Investing inside the Lottery over Mutual Funds???

Even though I am not a good investment advisor and not hold myself out together, clients continue to 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 in my profit sharing plan or monthly pension?



Contrary to popular belief, none of the are wise investments. Why? Among other reasons, they all involve putting money into a smart investment vehicle over which they've got little control regarding investment and timing and quite a few people wind up choosing Mutual Funds as their investment within diets. In fact, putting your hard earned money into the Lottery has to be 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 possibility of winning? Where millions of other folks are putting in take advantage hopes of winning the important one? Where a lot of the money travels to someone else and also the chances are strong that I will lose part or most of my money?



Wait a minute - shall we be talking now regarding 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 inside a 401(k) or IRA. After all, precisely what are my odds of retiring on Mutual Fund investments? Not very high, actually.



A few years ago, I was hearing a financial program around the radio on my way into work. The interviewer was asking the representative of a large Mutual Fund regarding the performance in 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 in the event the interviewer asked concerning the average return to the normal investor within the Fund, the Rep responded that this average investor had actually lost 2% per year. Why? Because from the timing of planning and out of the market. Compare this towards the Lottery, where everyone should know the exact odds of winning and the exact amount that might be won!



But what in regards to 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're young and in the relatively low tax bracket in order to pay taxes on the money you are taking out when you're retired and in a very higher tax bracket? Yeah, that's a good deal. Or, look at 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 about the earnings once you pull them through your 401(k) or IRA.



So now you are thinking that you need to just purchase Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds bring about capital gains taxes if the Fund Managers trade them even if you don't see the money! You have to pay taxes although Fund may actually have gone down in value! And what concerning the lost opportunity tariff of that money that you are now paying in taxes you could have put in other investments? At least using the Lottery, you know the actual amount of taxes you could pay if you win and you only have to pay taxes if you do win.



Yes, you say, however get more info the Lottery is gambling and I don't have any control over whether I win or lose. You are right. The Lottery is gambling. But same with a Mutual Fund. You don't have any control over the stock market and neither does the Fund Manager. The market fails, the same is true your Fund. At least you recognize that you are gambling whenever you play the Lottery. You don't have the federal government, finance institutions and your employer telling you how the Lottery is an excellent investment. And your employer doesn't go so far concerning match the sum you put in the Lottery as it might using your 401(k). Nobody is lying to you regarding the Lottery being gambling, but those invoved with positions of authority are lying to you regarding the chances of success in a very Mutual Fund!



But surely, you say, there exists a better potential for making money in the Mutual Fund than there is inside the Lottery? Hardly. There may be less of a potential for losing all the money you put right into a Mutual Fund than there's losing every one of the money you put in the Lottery. But you are never going to win big in the 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 nobody can minimize the risk with the market without sophisticated hedge strategies which are not typically utilized in Mutual Funds. At least using the Lottery, you have a probability of winning big. And you can sleep in the evening, because you aren't wondering if the probability of winning are inclined down overnight as a result of something that occur in Tokyo.



You say you don't like the idea that most of your Lottery gamblings are inclined to support government programs? Where do you think a lot of the earnings from your Mutual Fund are going? No, to never support government programs, but to support neglect the advisor's and also the Mutual Fund manager's retirement? You take all of the risk, you add in all the capital, but most of the earnings through 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 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 prefer to put in the time to assist you retire soon and retire rich. Financial freedom can be obtained to those who are willing to work and understand it, although not likely in case you want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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