Investing inside the Lottery over Mutual Funds???

Even though I am not a good investment advisor and never hold myself out jointly, clients still 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 during my profit sharing plan or monthly pension?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, all of them involve putting money into a good investment vehicle over which they have got little control as to investment and timing and many people find yourself choosing Mutual Funds as their investment within these plans. In fact, putting your cash into the Lottery has to be better investment.



Really? The Lottery as an investment vehicle? Sound crazy? Gamble my retirement funds away in the government-sponsored game of chance where I have little chance of winning? Where millions of other everyone is putting in money in hopes of winning the big one? Where a lot of the money goes to someone else and also the chances are strong that I will miss part or most of my money?



Wait a few minutes - shall we be held talking now about 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 inside a 401(k) or IRA. After all, precisely 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 about the radio going into work. The interviewer was asking the representative of a big Mutual Fund regarding the performance of the Fund. The Rep responded that this Mutual Fund had risen in value by typically 20% each year for the prior 2 yrs. But if the interviewer asked in regards to the average return to the normal investor in the Fund, the Rep responded that the average investor had actually lost 2% each year. Why? Because from the timing of planning and out with the market. Compare this towards the Lottery, where everyone understands the exact odds of winning along with the exact amount that might be won!



But what in regards to the great tax features of putting my money in a 401(k) or even an IRA? Yeah, right! Get a tax deduction if you are young and in the relatively low tax bracket to help you pay taxes on the money you adopt out when you find yourself retired and in the higher tax bracket? Yeah, this is a good deal. Or, take into account the difference in tax rates on capital gains and dividends in case you are not in a very 401(k) or IRA versus the ordinary income tax rates on the earnings whenever you pull them from 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 lead to capital gains taxes if the Fund Managers trade them even if you don't see the amount of money! You have to pay taxes although the Fund could actually have gone down in value! And what in regards to the lost opportunity cost of that money you are now paying in taxes you could have place into other investments? At least with all the Lottery, you know the exact amount of taxes you will pay if you win and you also only have to pay taxes if you do win.



Yes, you say, nevertheless the Lottery is gambling and I have no 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 the stock market and neither does the Fund Manager. The market falls, so does your Fund. At least you recognize that you are gambling whenever you play the Lottery. You don't have government entities, loan companies and your employer telling you that this Lottery is an excellent investment. And your employer doesn't go so far as to match the sum you put to the Lottery like it get more info might along with your 401(k). Nobody is lying to you about the Lottery being gambling, but those invoved with positions of authority are lying to you concerning the chances of success in a very Mutual Fund!



But surely, you say, there's a better potential for making money in a Mutual Fund than there is inside Lottery? Hardly. There may be less of a possibility of losing every one of the money you put right into a Mutual Fund than there exists losing all of the money you put in to the Lottery. But you are never gonna 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 with the market itself, this might be okay. But the problem is always that nobody can minimize the risk in the market without sophisticated hedge strategies that are not typically utilized in Mutual Funds. At least with all the Lottery, you have a potential for winning big. And you can sleep at night, because you aren't wondering if the likelihood of winning are getting down overnight as a result of something that occurs in Tokyo.



You say you don't like the idea that a lot of of your Lottery gamblings are going to support government programs? Where do you think most of the earnings out of your Mutual Fund are getting? No, to not support government programs, but instead to support ignore the advisor's and the Mutual Fund manager's retirement? You take all the risk, you place in all the capital, but a lot of the earnings from your Mutual Fund go to the Fund manager along with your investment advisor. At least while using Lottery, the funds are going to worthy causes, like the Arts.



Of course, I would never advise a client to rely on the Lottery for their 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 in case you want to retire, examine other investments and help someone who will to put inside time that may help you retire soon and retire rich. Financial freedom is accessible to those that are willing to work and understand it, and not likely for many who want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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