Investing in the Lottery over Mutual Funds???

Even though I am not a great investment advisor rather than hold myself out as one, 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 inside my profit sharing plan or type of pension?



Contrary to popular belief, none of the are wise investments. Why? Among other reasons, they all involve putting money into a great investment vehicle over which they have little control concerning investment and timing and most people turn out choosing Mutual Funds as his or her investment within diets. In fact, putting your cash into the Lottery has to be better investment.



Really? The Lottery as a great investment vehicle? Sound crazy? Gamble my retirement funds away in the government-sponsored game of chance where I have little probability of winning? Where millions of other people are putting in take advantage hopes of winning the top one? Where the majority of the money travels to someone else along with the chances are strong that I will suffer part or every one of my money?



Wait a minute - shall we be held talking now regarding 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 couple of years ago, I was hearing a financial program on the radio walking on into work. The interviewer was asking the representative of a big Mutual Fund regarding the performance in the Fund. The Rep responded that this Mutual Fund had risen in value by an average of 20% per year for the prior 2 yrs. But once the interviewer asked in regards to the average return to the common investor in the Fund, the Rep responded that this average investor had actually lost 2% per year. Why? Because with the timing of going in and out in the market. Compare this for the Lottery, where everybody knows the exact likelihood of winning and also the exact amount that may be won!



But what concerning the great tax attributes of putting my money in to a 401(k) or an IRA? Yeah, right! Get a tax deduction when you are young and in the relatively low tax bracket to help you pay taxes for the money you're taking out when you're retired and in a very higher tax bracket? Yeah, which is a good deal. Or, consider the difference in tax rates on capital gains and dividends in the event you are not inside a 401(k) or IRA versus the normal income tax rates about the earnings whenever you pull them through your 401(k) or IRA.



So now you are thinking that you need to just purchase Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds result in capital gains taxes once the Fund Managers trade them even though you don't see the money! You have to pay taxes even though the Fund may actually have gone down in value! And what regarding the lost opportunity price of that money that you're now paying in taxes you could have placed into other investments? At least with all the Lottery, you know the complete amount of taxes you will pay in case you win and also you only have to pay taxes should 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 same with a Mutual Fund. You have no control over the stock market and neither does the Fund Manager. The market fails, does your Fund. At least you recognize that you're gambling whenever you play the Lottery. You don't have the government, banking institutions and your employer telling you how the Lottery is a great investment. And your employer doesn't go so far about match the number you put to the Lottery enjoy it might with your 401(k). Nobody is lying to you in regards to the Lottery being gambling, but those in positions of authority are lying to you regarding the chances of success in a very Mutual Fund!



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



You say you never like the idea that a lot of of your Lottery gamblings 're going to support government programs? Where do you think almost all of the earnings from the Mutual Fund 're going? No, to not support government programs, but instead to support neglect the advisor's and also the Mutual Fund manager's retirement? You take all of the risk, you put in every one of the capital, but a lot of the earnings from your Mutual Fund go read more towards the Fund manager along with your investment advisor. At least with the Lottery, the funds 're going to worthy causes, including the Arts.



Of course, I would never advise a customer to rely around the Lottery for his or her 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 in the event you want to retire, take a look at other investments and work with someone who would prefer to put in the time that may help you retire soon and retire rich. Financial freedom is accessible to those who're willing to work and understand it, but not likely in case you want to count on such risky investment strategies as Mutual Funds.



Warmest Regards,



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