Fun Facts Newsletter | November 2013

Congratulations! Your investment portfolio just won the Nobel Prize in Economics!

Well, sort of, not directly, but certainly indirectly!

We are proud to report that Eugene Fama, Professor at the University of Chicago, was awarded the Nobel Prize in Economics based on his groundbreaking work on asset pricing and financial markets. Dr. Fama's academic research has been implemented in the real world thru the work of Dimensional Fund Advisors (DFA mutual funds) and is also the fundamental basis supporting the use of index funds such as the various stock funds we use in your portfolio from The Vanguard Group. His "Efficient Market Hypothesis" states that stock market prices reflect all available information and trying to pick superior performing stocks in advance is a fruitless exercise. We are proud to bring this award-winning investment philosophy to you and we are delighted to see the academic basis of our investment strategy awarded a Nobel Prize.

October was newsworthy for other reasons. As reported in the Kiplinger Tax Letter, the federal income tax just turned 100. President Wilson signed it into law on Oct. 3, 1913, a little more than four years after the 16th Amendment was proposed by Congress and eight months after official ratification by the states. Some facts about the 1913 tax:

The basic income tax rate was only 1%, with a surtax that ranged from 1% on net income over $20,000 and up to $50,000 to 6% on net income in excess of $500,000.

All filers were allowed to deduct interest on personal debts plus state and local taxes paid. The standard deduction was $3,000 for single filers and $4,000 for married couples. About 1% of households paid tax. The 1040 form was three pages long, with separate pages for income, deductions and the calculation of the tax and surtax.

The 20 instructions for completing the form fit on one page. The full set of instructions for filling out 2012's 1040 was 214 pages. But don't pine too hard for the good old days. Five years later, as World War I was coming to an end, the top rate had soared to 77% on net income over $1 million.

Since the calendar has closed on October, we hope you remembered to review your fire safety at home. Why is a financial planner writing about fire safety? We hope all of our clients live long and healthy lives and we always advocate that we manage things that are within our control and not be consumed about things that are beyond our control.

So remember to change your smoke detector batteries, replace your smoke detectors if they are over 10 years old, same for at least 1 carbon monoxide detector in your home. Then sleep well!

Happy Thanksgiving! Celebrate the good fortune and blessings that we have!

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