Investing within the Lottery over Mutual Funds???

Even though I am not an investment advisor and not 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 within my profit sharing plan or type of pension?

Contrary to popular belief, none of these are wise investments. Why? Among other reasons, each of them involve putting money into a good investment vehicle over which they've got little control regarding investment and timing and many people end up choosing Mutual Funds for their investment within efforts. In fact, putting your dollars into the Lottery would have been 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 probability of winning? Where millions of other everyone is putting in cash in hopes of winning the large one? Where the majority of the money travels to someone else as well as the chances are strong that I will lose part or all of my money?

Wait a minute - are we talking now about the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little potential for winning. Sounds like nearly the same as Mutual Fund investment in a 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 paying attention to a financial program for the radio walking on into work. The interviewer was asking the representative of a sizable Mutual Fund about the performance from the Fund. The Rep responded how the Mutual Fund had risen in value by around 20% annually for the prior a couple of years. But when the interviewer asked about the average return to the common investor inside the Fund, the Rep responded how the average investor had actually lost 2% each year. Why? Because from the timing of going in and out in the market. Compare this for the Lottery, where everyone knows the exact odds of winning and the exact amount that could be won!

But what concerning the great tax advantages of putting my money right into a 401(k) or an IRA? Yeah, right! Get a tax deduction when you're young and in the relatively low tax bracket so you can pay taxes about the money you take out if you are retired and in a very higher tax bracket? Yeah, this is a good deal. Or, look at the difference in tax rates on capital gains and dividends should you are not in a 401(k) or IRA versus the standard income tax rates around the earnings once you pull them from the 401(k) or IRA.

So congratulations, you are thinking that you should just purchase Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds bring about capital gains taxes if the Fund Managers trade them while you don't see the bucks! You have to pay taxes however the Fund may actually 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 in other investments? At least with all the Lottery, you know the actual amount of taxes you can expect to pay if you win and you also only have to pay taxes in case you do win.

Yes, you say, though 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 have no control over the stock exchange and neither does the Fund Manager. The market falls, the same is true your Fund. At least you recognize that you are gambling if you play the Lottery. You don't have government entities, banking institutions and your employer telling you that the Lottery is a great investment. And your employer doesn't go so far as to match the amount you put in the Lottery as it might with your 401(k). Nobody is lying to you about the Lottery being gambling, but those invoved with positions of authority are lying to you regarding the chances of success inside a Mutual Fund!

But surely, you say, there exists a better possibility of making money in the Mutual Fund than there is inside Lottery? Hardly. There may be less of a chance of losing all of the money you put in a Mutual Fund than there's losing all the money you put in the Lottery. But you are never gonna win big in a Mutual Fund. In fact, Mutual Funds are made 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 the fact that nobody can minimize the risk in the market without sophisticated hedge strategies that aren't typically used in Mutual Funds. At least while using Lottery, you have a possibility of winning big. And you can sleep at night, when you aren't wondering if the likelihood of winning are getting down overnight as a consequence of something that occurs in Tokyo.

You say that you do not like the idea that most of your Lottery gamblings are going to support government programs? Where do you think most of the earnings out of your Mutual Fund are getting? No, never to support government programs, check here but instead to support neglect the advisor's as well as the Mutual Fund manager's retirement? You take all of the risk, you put in most of the capital, but the majority of the earnings through the Mutual Fund go on the Fund manager along with your investment advisor. At least with all the Lottery, the funds are inclined to worthy causes, including the Arts.

Of course, I would never advise a customer to rely for the Lottery for his or her retirement. But neither would I advise them to count 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, examine other investments and help someone who would like to put within the time to help you retire soon and retire rich. Financial freedom is available to those who will be willing to work and learn about it, although not likely for many who want to depend upon such risky investment strategies as Mutual Funds.

Warmest Regards,

TomArticle Source:

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