Investing inside Lottery over Mutual Funds???

Even though I am not a smart investment advisor and not hold myself out as one, clients always 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 these are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they've got little control about investment and timing and most people turn out choosing Mutual Funds for their investment within diets. In fact, putting your hard earned money into the Lottery would be a better investment.



Really? The Lottery as an investment vehicle? Sound crazy? Gamble my retirement funds away in the government-sponsored game of chance where I have little chance of winning? Where millions of other everyone is putting in take advantage hopes of winning the important one? Where the majority of the money travels to someone else and also the chances are strong that I will suffer part or all of my money?



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



A couple of years ago, I was playing a financial program on the radio going into work. The interviewer was asking the representative of a substantial Mutual Fund in regards to the performance in the Fund. The Rep responded the Mutual Fund had risen in value by around 20% per year for the prior 2 yrs. But in the event the interviewer asked concerning the average return to the common investor inside Fund, the Rep responded the average investor had actually lost 2% annually. Why? Because with the timing of moving in and out of the market. Compare this on the Lottery, where everybody knows the exact odds of winning and also the exact amount that could be won!



But what about the great tax benefits of putting my money into a 401(k) or an IRA? Yeah, right! Get a tax deduction if you are young and inside a relatively low tax bracket in order to pay taxes on the money you adopt out when you're retired and in the higher tax bracket? Yeah, this is a good deal. Or, take into account the difference in tax rates on capital gains and dividends in the event you are not inside a 401(k) or IRA versus the standard income tax rates about the earnings whenever you pull them out of your 401(k) or IRA.



So congratulations, you are thinking that you ought to just spend money on Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds cause capital gains taxes when the Fund Managers trade them even if you don't see the cash! You have to pay taxes although the Fund might actually have gone down in value! And what about the lost opportunity tariff of that money that you are now paying in taxes that one could have put into other investments? At least using the Lottery, you know the complete amount of taxes you could pay in the event you win and you also only have to pay taxes check here in case you do win.



Yes, you say, but the Lottery is gambling and I have no control over whether I win or lose. You are right. The Lottery is gambling. But same with a Mutual Fund. You don't have any control over trading stocks and neither does the Fund Manager. The market fails, the same is true your Fund. At least you recognize that you are gambling if you play the Lottery. You don't have the federal government, loan companies and your employer telling you that this Lottery is an excellent investment. And your employer doesn't go so far as to match the number you put in to the Lottery want it might along with your 401(k). Nobody is lying to you about the Lottery being gambling, but those invoved with positions of authority are lying to you about the chances of success in a Mutual Fund!



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



You say you do not like the idea that many of your Lottery gamblings are going to support government programs? Where do you think the majority of the earnings from your Mutual Fund are inclined? No, never to support government programs, but instead to support ignore the advisor's and the Mutual Fund manager's retirement? You take all of the risk, you add in all the capital, but the majority of the earnings from the Mutual Fund go on the Fund manager along with your investment advisor. At least using the Lottery, the funds are going to worthy causes, like the Arts.



Of course, I would never advise litigant to rely for the Lottery for their retirement. But neither would I advise them to depend upon Mutual Fund investments. For my dollar, the Lottery is much 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 prefer to put inside time to help you retire soon and retire rich. Financial freedom is accessible to those who're willing to work and learn about it, however, not likely for individuals who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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