Investing inside the Lottery over Mutual Funds???

Even though I am not a good investment advisor and not hold myself out as you, clients continue to 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 during my profit sharing plan or type of pension?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they've little control about investment and timing and quite a few people wind up choosing Mutual Funds his or her investment within efforts. In fact, putting your cash 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 possibility of winning? Where millions of other folks are putting in profit hopes of winning the top one? Where a lot of the money goes to someone else as well as the chances are strong that I will lose part or all my money?



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



A year or two ago, I was listening to a financial program about the radio walking on into work. The interviewer was asking the representative of a sizable Mutual Fund in regards to the performance of the Fund. The Rep responded the Mutual Fund had risen in value by about 20% a year for the prior a couple of years. But in the event the interviewer asked concerning the average return to the normal investor inside the Fund, the Rep responded how the average investor had actually lost 2% per year. Why? Because with the timing of going in and out from the market. Compare this on the Lottery, where everyone understands the exact probability of winning and also the exact amount that might be won!



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



So now you are thinking that you can just invest in Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes when the Fund Managers trade them even though you don't see the money! You have to pay taxes however the 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 you might have put in other investments? At least with the Lottery, you know the actual amount of taxes you can expect to pay if you win and you only have to pay taxes should 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 do i think the a Mutual Fund. You have zero control over trading stocks and neither does the Fund Manager. The market falls, the same is true your Fund. At least you recognize that you are gambling whenever you play the Lottery. You don't have government entities, finance institutions and your employer telling you that this Lottery is a great investment. And your employer doesn't go so far concerning match the sum you put in to the Lottery want it might using your 401(k). Nobody is lying to you about 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's a better potential for making money inside a Mutual Fund than there is within the Lottery? Hardly. There may be less of a probability of losing every one of the money you put in a Mutual Fund bola than there is losing all of the money you put into 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 setting up 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 in the market without sophisticated hedge strategies which are not typically used in Mutual Funds. At least using the Lottery, you have a probability of winning big. And you can sleep in the evening, because you aren't wondering if the odds of winning 're going down overnight due to something that occurs in 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 ignore the advisor's as well as the Mutual Fund manager's retirement? You take most of the risk, you add in all the capital, but almost all of the earnings from your Mutual Fund go for the Fund manager plus your investment advisor. At least with the Lottery, the funds are inclined to worthy causes, including the Arts.



Of course, I would never advise a client to rely for the Lottery for retirement. But neither would I advise them to count on Mutual Fund investments. For my dollar, the Lottery is more fun and at least I know I'm gambling. But should you want to retire, look at other investments and help someone who would like to put inside time to assist you retire soon and retire rich. Financial freedom can be obtained to those who are willing to work and understand it, although not likely for those who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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