Investing inside Lottery over Mutual Funds???

Even though I am not a great investment advisor and don't hold myself out as one, clients carry on and 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 in my profit sharing plan or pension plan?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, each of them involve putting money into a great investment vehicle over which they have little control as to investment and timing and many people wind up choosing Mutual Funds his or her investment within efforts. In fact, putting your dollars 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 chance of winning? Where millions of other everyone is putting in cash in hopes of winning the top one? Where almost all of the money visits someone else and also the chances are strong that I will forfeit part or all my money?



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



A year or so ago, I was playing a financial program around the radio walking on into work. The interviewer was asking the representative of a substantial Mutual Fund regarding the performance of the Fund. The Rep responded how the Mutual Fund had risen in value by an average of 20% a year for the prior 2 yrs. But when the interviewer asked about the average return to the typical investor within the Fund, the Rep responded that the average investor had actually lost 2% each year. Why? Because with the timing of planning and out of the market. Compare this on the Lottery, where everyone knows the exact odds of winning and the exact amount that might be won!



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



So now you are thinking that you ought to just put money into Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes in the event the Fund Managers trade them while you don't see the cash! You have to pay taxes although Fund could actually have gone down in value! And what regarding the lost opportunity cost of that money that you are now paying in taxes that you could have put in other investments? At least with the Lottery, you know the precise amount of taxes you will pay in the event you win and you only have to pay read more taxes if you do win.



Yes, you say, but the Lottery is gambling and I don't have any control over whether I win or lose. You are right. The Lottery is gambling. But same with a Mutual Fund. You haven't any control over trading stocks and neither does the Fund Manager. The market decreases, the same is true your Fund. At least you recognize that you're gambling once you play the Lottery. You don't have the us government, loan companies and your employer telling you that this Lottery is a superb investment. And your employer doesn't go so far concerning match the sum you put in to the Lottery enjoy it might using your 401(k). Nobody is lying to you concerning the Lottery being gambling, but those in positions of authority are lying to you about the chances of success in a very Mutual Fund!



But surely, you say, there exists a better possibility of making money in a Mutual Fund than there is inside Lottery? Hardly. There may be less of a possibility of losing all the money you put in to a Mutual Fund than there's losing all of the money you put in the Lottery. But you are never likely to win big in a Mutual Fund. In fact, Mutual Funds are built to minimize your returns by creating a "balanced portfolio." If they could minimize your risk of the market itself, this might be okay. But the problem is nobody can minimize the risk from the market without sophisticated hedge strategies that are not typically employed in Mutual Funds. At least with all the Lottery, you have a possibility of winning big. And you can sleep during the night, when you aren't wondering if the likelihood of winning are going down overnight as a result of something that occur in Tokyo.



You say that you do not like the idea that a majority of of your Lottery gamblings are inclined to support government programs? Where do you think a lot of the earnings from a Mutual Fund are going? No, to never support government programs, but instead to support your investment advisor's along with the Mutual Fund manager's retirement? You take most of the risk, you set in all the capital, but almost all of the earnings through the Mutual Fund go to the Fund manager along with your investment advisor. At least using the Lottery, the funds are inclined to worthy causes, such as 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 on Mutual Fund investments. For my dollar, the Lottery is a bit more fun and at least I know I'm gambling. But if you want to retire, have a look at other investments and work with someone who would like to put in the time to help you retire soon and retire rich. Financial freedom can be acquired to those who are willing to work and understand it, and not likely for those who want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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