Although it’d be easier if financial panics and crashes were that predictable, October is no more prone to bad times than any other month in the calendar. So don’t panic based on a few trends, and save the scream for your kid’s Halloween costume. -Nikki Ea rley

OCTOBER IS A UNIQUE MONTH. In the West, it’s a transitional time with autumn sliding relentlessly toward winter. It also boasts the only holiday where people are encouraged to dress up, scare each other, and extort candy with threats of mischief. In the finance world, October is scary for another reason — the October Effect. It’s one of the most feared months of the financial calendar. But is this bad rap really justified? The following are some of the events that help give October a bad reputation: THE PANIC OF 1907, OCTOBER 1907 Threats of legislative action against trusts and shrinking credit created a financial panic that threatened to overwhelm Wall Street. Multiple bank runs and heavy panic caused frenzied selling at the stock exchange. All that stood between the U.S. and a serious crash was one financier who did the work of the Fed before the Fed even existed. Thanks to a

Oddly enough, September has actually had more downed markets than October.

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WHICH FEARS ARE INSTINCTUAL,

and Which Are Learned?

4 WAYS From the moment you wake up in the morning, it feels like a dense fog fills your head. When you drag yourself out of bed and go to make yourself a plate of eggs and toast, it suddenly seems like a much more complicated task than before. You lose track of time, and the smell of smoke enters your nostrils. Frantically turning the burner off, it occurs to you that you can’t remember the day of the week. According to Time Magazine, 47 million people around the world live with some type of dementia. Typically, as we age, we’re told that all we can do is hope for the best and bide our time until there’s a cure, but recent research by the Alzheimer’s Research Center paints a different picture. A set of simple lifestyle changes may be the key to staving off cognitive decline as we get older. REGULAR EXERCISE has been shown to reduce your risk of Alzheimer’s by up to 50 percent, according to Help Guide, and it can even slow the onset of already-present cognitive decline. Walk or swim for about 150 minutes each week, along with two to three sessions of moderate resistance training, as well Where does fear come from? As the jack-o’-lanterns show their grinning, glowing faces and skeletons, cobwebs, and gravestones adorn yards around the neighborhood, it’s a question hanging in many of our minds. When you recoil from the giant mechanical spider suspended above your neighbor’s garage, is that fear instinctual, or is it learned? Many people, spurred on by evolutionary psychology, believe that the fear of creepy crawlies, particularly spiders and snakes, is innate. Certainly, spiders and snakes are among the most common phobias in the world. But research shows that, though humans and apes may be predisposed to easily develop a fear of these poisonous animals, the fears are just that — learned. In a 2016 study, babies were presented with videos of snakes and other animals like elephants, paired with either a fearful or happy auditory track, measuring the babies’ physiological responses when the videos were interrupted by a startling flash of light. Though babies were more interested in the snakes, they weren’t more startled, indicating a lack of fear.

According to the Association for Psychological Science, there are only two fears we inherit at birth: the fear of falling and the fear of loud sounds. A 1960 study, conducted by psychologists Gibson and Walk for Cornell University, sought to investigate depth perception in human and animal species. They suspended a sheet of transparent plexiglass about four feet off the ground and covered one half of it with a checkerboard-pattern cloth, creating a simulated cliff. Infants, both human and animal, were then encouraged by their caregivers, usually their mothers, to crawl off the “cliff” onto the clear half of the platform. Animals and humans alike avoided stepping over what they perceived as a sharp drop, and pre-crawling-age infants showed heightened cardiac distress on the “suspended” side. Coupled with this innate fear of plummeting to the ground is something called the Moro reflex, one of several involuntary reflexes healthy newborn infants have at birth. Often called the “startle reflex,” it occurs when a baby is startled by a loud sound

You May Be Able to Prevent Dementia Before It Starts

as balance and coordination exercises. Check out eldergym.com for more info on staying active as you age. HEART-HEALTHY EATING may also protect the brain. Limit your intake of sugar and saturated fats and eat plenty of fruits, vegetables, and whole grains. Replace butter and margarine with olive or canola oil. Two diets that have been linked to heart health are the DASH diet (dashdiet.org) and the Mediterranean diet. FREQUENT SOCIAL ENGAGEMENT may help keep your brain sharp. Make efforts to speak face to face with someone you’re close to as often as you can. Try to make new friends, volunteer, join a club or social group, get to know your neighbors, or connect with people over social media. MENTAL STIMULATION may also be important to brain health as we age. Study something new to you, such as a foreign language or a musical instrument. Make reading books and newspapers part of your regular routine. Try doing crossword or sudoku puzzles. It’s not difficult to find an activity you enjoy that will also help keep your brain active.

2 • Matson & Cuprill is an Ohio Registered Investment Advisor

ROTH IRAS

Valuable to Over-40 Investors

If you’re over 40, odds are good that you have a traditional IRA. According to the Investment Company Institute, 85 percent of traditional IRA investors are over 40, and 39 percent are over 60. But even if you rolled your 401(k) assets into a traditional IRA, you may want to switch to a Roth IRA — which is the preference of young people with lower incomes. After you reach 59½ years old, the distributions from your traditional IRA are taxed. This isn’t a problem if you expect a lower tax rate during retirement, which was often the case for retirees. But not anymore. New research shows that about 10,000 people turn 65 every day. That means there are more people on Social Security than ever before. To pay for it, taxes are going to go up, even for retirees drawing from traditional IRAs. For that reason, many are switching to a Roth IRA. Funded with after-tax dollars, the money grows tax-free, and the distributions after you turn 59½ years old are also tax-free. If your single income is less than $132,000 or your household income less than $194,000, you’re eligible for a Roth IRA account. If you earn more than the cut-off, you can still convert from a traditional IRA to a Roth IRA. There aren’t any income limits on people converting to a Roth IRA. Of course, converting means paying the income tax on any amount you convert, usually immediately. For that reason, we tell people to convert only if they don’t have to use their converted funds to pay off the tax that’s due. We also suggest waiting for a year when your total income is down or your investments suffered losses, both of which mean a lower tax bill. Roth IRAs won’t be for everyone, but they can be valuable when considering future tax rates. And if you’re worried about your estate, a Roth account is one way to allow your investment to grow, tax-free.

Sudoku! or movement, especially a falling motion. The reflex usually triggers the newborn to lift and spread their arms as if grasping for support, followed by crying. Though the Moro reflex usually disappears at around 5 to 6 months of age, our instinctive aversion to sudden loud noises stays with us throughout our lives.

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Inside This Issue Should You be Spooked by the October Effect? PAGE 1 The Origins of Fear PAGE 2 Can You Prevent Dementia Before It Starts? PAGE 2 Sudoku PAGE 3 Consider a Roth IRA PAGE 3 The Acropolis of Athens: Tips for Your Trip Back in Time PAGE 4 100 E-Business Way Ste. 160 Cincinnati, OH 45241

THE ACROPOLIS OF ATHENS: Tips for Your Trip Back in Time

When people think of a vacation to Greece, the first images that come to mind are often the picturesque beaches of Mykonos Island or plates of delicately layered moussaka. But no trip to the cradle of Western civilization would be complete without a visit to one of the most incredible historical sites in the world: the ancient Acropolis of Athens. Around 468 B.C., while Athens was enjoying its status as the greatest cultural hub of the era, Pericles initiated a robust reconstruction of the Acropolis. Almost half of the population was on the public payroll during the project, generating what would become many of the most memorable structures in history, including the famous Parthenon. Today, the ruins of the Acropolis still stand, a testament to the ingenuity of one of the most advanced civilizations of the classical age.

If you plan on exploring the breathtaking ruins and the Acropolis Museum, which houses over 4,000 artifacts from the site, it’s a good idea to avoid the Mediterranean cruise hordes and get there early, as close to 8 a.m. as possible. A four-day pass to peruse the Parthenon, the temples of Athena and Zeus, and many other world-famous sites costs around 12 euros, but keep in mind you can visit each site only once per pass. Due to the scorching heat that hits the area in the summer, you may want to visit during late winter or early spring. To absorb the incredible history of this ancient monument, it’s a good idea to either pay for the audio guide as you enter or go to the “Watch, Read, Listen” section of ricksteves.com and download his audio guide for free. You can also get a full tour from a local guide. Head to toursbylocals.com/Athens-Tours to find the perfect guide for your trip.

4 • Matson & Cuprill is an Ohio Registered Investment Advisor

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