Investing in the Lottery over Mutual Funds???

Even though I am not an 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 during my profit sharing plan or type of pension?

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

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

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

A couple of years ago, I was playing a financial program on the radio on my way 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 around 20% a year for the prior a couple of years. But when the interviewer asked in regards to the average return to the average investor inside Fund, the Rep responded that this average investor had actually lost 2% each year. Why? Because in the timing of planning and out in the market. Compare this on the Lottery, where everyone knows the exact chances of winning and also the exact amount that might be won!

But what regarding the great tax features of putting my money in a 401(k) or an IRA? Yeah, right! Get a tax deduction when you're young and in a relatively low tax bracket so that you can pay taxes about the money you adopt out when you're retired and in a very higher tax bracket? Yeah, which is a good deal. Or, look at the difference in tax rates on capital gains and dividends if you are not inside a 401(k) or IRA versus the normal income tax rates on the earnings if you pull them out of your 401(k) or IRA.

So congratulations, you are thinking that you ought to just purchase Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes when the Fund Managers trade them while you don't see the bucks! You have to pay taxes even though the Fund could possibly have gone down in value! And what concerning the lost opportunity expense of that money that you are now paying in taxes that you might have place into other investments? At least with the Lottery, you know the exact amount of taxes you will probably pay if you win and you only have to pay taxes should you do win.

Yes, you say, however 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 with a Mutual Fund. You have zero control over stock market trading and neither does the Fund Manager. The market decreases, does your Fund. At least you recognize that you are gambling if you play the Lottery. You don't have the federal government, banking institutions and your employer telling you that the Lottery is a good investment. And your employer doesn't go so far concerning match the number you put in to the Lottery enjoy it might along with your 401(k). Nobody is lying to you concerning the Lottery being gambling, but those who work in positions of authority are lying to you in regards to the chances of success inside a Mutual Fund!

But surely, you say, there's a better possibility of making money inside a Mutual Fund than there is inside Lottery? Hardly. There may be less of a chance of losing all of the money you put in to a Mutual Fund than there's losing all of the money you put in the Lottery. But you are never planning to win big in a Mutual Fund. In fact, Mutual Funds are made to minimize your returns by creating a "balanced portfolio." If they could minimize your risk from the market itself, this might be okay. But the problem is that nobody can minimize the risk of the market without sophisticated hedge strategies which aren't typically found 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 due to something that is situated Tokyo.

You say you don't like the idea that many of your Lottery gamblings are getting to support government programs? Where do you think a lot get more info of the earnings from a Mutual Fund are going? No, to never support government programs, but alternatively to support neglect 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 a lot of the earnings from your Mutual Fund go on the Fund manager plus your investment advisor. At least with the Lottery, the funds are going to worthy causes, like the Arts.

Of course, I would never advise complaintant to rely for the Lottery for his or her retirement. But neither would I advise them to depend upon Mutual Fund investments. For my dollar, the Lottery is a bit more fun and at least I know I'm gambling. But in case you want to retire, look at other investments and help someone who will to put inside the time to help you retire soon and retire rich. Financial freedom can be obtained to those who are willing to work and find out about it, but not likely for individuals who want to depend upon such risky investment strategies as Mutual Funds.

Warmest Regards,

TomArticle Source:

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