Investing in the Lottery over Mutual Funds???

Even though I am not a good investment advisor and not 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 inside my profit sharing plan or type of pension?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, they all involve putting money into a smart investment vehicle over which they've got little control as to investment and timing and quite a few people wind up choosing Mutual Funds as their investment within efforts. In fact, putting your hard earned money into the Lottery would be a better investment.



Really? The Lottery as a smart investment vehicle? Sound crazy? Gamble my retirement funds away in the government-sponsored game of chance where I have little potential for winning? Where millions of other folks are putting in money in hopes of winning the big one? Where almost all of the money visits someone else and the chances are strong that I will suffer 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 probability of winning. Sounds like similar to Mutual Fund investment inside a 401(k) or IRA. After all, exactly what are my chances of retiring on Mutual Fund investments? Not very high, actually.



A few years ago, I was hearing a financial program around the radio on my way into work. The interviewer was asking the representative of a large Mutual Fund concerning the performance from the Fund. The Rep responded that the Mutual Fund had risen in value by an average of 20% annually for the prior a couple of years. But if the interviewer asked regarding the average return to the normal investor inside the Fund, the Rep responded that this average investor had actually lost 2% each year. Why? Because with the timing of going in and out of the market. Compare this to the Lottery, where everybody knows the exact chances of winning and also the exact amount that is won!



But what about the great tax features of putting my money right into 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 on the money you take out when you find yourself retired and in the higher tax bracket? Yeah, which 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 around the earnings if you pull them through your 401(k) or IRA.



So you now are thinking that you need to just put money into Mutual Funds outside your 401(k) or IRA? Wrong again. check here Mutual Funds lead to capital gains taxes if the Fund Managers trade them even if you don't see the money! You have to pay taxes however the Fund could possibly have gone down in value! And what concerning the lost opportunity expense of that money you are now paying in taxes that you could have put into other investments? At least using the Lottery, you know the actual amount of taxes you will pay if you win and you also only have to pay taxes if you do win.



Yes, you say, nevertheless the Lottery is gambling and I have zero 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 trading stocks and neither does the Fund Manager. The market fails, so does your Fund. At least you recognize that you're gambling whenever you play the Lottery. You don't have the federal government, banking institutions and your employer telling you how the Lottery is an excellent investment. And your employer doesn't go so far concerning match the total amount you put to the Lottery want it might along with your 401(k). Nobody is lying to you in regards to the Lottery being gambling, but those invoved with positions of authority are lying to you in regards to the chances of success inside a Mutual Fund!



But surely, you say, there's a better chance of making money in a Mutual Fund than there is inside the Lottery? Hardly. There may be less of a chance of losing every one of the money you put in a Mutual Fund than there is losing every one of the money you put in the Lottery. But you are never planning to win big in the Mutual Fund. In fact, Mutual Funds are made 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 that nobody can minimize the risk in the market without sophisticated hedge strategies which aren't typically found in Mutual Funds. At least using the Lottery, you have a possibility of winning big. And you can sleep at night, because you aren't wondering if the odds of winning 're going down overnight because 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 most of the earnings from the Mutual Fund 're going? No, not to support government programs, but to support neglect the advisor's and also the Mutual Fund manager's retirement? You take all of the risk, you add in all the capital, but most of the earnings through the Mutual Fund go towards the Fund manager and your investment advisor. At least while using Lottery, the funds are getting to worthy causes, such as the Arts.



Of course, I would never advise complaintant to rely about 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 if you want to retire, examine other investments and use someone who will to put inside the 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 those who want to count on such risky investment strategies as Mutual Funds.



Warmest Regards,



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