Investing in the Lottery over Mutual Funds???

Even though I am not a smart investment advisor and not hold myself out together, clients still ask me what to do to prepare 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, each will involve putting money into a good investment vehicle over which they have little control concerning investment and timing and most people turn out choosing Mutual Funds his or her investment within efforts. 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 in a very government-sponsored game of chance where I have little potential for winning? Where millions of other individuals are putting in cash in hopes of winning the top one? Where almost all of the money visits someone else as well as the chances are strong that I will forfeit part or every one of my money?



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



A year or two ago, I was listening to a financial program about the radio walking on into work. The interviewer was asking the representative of a sizable Mutual Fund in regards to the performance of the Fund. The Rep responded how the Mutual Fund had risen in value by an average of 20% each year for the prior couple of years. But once the interviewer asked in regards to the average return to the common investor inside Fund, the Rep responded that the average investor had actually lost 2% per year. Why? Because of the timing of moving in and out with the market. Compare this for the Lottery, where everybody knows the exact chances of winning as well as the exact amount that could be won!



But what concerning the great tax benefits of putting my money in to 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 on the money you are taking out when you're retired and inside a higher tax bracket? Yeah, which is a good deal. Or, take into account the difference in tax rates on capital gains and dividends should you are not in the 401(k) or IRA versus the normal income tax rates for the earnings whenever you pull them through your 401(k) or IRA.



So you now are thinking that you need to just spend money on Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds bring about capital gains taxes if the Fund Managers trade them even when you don't see the cash! You have to pay taxes although the Fund may actually have gone down in value! And what in regards to the lost opportunity expense of that money that you will be now paying in taxes you could have put into other investments? At least with all the Lottery, you know the exact amount of taxes you will probably pay in the event you win so you only have to pay taxes in case you do win.



Yes, you say, though the Lottery is gambling and I have no 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 the stock exchange and neither does the Fund Manager. The market falls, so does your Fund. At least you recognize that you're gambling whenever 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 regarding match the amount you put into the Lottery enjoy it might together with your 401(k). Nobody is lying to you about the Lottery being gambling, but those in positions of authority are lying to you about the chances of success in a Mutual Fund!



But surely, you say, you will find there's better probability of making money inside a Mutual Fund than there is inside Lottery? Hardly. There may be less of a potential for losing all of the money you put right into a Mutual Fund than there is certainly losing all the money you put in to the Lottery. But you are never likely to win big in a very Mutual Fund. In fact, Mutual Funds are meant to minimize your returns by setting up a "balanced portfolio." If they could minimize your risk with the market itself, this might be okay. But the problem is always that nobody can minimize the risk from the market without sophisticated hedge strategies that are not typically employed in Mutual Funds. At least while using 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 inclined down overnight as a result of something that occur in Tokyo.



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



Of course, I would never advise a client to rely for more info the Lottery for retirement. But neither would I advise them to rely on Mutual Fund investments. For my dollar, the Lottery is a bit more fun and at least I know I'm gambling. But should you want to retire, look at other investments and help someone who would like to put inside time to assist you retire soon and retire rich. Financial freedom is available to those that are willing to work and find out about it, and not likely for individuals who want to rely on such risky investment strategies as Mutual Funds.



Warmest Regards,



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