October has a reputation for being a “bad month” to be in the market. Does this allegation hold up in practice?
For answers, I turned to Forbes’ description of the “October Effect,” which simply states that the stock market allegedly declines in October. Given some of October’s history, it is not surprising that investors respond negatively to the mention of our 10th month. Halloween and market crashes both present scary scenarios for many Americans.
First, we’ll look at some of October’s “greatest hits” on Wall Street. Many of the scariest declines in the market occurred in the month of October, including the “Panic of 1907,” the “Crash of 1929,” and one big event during my personal experience, “Black Monday in 1987,” on which day (the 19th of October) the S&P500 Index dropped 22.7%. 2007 also saw October begin the so-called “Financial Crisis,” which lasted about 18 months, during which the S&P500 Index dropped by about half. Households lost more than $16 trillion in Net Worth.
In each case, economic conditions caused the drops, not the calendar.
Those unsettling events left a lasting stain on the reputation of an otherwise beautiful month, when temperatures and humidity fall to stimulating levels, and Mother Nature puts on her annual color show throughout much of the country. They also contribute to a misguided Wall Street axiom that states, “Sell in May and Go Away.” Don’t tell July about that one, as July generally delivers gains.
Despite the common fears and past events in October’s history, the stock market, on average, rises (erratically) during the month. Among our historically positive market months, the average return in October is the smallest. For my part, I find any monthly market increase satisfactory, no matter how slight. Up is up, and October leads into the generally most profitable months. No one can predict when a year-end rally may begin, and anyone who misses the start squanders a chunk of the usual increase.
What many investors attribute to the “October Effect” is likely based on the “Big V,” for Volatility. Historically, October is the most volatile month of the year. Short-tempered investors are frequently frightened into making stupid moves (Forbes’ term), selling into volatility, and missing out on the upswings.
Today’s lesson is the same one we have touted for decades – get into the market in an intelligent manner, and remain invested, no matter how much it hurts some days. Assuming your investments are long-term (as they should be), the rewards last a lifetime.
In 2019, on the Van Wie Financial Hour radio program, we reported on a spreading phenomenon known as “FIRE,” short for “Financial Independence Retire Early.” In cult-like instructional guides, FIRE proponents attempt to entice people into a utopian world of carefree decades of cushy retired life, beginning in early or middle-age. To me, this is a component of a “Big Lie” Americans are being fed on a daily basis by money-grubbing “influencers.” Far too many of these “financial experts” are in their businesses for the simple reason that they sell expensive newsletters to unsuspecting people.
The FIRE movement tells people they can retire at age 35, 40, 50, or even 60. My study of information on FIRE from the zealots (who claim to have all the answers) reveals that a successfully retired FIRE candidate must go to WORK! We’re not talking about volunteering, but a real paid endeavor; even a “side hustle” or “gig work.” Apparently, when doing something you enjoy, it is not considered by FIRE to constitute work, much less a new career. Instead, it is supposed to provide some kind of self-fulfillment, justifying the cut in pay. Think of it as a paid hobby. Some, like me, call it working.
I have a better idea. My concept is called “DREC,” short for “Delay Retirement Extend Careers.” DREC offers a path toward the real financial goal of most people – true Financial Independence. It does this the old-fashioned way, by working longer, making more money, and enjoying life and family along the way. FIRE too often requires sacrificing a fulfilling family life.
Under DREC, a young worker who enjoys his or her occupation and career path should set a retirement goal of complete Financial Independence. Physical age is only relevant for insurance planning and Social Security claiming purposes. Many people work later into life these days – on purpose!
Not enjoying your current job? Change it now, and work until you are financially prepared to (completely) retire.
Wasting years, while skimping and saving pennies toward an unrealistic and artificial FIRE goal, makes for unhappy and unsuccessful lives. People will always require food, clothing, shelter, and a wide variety of expensive non-luxuries (including taxes). Financial Independence requires our nest eggs to be sufficient to cover a lifetime of expenses, hopefully including some non-essentials. You only live once, so have a good time.
DREC (Delay Retirement Extend Careers) will yield a significant improvement in your probability of achieving true Financial Independence. If your only goal is early retirement, chances are you’ll be working forever, only not by choice. FIRE may be trendy, but DREC is practical.
Affordable real estate for young Americans has been at historic lows in recent years, due to the double whammy of inflated home prices and high mortgage interest rates. Elevated mortgage rates are slow to decline, but the process is underway. As if to contradict the rudimentary law of supply and demand, new home sales in August jumped an “unexpected” 20.5% nationwide.
There must be a reason, and of course, there is a rationale for so many sudden buyers. When homebuilders are faced with a softening market, they pull a few rabbits out of their collective hard hats. Price reductions are being offered, and builders have been financially creative with their offerings. Providing fewer upgrades from “builder quality” reduces builders’ costs, and buyers are loving the resultant lower prices. Many builders are offering creative financing options, including mortgage interest rate “buy-downs” for the first few years.
Ultimately, the real estate market will be best stimulated by a general reduction in interest rates. Mortgage rates are not directly impacted by Federal Reserve (FED) actions, but as the FED eases monetary policy, mortgage rates will follow the trend. The first rate cut in this cycle has been implemented, and more will follow. Mortgages will become less expensive over the next several months, and smart buyers will capitalize on the friendlier rate environment.
Buyers and sellers alike must pay attention to interest rate fluctuation. Timing a real estate transaction for maximum personal benefit is tricky work, as the goals of buyers and sellers often conflict. Deals are made, and sales get completed, only when buyers and sellers are both satisfied, if not ecstatic.
Buyers need to remember that their monthly payments are changeable later by refinancing, while sellers experience a “one and done” transaction. In my view, buyers have the financial advantage over time. It would be a mistake to pass on a home you love without considering the probability of a refinancing possibility in a reasonable amount of time.
Potential buyers should be attuned to creative financing available at any time in the rate cycle. Regardless of the buyer’s intention to stay in the home for a short or long period, an Adjustable-Rate Mortgage (ARM) should be considered. Initial interest rates on ARMS are lower than those of Conventional 30-year fixed mortgages. In subsequent stages of a softening interest rate market, ARMS can be refinanced when the time is right.
Every month spent paying a lower ARM interest rate lines the pockets of the homeowner. Savings accrue until the mortgage is refinanced, hopefully at a significantly lower rate. Once the lower rate is locked in for 15 or 30 years, the overall lifetime cost of the home purchase will be minimized.
One Big Beautiful Bill (OBBBA) is now the law of the land, and within its hundreds of pages are many changes, most of which are positive for America’s taxpayers. Under OBBBA, many tax credits for energy saving items are expiring at year-end, and should be understood while they remain available. To qualify for a tax credit, work must be completed and paid for before December 31, 2025.
Residential Energy Credits provide long-term savings from decreased energy consumption, but that may not be the only benefit. In recent years, we (personally) have replaced our residential HVAC units with higher SEER-rated heat pumps and variable speed fans. As a result, the comfort level in our home is vastly improved, while our outlay for monthly electric bills decreased.
From our own records, I compared our summer electric bills from 2010 against this year, using the months of July, August and September. This year’s bills averaged 57% less than those from 2010, despite increases in the price of kilowatt hours. To be fair, we have also replaced most light bulbs with LEDs, but those savings likely provided a small portion of the overall decrease.
Exterior doors and windows are eligible for tax credits, as are skylights. Rooftop solar systems are as well, though the payback period on many of these is quite long. Efficient water heaters, including tankless and electric or gas heat pump styles, may also qualify, and all will save money. (We also switched to LP tankless water heaters, and our LP bills were dramatically reduced.)
Changing out an electric panel may also qualify, and adding insulation is always an effective money saver, often accompanied by improved comfort. Both are eligible for Residential Energy Credits this year.
Residential Energy Credits must adhere to strict guidelines. Understanding the rules is the responsibility of each taxpayer, and a good place to begin discovery is on the Energy Star website (energystar.gov). Claiming tax credits for which you qualify is done on IRS Form 5695, available on irs.gov.
Attention to detail is important, as the rules are strict. However, with the impending expiration of tax credits, anyone who has been contemplating making upgrades should begin immediately to see if their intended upgrades qualify. Remember, a tax credit is a one-for-one dollar savings, rather than a tax deduction. With current budget problems in Washington, Congress is unlikely to extend these expiring credits any time soon.
Potential Electric Vehicle (EV) buyers are not alone in facing a deadline, but the subsidy for EVs is very large, and expiring at the end of September, 2025 (today). The credit may still be claimed by purchasers who have signed a contract by then, even if delivery has not been made. Whether these subsidies will be renewed is anyone’s guess, but there are plenty of savings available to homeowners in the remaining weeks of 2025.
When politics meets economics (which happens far too often), someone is bound to get his or her feelings hurt. Starting at noon on January 20, 2025, and running continuously until Wednesday, September 18, 2025, Jerome Powell, the Chairman of the Federal Reserve (FED), has been on a political collision course with the President of the United States, Donald J. Trump.
The “Mutual Dis-Admiration Society” these two have developed has been on public display for several months, and it’s not over yet. Neither of the individuals involved deserves sole blame for where our economy stands right now, nor with our current inflation. Their jobs are to improve the state of the economy.
President Trump wants interest rates much lower to stimulate business, so the economy will flourish. The FED has a dual responsibility, to both the economy and the rate of inflation, presenting often-conflicting goals. In my opinion, this is a flaw in the very concept of the FED, which Thomas Jefferson opposed with his massive political clout. During his lifetime and beyond, Jefferson’s side kept winning, and the U.S. had no Central Bank. That changed in 1913, when circumstances changed, and Congress authorized a Central Bank.
Regardless of any reader’s opinion on that subject, airing in public the dirty laundry of political and economic policy is never pretty. This particular spat provides visual evidence that political conflicts should be negotiated behind doors, with results made public after final decisions are made.
Enough with the infighting – the FED has now made their pronouncement regarding the current direction of interest rates (down). All Americans are affected to some degree, and investors should now plan their strategies. Following a decade or so of near-zero interest rates, savers have lately been relishing higher returns in the Money Market, on CDs, and on High-Yield Savings. The FED’s recent interest rate reduction of one-quarter point will not make a great deal of difference, but more cuts are coming, and each reduces low-risk money-making opportunities.
For the risk-averse, buying longer-term CDs will lock in today’s interest rates during this FED easing cycle. Other investors may want to increase the bond portion of their portfolio mix, as bond prices rise in reaction to interest rate cuts. We prefer using bond mutual funds to diversify holdings and take advantage of rising prices on existing bonds already held in the funds.
Whenever interest rates change, winners and losers are created. During this FED rate easing cycle, investors (creditors) should implement portfolio changes, while borrowers (debtors) will be better able to afford major purchases that rely on financing, including home mortgages and auto loans.
Whichever side you are on, be pro-active while making your adjustments, and the long-term result will tilt in your favor.
Last week, we blogged about two Powerball winners “forced” to split a grand prize of nearly $1.8 billion. Assuming they each choose the lump sum option, as almost all winners of large sums do, they will need to manage a level of wealth unimaginable to most Americans. Unless either winner has an unusually extensive background in finance and investing, this means they will be starting from scratch (pun intended). Lots of “scratch” involved here, to be sure.
In last week’s post, we elucidated the need for personal safety for lottery winners. Today, we discuss the monetary and investing aspects of Sudden Wealth.
Media reporting on winners is designed to attract a large audience, looking for computer clicks and web page headlines. Media hustlers are determined to garner maximum attention, so they report the largest numbers possible. In real life, after taking the lump sum option, $1.8 billion is more like $820 million.
Taxes come next, imposing a 37% Federal Income Tax Rate. Note that only 24% will be withheld prior to receiving the winnings, with the balance due in cash the following year’s April 15th. Both will pay “Obama Care Tax,” and both will be subject to large IRMAA (Income-Related Monthly Adjustment Amounts) surcharges (for life, unless they blow the windfall).
From the Missouri winner will be extracted State Income Tax, where the maximum tax rate is 5%, and applies to the actual winnings of $410 Million. That depletes the winning prize by another $20.5 million or so. Of course, what’s left is still impressive.
Net winnings must be protected and invested. In all likelihood, new winners will not have a pre-established safe place for their funds to be electronically transferred and will need to make provisions prior to claiming their winnings. Before opening any accounts, owners must exercise due diligence to discover what degree of protection is afforded by the receiving institutions.
For reference, the Federal Deposit Insurance Corporation (FDIC) insures only $250,000 per account. Bottom line – winners need professionals, working with large financial organizations, to ensure that funds will be protected.
Once funds are safely deposited, a few suggestions from our experience may prove insightful. First, pay all your own bills, which is an easy way to track your spending. Next, don’t throw huge investment money into the market all at once. Develop and implement an investment plan and procedure that is time-phased.
Above all else, ignore the “noise” from your family and “friends.” You don’t owe a penny to anyone, except for pre-existing debt. Be nice, not stupid.
If you ask members of America’s wealthiest families how to remain wealthy for generations, most will mention one simple and profound guideline – Don’t spend the principle. My recent Internet search on “lottery winners who went broke” yielded 1,380,000 results. Don’t make it 1,380,001.
Saturday night, September 6, 2025, is a date that will long be remembered by two Powerball ticket holders, one in Missouri and the other in Texas. The prize they will split (sorry, winners, you will have to share) is estimated at nearly $1.8 billion (that’s 1,800 Millions of Dollars). After my initial disappointment that there were no Florida winners, my concerns fell to the winners’ situations.
Having spent 2+ decades as a professional financial advisor, I have learned firsthand about errors made, and dreams shattered, among people experiencing “Sudden Wealth.” While only one example of Sudden Wealth (inheritance is another), today we are talking about lottery winners. Over the years, we have had several direct experiences with Sudden Wealth (not our own), through our financial advisory business. Contact with Sudden Wealth presents a learning experience, one which I hope the new winners get educated very quickly.
Among non-winning lottery ticket purchasers, the worst cases we see (and hear about) are in a group that spends their working years “planning for a windfall” by purchasing lottery tickets. These people “know” that eventually their numbers will be the right ones, and a cushy retirement awaits. They are, of course, wrong, eventually becoming old, broke, and miserable.
Having had the unusual good fortune of getting involved with winners of staggering lottery prizes and substantial inheritances, I must also report that money can buy happiness, at least for the right people. The secret lies in planning for the windfall, once notification of its imminent arrival is received.
This may sound strange to some people, but the last action when becoming a large lottery winner should be making any public announcement. Media people will discover and divulge names and locations; you won’t have to do anything except stay quiet, while immediately finding and procuring yourself a safe environment. This satisfies the highest priority for winners – personal safety.
Second in priority (but also critical) is the security of the actual money. With each of Saturday’s winners expecting a pre-tax windfall of about $410 million (assuming they select the lump sum option), they need a plan for custody of funds with maximum security and insured coverage. Federal Income Tax owed by each will be in the 37% bracket, or about $152 million, but only 25% will be withheld. The balance is owed as of the next April 15, and must be preserved.
Finding a personal “Dream Team” of advisors is a necessity for any substantial Sudden Wealth recipients. We recommend starting with a qualified Certified Financial Plannerâ, operating as a fee-only Registered Investment Advisory, or RIA. Add a trusted attorney and CPA, and you have a good start.
Planning on sudden wealth, whether through gambling or inheritance, is never an acceptable retirement plan. But not planning for the windfall, once notified of its pending arrival, is equally dangerous.
Starting life with a little financial “nudge” would benefit nearly everyone, and for now anyway, that is about to happen. Part of the One Big Beautiful Bill Act (OBBBA) of 2025 is a provision for newborns in 2025 through 2028 to receive a $1,000 “gift” deposit from the Government into “Trump Accounts.” Those funds are required to be invested in U.S. Equities, and account assets cannot be touched before the owner turns 18. So far, so good, but remember that the actual gifts are from all of us who pay taxes.
As usual in dealings with the Government, there are layers of complexities that have not been broadcast in the media. Many optional provisions are available for people who have the desire (and the means) to hand their children a more substantial “head start.” Where complexity exists, analysis is needed to optimize intended results. We can’t cover everything in one Blog, but we’ll address some highlights everyone should know.
Including one-time Government Contribution for Newborns (these only apply to citizens with Social Security Numbers), there are two optional forms of contributions. Private Contributions can be made by anyone, prior to the year of the child’s 18th birthday. No contributions are tax-deductible, and total annual (non-government) contributions cannot exceed $5,000.
A third Trump Account deposit type is dubbed Employer Contributions, which are limited to $2,500, although there remain grey areas as to the restrictions on these contributions. At this point, Employer Contributions are included in the $5,000 annual limit, but this may change in the final regs.
Until the account owner turns 18, the account is treated as a type of Traditional IRA, but with totally separate rules. Upon reaching 18, the Trump Account becomes a Traditional IRA, subject to regular rules. Notably, this includes the ability to convert the Trump Account to a Roth IRA, which is likely to become one of the most important considerations for people considering making contributions.
Although the Newborn Contribution applies to all babies born on or after January 1, 2025, Trump Accounts will not be funded until at least July 1, 2026. This waiting period will allow final regulations to become part of the U.S. Tax Code, and paperwork to be made available for program operation.
Many other available forms of financial assistance by parents and relatives to assist minor children must be considered when allocating scarce dollars. Universal Transfer to Minors Accounts (UTMAs), 529 College Savings Accounts, and other IRAs should be considered in the mix. Competent financial advisors will need to understand the options.
Pretty much everyone pooh-poohed President Trump 47 for openly and tirelessly supporting passage of his wide-ranging tax proposal dubbed One Big Beautiful Bill (OBBB). Washington “insiders” know that things are just not done that way in D.C., preferring an incremental approach. For the most part, the insiders are right. Far-reaching tax legislation is seldom popular among taxpayers, likely because experience has made us all suspicious. But with Trump, usual and customary is not the flavor of the month.
OBBB slowly became both acronym and legislation for Trump’s second major Tax Code overhaul. Against strong political headwinds, OBBB passed and was signed into law on Trump’s original target date of July 4, 2025. Immediately, Trump’s political opponents dove headfirst into their thematic resistance, using a disinformation campaign of epic proportions. Their rallying cry was (again), “Tax cuts for millionaires and billionaires.” As usual, the legacy media was quick to oppose Trump, endlessly parroting the false depiction.
Under OBBBA (“A” stands for “Act”), a vast majority of taxpayers are better off financially. NOT by just a little, and the only losers are some uber-high-income Americans.
Far from providing “tax cuts for the rich,” OBBBA prevented scheduled tax increases on everyone. The Tax Cuts and Jobs Act of 2017 (TCJA) temporarily (Tax Years 2018 through 2025) provided tax cuts for most Americans, but the Act was set to expire on January 1, 2026. OBBBA made those tax reductions permanent, saving average American families approximately $2,900 annually.
Additionally, OBBBA cut taxes even further for most Americans, and some of these cuts are retroactive to January 1, 2025. Most notable are provisions called No Tax on Tips and No Tax on Overtime. These provisions were Trump campaign promises, and are now the law of the land, except for America’s highest-income taxpayers. Only Lower-income and Middle-income Americans reap the benefits from these provisions.
Throughout history, “Big Lies” have been propagated by politicians and by the complicit legacy media. Media coverage of OBBBA is a classic example of this “unholy alliance.” OBBBA should be revered, rather than reviled.
Overall tax savings for an average American household with 2 children are estimated to be $7,400 per household, each and every year of the Trump 47 Administration. Shameless are the political and media forces obstructing this information from the general public. The Truth will change public opinion.
It is time to stop the lies, embrace good news, and pocket our savings.
Right up front: we don’t purchase and/or hold Cryptocurrency or “crypto” in client accounts at Strivus Wealth Management. Some of our clients do hold crypto, but they do not own any crypto in accounts under our management. The “why” is very simple. Our business involves assisting clients in the accumulation of long-term wealth, with a level of risk appropriate to that mission, and within our clients’ personal tolerances. Slow and steady growth over time creates winners.
Creating portfolios within the rules and regulations of the U.S. Securities and Exchange Commission (SEC) requires transparency. We caution all investors to understand every asset in their portfolios, and to be able to view them at any time, using a well-known, independent, third-party website. This requires the utilization of publicly traded securities, all held at large custodial firms, such as Schwab, Fidelity, and others, where asset prices are listed at all times.
Investors seeking a faster (more “exciting”) path to wealth are feeling encouraged by a recent Trump Administration announcement that the rules are about to be loosened, allowing purchase of certain previously-unallowed Alternative Investments (Alts) within 401(k) Accounts (and similar Plans at other employer types). The most well-known Alt investment these days is Cryptocurrency, or simply crypto. Crypto hype is everywhere, but crypto understanding is sadly lacking.
Employer-sponsored Retirement Plans are regulated by ERISA, the Employee Retirement Income Security Act of 1974. The law has been amended several times over the years, but its purpose remains the same – to protect employees’ retirement funds through adherence to strict standards of conduct and regulation. ERISA established a fiduciary standard for anyone involved in any significant role with 401(k) Plan Administration and Investing. This strict standard requires execution of Plan-related duties in a manner the law describes as a “prudent man standard.”
Crypto is inherently riskier than publicly traded securities and is not even classified as a security. Instead, crypto is considered property by the IRS, and Capital Gains Taxes are paid on (net) profits made by trading (buying and selling) crypto shares, or “coins.”
Until such time as crypto is accepted as legal tender under the law for all debts, public and private, I believe that it has no place in traditional Retirement Accounts. Investors should be able to invest in what makes them happy, but our interests lie in long-term success.
Count me out for crypto, at least for now. Changes are certainly on the horizon, but caution reigns supreme when the stakes are high.