Investing within the Lottery over Mutual Funds???

Even though I am not an investment advisor and never hold myself out together, clients still ask me what to do to prepare for retirement. Should I max out my 401(k) contribution? Should I do an IRA? Should I put more inside my profit sharing plan or pension plan?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, all of them involve putting money into a good investment vehicle over which they've little control concerning investment and timing and most people wind up choosing Mutual Funds his or her investment within efforts. In fact, putting your dollars into the Lottery would have been a better investment.



Really? The Lottery as a good investment vehicle? Sound crazy? Gamble my retirement funds away in a very government-sponsored game of chance where I have little potential for winning? Where millions of other people are putting in take advantage hopes of winning the important one? Where almost all of the money visits someone else and also the chances are strong that I will miss part or most of my money?



Wait a minute - are we talking now in regards to the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little potential for winning. Sounds like similar to Mutual Fund investment inside a 401(k) or IRA. After all, what are my likelihood of retiring on Mutual Fund investments? Not very high, actually.



A couple of years ago, I was listening to a financial program on the radio walking on into work. The interviewer was asking the representative of a substantial Mutual Fund about the performance with the Fund. The Rep responded that the Mutual Fund had risen in value by typically 20% a year for the prior two years. But if the interviewer asked regarding the average return to the typical investor inside the Fund, the Rep responded that this average investor had actually lost 2% each year. Why? Because with the timing of opting and out of the market. Compare this to the Lottery, where everyone understands the exact likelihood of winning and the exact amount that may be won!



But what in regards to the great tax benefits of putting my money in a 401(k) or even an IRA? Yeah, right! Get a tax deduction if you are young and in a relatively low tax bracket so that you can pay taxes on the money you adopt out when you find yourself retired and in a very higher tax bracket? Yeah, which is a good deal. Or, look at the difference in tax rates on capital gains and dividends if you are not inside a 401(k) or IRA versus the standard income tax rates for the earnings when you pull them from your 401(k) or IRA.



So congratulations, you are thinking that you should just put money into Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds result in capital gains taxes in the event the Fund Managers trade them even though you don't see the cash! You have to pay taxes although Fund could possibly have gone down in value! And what regarding the lost opportunity tariff of that money that you are now paying in taxes that you could have put in other investments? At least using the Lottery, you know the actual amount of taxes you will pay in the event you win so you only have to pay taxes in case you do win.



Yes, you say, though the Lottery is gambling and I have no control over whether I win or lose. You are right. The Lottery is gambling. But so is a Mutual Fund. You have no control over the stock market and neither does the Fund Manager. The market goes down, does your Fund. At least you recognize you are gambling if you play the Lottery. You don't have government entities, loan companies and your employer telling you that this Lottery is a superb investment. And your employer doesn't go so far about match the sum you put in the Lottery as it might using your 401(k). Nobody is lying to you in regards to the Lottery being gambling, but those invoved with positions of authority are lying to you in regards to the chances of success in the Mutual Fund!



But surely, you say, there's a better possibility of making money in a very Mutual Fund than there is inside Lottery? Hardly. There may be less of a probability of losing every one of the money you put in to a Mutual Fund than there is certainly losing all the money you put in to the Lottery. get more info But you are never going to win big inside a Mutual Fund. In fact, Mutual Funds are built to minimize your returns by developing a "balanced portfolio." If they could minimize your risk with the market itself, this might be okay. But the problem is nobody can minimize the risk of the market without sophisticated hedge strategies which aren't typically found in Mutual Funds. At least with all the Lottery, you have a possibility of winning big. And you can sleep during the night, because you aren't wondering if the probability of winning are inclined down overnight as a result of something that occurs in Tokyo.



You say you do not like the idea that most of your Lottery gamblings are going to support government programs? Where do you think almost all of the earnings from the Mutual Fund are getting? No, to never support government programs, but instead to support ignore the advisor's and also the Mutual Fund manager's retirement? You take all of the risk, you set in most of the capital, but most of the earnings through the Mutual Fund go for the Fund manager as well as your investment advisor. At least with the Lottery, the funds are inclined to worthy causes, like the Arts.



Of course, I would never advise a client to rely for the Lottery for his or her retirement. But neither would I advise them to rely on Mutual Fund investments. For my dollar, the Lottery is a bit more fun and at least I know I'm gambling. But in the event you want to retire, look at other investments and help someone who would like to put in the time that may help you retire soon and retire rich. Financial freedom can be obtained to those who are willing to work and understand it, although not likely in case you want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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