Investing in the Lottery over Mutual Funds???

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

Contrary to popular belief, none of these are wise investments. Why? Among other reasons, each will involve putting money into a good investment vehicle over which they've little control as to investment and timing and a lot people end up choosing Mutual Funds for their investment within diets. In fact, putting your money into the Lottery will 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 everyone is putting in money in hopes of winning the top one? Where most of the money goes to someone else as well as the chances are strong that I will lose part or all of my money?

Wait a minute - am i talking now about the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little potential for winning. Sounds like similar to Mutual Fund investment in a very 401(k) or IRA. After all, what exactly are my probability of retiring on Mutual Fund investments? Not very high, actually.

A year or two ago, I was paying attention to a financial program around the radio walking on into work. The interviewer was asking the representative of a large Mutual Fund regarding the performance of the Fund. The Rep responded how the Mutual Fund had risen in value by about 20% each year for the prior a couple of years. But once the interviewer asked regarding the average return to the typical investor inside the Fund, the Rep responded that this average investor had actually lost 2% each year. Why? Because with the timing of opting and out of the market. Compare this towards the Lottery, where everyone understands the exact likelihood of winning as well as the exact amount that could be won!

But what concerning the great tax features of putting my money into a 401(k) or an IRA? Yeah, right! Get a tax deduction if you are young and in the relatively low tax bracket so you can pay taxes on the money you're taking out when you find yourself retired and in 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 inside a 401(k) or IRA versus the standard income tax rates for the earnings if you pull them out of your 401(k) or IRA.

So you now are thinking that you ought to just spend money on Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds result in capital gains taxes if the Fund Managers trade them even though you don't see the amount of money! You have to pay taxes although the Fund could possibly 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 into other investments? At least using the Lottery, you know the actual amount of taxes you will pay in case you win so you only have to pay taxes in case you do win.

Yes, you say, but the Lottery is gambling and I have no control over whether I win or lose. You are right. The Lottery is gambling. But same with a Mutual Fund. You don't have any 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 will be gambling once you play the Lottery. You don't have government entities, loan companies and your employer telling you that this Lottery is a superb investment. And your employer doesn't go so far about match the sum you put in the Lottery as it might using your 401(k). Nobody is lying to you regarding the Lottery being gambling, but those who work in positions of authority are lying to you in regards to the chances of success in the Mutual Fund!

But surely, you say, there exists a better potential for making money in a very Mutual Fund than there is inside Lottery? Hardly. There may be less of a probability of losing most of the money you put in a Mutual Fund than there exists losing most 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 built to minimize your returns by creating 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 of the market without sophisticated hedge strategies that are not typically employed in Mutual Funds. At least while using Lottery, you have a chance of winning big. And you can sleep at night, since you aren't wondering if the odds of winning are going down overnight as a consequence of something that is situated Tokyo.

You say you don't like the idea that a majority of of your Lottery gamblings are getting to support government programs? Where do you think a lot of the earnings out of your Mutual Fund are going? No, to never support government programs, but to support your investment advisor's and the Mutual Fund manager's retirement? You take all the risk, you place in all of the capital, but most of the earnings through the Mutual Fund go to the Fund manager as well as your investment advisor. At least with the Lottery, the funds are inclined to worthy causes, like the Arts.

Of course, I would never advise complaintant check here to rely on the Lottery because of their retirement. But neither would I advise them to depend upon Mutual Fund investments. For my dollar, the Lottery is 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 inside the time that may help you retire soon and retire rich. Financial freedom can be obtained to those who are willing to work and understand it, and not likely for many who want to depend upon such risky investment strategies as Mutual Funds.

Warmest Regards,

TomArticle Source:

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