Investing within the Lottery over Mutual Funds???

Even though I am not a great investment advisor and not hold myself out together, 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 during my profit sharing plan or monthly pension?



Contrary to popular belief, none of these are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they've little control as to investment and timing and most people end up choosing Mutual Funds for their investment within diets. In fact, putting your dollars into the Lottery would have been a better investment.



Really? The Lottery as a smart investment vehicle? Sound crazy? Gamble my retirement funds away in a government-sponsored game of chance where I have little possibility of winning? Where millions of other people are putting in money in hopes of winning the large one? Where most of the money goes to someone else and the chances are strong that I will forfeit part or most of my money?



Wait a moment - am i talking now about the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little possibility of winning. Sounds like a lot like Mutual Fund investment in a very 401(k) or IRA. After all, what exactly 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 on the radio going into work. The interviewer was asking the representative of a large Mutual Fund about the performance with the Fund. The Rep responded that the Mutual Fund had risen in value by about 20% annually for the prior a couple of years. But when the interviewer asked in regards to the average return to the average investor in the Fund, the Rep responded the average investor had actually lost 2% annually. Why? Because of the timing of going in and out of the market. Compare this towards the Lottery, where everybody knows the exact likelihood of winning and also the exact amount that could be won!



But what about the great tax attributes of putting my money in to a 401(k) or perhaps an IRA? Yeah, right! Get a tax deduction when you're young and in a very relatively low tax bracket to help you pay taxes on the money you adopt out when you find yourself retired and in the higher tax bracket? Yeah, this is a good deal. Or, think about the difference in tax rates on capital gains and dividends in case you are not in a 401(k) or IRA versus the ordinary income tax rates on the earnings if you pull them from the 401(k) or IRA.



So you now are thinking that you should just put money into 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 cash! You have to pay taxes however the Fund could possibly have gone down in value! And what in regards to the lost opportunity expense of that money that you are now paying in taxes that you could have put into other investments? At least with all the Lottery, you know the exact amount of taxes you could pay in the event you win and you also 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 goes with a Mutual Fund. You don't have any control over stock market trading and neither does the Fund Manager. The market goes down, the same is true your Fund. At least you recognize that you are gambling if you play the Lottery. You don't have the us government, loan companies and your employer telling you that this Lottery is a good investment. And your employer doesn't go so far concerning match the sum you put to the Lottery as it might together with your 401(k). Nobody is lying to you about the Lottery being gambling, but those involved with positions of authority are lying to you regarding the chances of success inside a Mutual Fund!



But surely, you say, there is a better probability of making money in the Mutual Fund than there is inside ca lottery games mega millions Lottery? Hardly. There may be less of a chance of losing all the money you put in a Mutual Fund than there's losing all the money you put into the Lottery. But you are never going to win big inside a Mutual Fund. In fact, Mutual Funds are built 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 nobody can minimize the risk of the market without sophisticated hedge strategies which are not typically employed in Mutual Funds. At least with the Lottery, you have a probability of winning big. And you can sleep through the night, as you aren't wondering if the odds of winning are inclined down overnight due to something that happens in Tokyo.



You say that you do not like the idea that most of your Lottery gamblings 're going to support government programs? Where do you think almost all of the earnings from your Mutual Fund are getting? No, to never support government programs, but rather to support ignore the advisor's as well as the Mutual Fund manager's retirement? You take all of the risk, you set in all the capital, but the majority of the earnings from the Mutual Fund go for the Fund manager and your investment advisor. At least while using Lottery, the funds are going to worthy causes, for example the Arts.



Of course, I would never advise a client to rely on the Lottery because of their 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, look at other investments and use someone who is willing to put inside the time to help you retire soon and retire rich. Financial freedom is accessible to those who are willing to work and understand it, and not likely for individuals who want to count on such risky investment strategies as Mutual Funds.



Warmest Regards,



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