Investing in the Lottery over Mutual Funds???

Even though I am not a great investment advisor and never hold myself out as you, 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 inside my profit sharing plan or type of pension?



Contrary to popular belief, none of the are wise investments. Why? Among other reasons, all of them involve putting money into a good investment vehicle over which they've got little control concerning investment and timing and many people find yourself choosing Mutual Funds as his or her investment within diets. In fact, putting your hard earned money into the Lottery would be a better investment.



Really? The Lottery as a great investment vehicle? Sound crazy? Gamble my retirement funds away in a very government-sponsored game of chance where I have little potential for winning? Where millions of other individuals are putting in money in hopes of winning the big one? Where a lot of the money visits someone else and also the chances are strong that I will suffer part or all my money?



Wait a few minutes - shall we be talking now about the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little potential for winning. Sounds like as being similar to Mutual Fund investment in a 401(k) or IRA. After all, precisely what are my likelihood of retiring on Mutual Fund investments? Not very high, actually.



A year or so ago, I was listening to a financial program about the radio on my way into work. The interviewer was asking the representative of a substantial Mutual Fund in regards to the performance of the Fund. The Rep responded the Mutual Fund had risen in value by an average of 20% annually for the prior 2 yrs. But when the interviewer asked concerning the average return to the average investor inside the Fund, the Rep responded how the average investor had actually lost 2% per year. Why? Because from the timing of planning and out from the market. Compare this to the Lottery, where everybody knows the exact chances of winning as well as the exact amount that could be won!



But what in regards to the great tax advantages of putting my money right into a 401(k) or even an IRA? Yeah, right! Get a tax deduction when you are young and in a relatively low tax bracket to help you pay taxes about the money you are taking out if you are retired and inside a higher tax bracket? Yeah, that's a good deal. Or, consider the difference in tax rates on capital gains and dividends if you are not in a 401(k) or IRA versus the normal income tax rates about the earnings if you pull them from your 401(k) or IRA.



So congratulations, you are thinking that you should 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 amount of money! You have to pay taxes however the Fund could possibly have gone down in value! And what regarding the lost opportunity tariff of that money that you will be now paying in taxes that one could have placed into other investments? At least with all the Lottery, you know the actual amount of taxes you can expect to pay if you win and also you only have to pay taxes in case 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 same goes with a Mutual Fund. You have zero control over stock market trading and neither does the Fund Manager. The market falls, so does your Fund. At least you recognize that you are gambling when you play the Lottery. You don't have the federal government, banking institutions and your bola employer telling you the Lottery is a good investment. And your employer doesn't go so far as to match the number you put in to the Lottery as it might with your 401(k). Nobody is lying to you regarding the Lottery being gambling, but those involved with 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 inside a Mutual Fund than there is in 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 certainly losing most of the money you put to the Lottery. But you are never planning to win big in the Mutual Fund. In fact, Mutual Funds are designed to minimize your returns by setting up a "balanced portfolio." If they could minimize your risk of the market itself, this might be okay. But the problem is always that nobody can minimize the risk with the market without sophisticated hedge strategies that aren't typically used in Mutual Funds. At least with all the Lottery, you have a chance of winning big. And you can sleep in the evening, as you aren't wondering if the chances of winning 're going down overnight because of something that occurs in Tokyo.



You say you don't like the idea that a lot of of your Lottery gamblings are inclined to support government programs? Where do you think the majority of the earnings from a Mutual Fund are inclined? No, to not support government programs, but alternatively to support ignore the advisor's as well as the Mutual Fund manager's retirement? You take all of the risk, you place in every one of the capital, but almost all of the earnings from the Mutual Fund go on the Fund manager as well as your investment advisor. At least while using Lottery, the funds are going to worthy causes, such as the Arts.



Of course, I would never advise a client to rely about the Lottery for their retirement. But neither would I advise them to rely on Mutual Fund investments. For my dollar, the Lottery is much more fun and at least I know I'm gambling. But in case you want to retire, take a look at other investments and work with someone who would prefer to put in the time that will help you retire soon and retire rich. Financial freedom is accessible to those who're willing to work and understand it, and not likely in case you want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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