Investing inside the Lottery over Mutual Funds???

Even though I am not an investment advisor and not hold myself out as you, clients still ask me what to do to plan retirement. Should I max out my 401(k) contribution? Should I do an IRA? Should I put more during my profit sharing plan or pension plan?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, each will involve putting money into an investment vehicle over which they have little control concerning investment and timing and a lot people wind up choosing Mutual Funds as their investment within efforts. In fact, putting your money into the Lottery will be a better investment.



Really? The Lottery as a great investment vehicle? Sound crazy? Gamble my retirement funds away in a government-sponsored game of chance where I have little probability of winning? Where millions of other people are putting in money in hopes of winning the top one? Where a lot of the money would go to someone else and also the chances are strong that I will miss part or all my money?



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



A year or two ago, I was hearing a financial program about the radio walking on into work. The interviewer was asking the representative of a large Mutual Fund in regards to the performance of the Fund. The Rep responded how the Mutual Fund had risen in value by an average of 20% each year for the prior a couple of years. But in the event the interviewer asked concerning the average return to the common investor inside Fund, the Rep responded that the average investor had actually lost 2% per year. Why? Because of the timing of going in and out from the market. Compare this for the Lottery, where everyone should know the exact odds of winning as well as the exact amount that might be won!



But what in regards to the great tax features of putting my money right into a 401(k) or an IRA? Yeah, right! Get a tax deduction when you find yourself young and in the relatively low tax bracket so you can pay taxes about the money you take out if you are retired and inside a higher tax bracket? Yeah, this is a good deal. Or, think about the difference in tax rates on capital gains and dividends should you are not in a very 401(k) or IRA versus the ordinary income tax rates for the earnings whenever you pull them out of your 401(k) or IRA.



So congratulations, you are thinking that you should just invest in Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds bring about capital gains taxes once the Fund Managers trade them while you don't see the cash! You have to pay taxes although Fund may actually have gone down in value! And what concerning the lost opportunity expense of that money that you will be now paying in taxes that you could have placed into other investments? At least while using Lottery, you know the complete amount of taxes you can expect to pay should you win and also you only have to pay taxes in the event you do win.



Yes, you say, nevertheless the Lottery is gambling and I haven't any control over whether I win or lose. You are right. The Lottery is gambling. But do i think the a Mutual Fund. You have zero control over the stock market and neither does the Fund Manager. The market falls, the same is true your Fund. At least you recognize that you're gambling when you play the Lottery. You don't have the federal government, finance institutions and your employer telling you how the Lottery is a superb investment. And your employer doesn't go so far concerning match the sum you put to the Lottery like it might together with your 401(k). Nobody is lying to you concerning the Lottery being gambling, but those who work in positions of authority are lying to you concerning the chances of success inside a Mutual Fund!



But surely, you say, there's a better possibility of making money in a Mutual Fund than there is in the Lottery? Hardly. There may be less of a probability of losing every one of the money you put in a Mutual Fund than there exists losing most of the money you put to the Lottery. But you are never likely to win big inside a Mutual Fund. In fact, Mutual Funds are designed to minimize your returns by setting up a "balanced portfolio." If they could minimize your risk with the market itself, this might be okay. But the problem is always that nobody can minimize the risk with the market without sophisticated hedge strategies that aren't typically used in Mutual Funds. At least while using Lottery, you have a possibility of winning big. And you can sleep at night, since you aren't wondering if the here probability of winning are inclined down overnight because of something that is situated 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 your Mutual Fund are going? No, not to support government programs, but to support ignore the advisor's and also the Mutual Fund manager's retirement? You take all the risk, you put in all of the capital, but almost all of the earnings in the Mutual Fund go to the Fund manager plus your investment advisor. At least using the Lottery, the funds are inclined to worthy causes, like the Arts.



Of course, I would never advise complaintant to rely about the Lottery for their retirement. But neither would I advise them to count on Mutual Fund investments. For my dollar, the Lottery is a lot more fun and at least I know I'm gambling. But in the event you want to retire, look at other investments and work with someone who will to put within the time that may help you retire soon and retire rich. Financial freedom can be obtained to those who are willing to work and discover it, however, not likely for many who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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