Investing inside the Lottery over Mutual Funds???

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



Contrary to popular belief, none of such are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they have got little control concerning investment and timing and a lot people end up choosing Mutual Funds for their investment within these plans. 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 a government-sponsored game of chance where I have little potential for winning? Where millions of other individuals are putting in money in hopes of winning the top one? Where the majority of the money goes to someone else and also the chances are strong that I will suffer part or most of my money?



Wait one minute - shall we be talking now concerning the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little probability of winning. Sounds like nearly the same as 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 few 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 concerning 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 normal investor inside the Fund, the Rep responded the average investor had actually lost 2% each year. Why? Because of the timing of opting and out of the market. Compare this to the Lottery, where everyone understands the exact probability of winning as well as the exact amount that could be won!



But what regarding the great tax features of putting my money in to a 401(k) or perhaps an IRA? Yeah, right! Get a tax deduction if you are young and inside a relatively low tax bracket so you can pay taxes about the money you are taking out when you're retired and in a higher tax bracket? Yeah, what a good deal. Or, look at the difference in tax rates on capital gains and dividends if you are not in a very 401(k) or IRA versus the standard income tax rates for the earnings once you pull them out of your 401(k) or IRA.



So you are thinking that you ought to just invest in Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds cause capital gains taxes once the Fund Managers trade them even though you don't see the bucks! You have to pay taxes although Fund might actually have gone down in value! And what regarding the lost opportunity price of that money that you are now paying in taxes that one could have put into other investments? At least with all the Lottery, you know the exact amount of taxes you will pay if you win so you only have to pay taxes in case you do win.



Yes, you say, but the Lottery is gambling and I haven't any control over whether I win or lose. You are right. The Lottery is gambling. But so is a Mutual Fund. You don't have any control over stock market trading and neither does the Fund Manager. The market goes down, does your Fund. At least you recognize that you are gambling whenever you play the Lottery. You don't have government entities, banking institutions and your employer telling you the Lottery is an excellent investment. And your employer doesn't go so far as to match the total amount you put in the Lottery enjoy it might along with your 401(k). Nobody is lying to you about the Lottery being gambling, but those who work in positions of authority are lying to you regarding the chances of success inside a Mutual Fund!



But surely, you say, you will find there's better chance of making money inside a Mutual Fund than there is inside the Lottery? Hardly. There may be less of a probability of losing all of the money you put right into a Mutual Fund than there is certainly losing every one of the money you put into 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 creating a "balanced portfolio." If they could more info minimize your risk in 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 utilized in Mutual Funds. At least with the Lottery, you have a probability of winning big. And you can sleep in the evening, as you aren't wondering if the likelihood of winning are going down overnight as a consequence of something that is situated Tokyo.



You say you never like the idea that many of your Lottery gamblings are going to support government programs? Where do you think almost all of the earnings from the Mutual Fund 're going? No, not to support government programs, but to support neglect the advisor's along with the Mutual Fund manager's retirement? You take most of the risk, you place 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 with all the Lottery, the funds are going to worthy causes, for example the Arts.



Of course, I would never advise a customer to rely on the Lottery because of their retirement. But neither would I advise them to depend on Mutual Fund investments. For my dollar, the Lottery is a lot more fun and at least I know I'm gambling. But in case you want to retire, take a look at other investments and help someone who would prefer 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, but not likely for many who want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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