Investing inside Lottery over Mutual Funds???

Even though I am not a smart investment advisor and don't hold myself out together, clients continue to 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 these are wise investments. Why? Among other reasons, they all involve putting money into a great investment vehicle over which they have little control as to investment and timing and a lot people end up choosing Mutual Funds as his or her investment within diets. In fact, putting your cash 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 individuals are putting in take advantage hopes of winning the top one? Where the majority of the money would go to someone else as well as the chances are strong that I will suffer part or all my money?



Wait a moment - are we talking now concerning 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 are my likelihood of retiring on Mutual Fund investments? Not very high, actually.



A few years ago, I was playing a financial program for the radio walking on into work. The interviewer was asking the representative of a substantial Mutual Fund in regards to the performance with the Fund. The Rep responded how the Mutual Fund had risen in value by about 20% per year for the prior couple of years. But in the event the interviewer asked regarding the average return to the normal investor in the Fund, the Rep responded how the average investor had actually lost 2% annually. Why? Because with the timing of planning and out with the market. Compare this for the Lottery, where everyone understands the exact likelihood of winning as well as the exact amount that may be won!



But what in regards to the great tax features of putting my money in to a 401(k) or an IRA? Yeah, right! Get a tax deduction when you find yourself young and in the relatively low tax bracket so that you can pay taxes around the money you're taking out if you are retired and in a higher tax bracket? Yeah, what a good deal. Or, think about the difference in tax rates on capital gains and dividends should you are not in the 401(k) or IRA versus the standard income tax rates on the earnings once you pull them out of your 401(k) or IRA.



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



Yes, you say, but 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 trading stocks and neither does the Fund Manager. The market goes down, the same is true your Fund. At least you recognize you are gambling if you play the Lottery. You don't have the federal government, loan companies and your employer telling you that the Lottery is a great investment. And your employer doesn't go so far about match the amount you put in to the Lottery enjoy it might with your 401(k). Nobody here is lying to you regarding the Lottery being gambling, but those invoved with positions of authority are lying to you about the chances of success in a Mutual Fund!



But surely, you say, there is a better chance of making money in a Mutual Fund than there is in the Lottery? Hardly. There may be less of a probability of losing every one of the money you put in a Mutual Fund than there exists losing most of the money you put to the Lottery. But you are never likely to win big inside a Mutual Fund. In fact, Mutual Funds are designed 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 always that nobody can minimize the risk with the market without sophisticated hedge strategies that aren't typically utilized in Mutual Funds. At least with all the Lottery, you have a potential for winning big. And you can sleep through the night, since you aren't wondering if the chances of winning are going down overnight as a consequence of something that is situated Tokyo.



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



Of course, I would never advise a client to rely about 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 more fun and at least I know I'm gambling. But should you want to retire, have a look at other investments and assist someone who is willing to put inside time to assist you retire soon and retire rich. Financial freedom is available to those who will be willing to work and find out about it, although not likely for those who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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