Investing inside Lottery over Mutual Funds???

Even though I am not a good investment advisor and not hold myself out as one, clients always ask me what to do to get ready for retirement. Should I max out my 401(k) contribution? Should I do an IRA? Should I put more in my profit sharing plan or type of pension?



Contrary to popular belief, none of those are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they have got little control as to investment and timing and many people turn out choosing Mutual Funds his or her investment within these plans. In fact, putting your cash into the Lottery would be a better investment.



Really? The Lottery as a great investment vehicle? Sound crazy? Gamble my retirement funds away in the government-sponsored game of chance where I have little possibility of winning? Where millions of other folks are putting in cash in hopes of winning the important one? Where almost all of the money goes to someone else along with the chances are strong that I will lose part or most of my money?



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



A couple of years ago, I was playing a financial program about the radio walking on into work. The interviewer was asking the representative of a substantial Mutual Fund regarding the performance of the Fund. The Rep responded that the Mutual Fund had risen in value by an average of 20% a year for the prior two years. But when the interviewer asked concerning the average return to the average investor within the Fund, the Rep responded that the average investor had actually lost 2% annually. Why? Because from the timing of moving in and out with the market. Compare this for the Lottery, where everyone should know the exact probability of winning and the exact amount that may be won!



But what in regards to the great tax advantages of putting my money in to a 401(k) or an IRA? Yeah, right! Get a tax deduction if you are young and inside a relatively low tax bracket so that you can pay taxes around the money you take out when you're retired and in a very higher tax bracket? Yeah, this is 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 on the earnings once you pull them through 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 lead to capital gains taxes in the event the Fund Managers trade them even if you don't see the cash! You have to pay taxes however the Fund could possibly 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 place into other investments? At least while using Lottery, you know the precise amount of taxes you can expect to pay if 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 haven't any control over trading stocks and neither does the Fund Manager. The market decreases, the same is true your Fund. At least you recognize that you're gambling whenever you play the Lottery. You don't have the us government, financial institutions and your employer telling you the Lottery is a great investment. And your employer doesn't go so far regarding match the sum you put in the Lottery enjoy it might with your 401(k). Nobody is lying to you in regards to the Lottery being gambling, but those involved with positions of authority are lying to you in regards to the chances of success in a very Mutual Fund!



But surely, you say, there exists a better potential for making money in a very Mutual Fund than there is inside the Lottery? Hardly. There may be less of a potential for losing most of the money you put in to a Mutual Fund than there is losing all of the money you put in to the Lottery. But you are check here never likely to win big inside a Mutual Fund. In fact, Mutual Funds are built to minimize your returns by setting up a "balanced portfolio." If they could minimize your risk of the market itself, this might be okay. But the problem is that nobody can minimize the risk with the market without sophisticated hedge strategies which 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, since you aren't wondering if the likelihood of winning are going down overnight because of something that is situated 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 a lot of the earnings out of your Mutual Fund 're going? No, to not support government programs, but instead to support ignore the advisor's along with the Mutual Fund manager's retirement? You take every one of the risk, you set in most of the capital, but almost all of the earnings from your Mutual Fund go to the Fund manager and your investment advisor. At least while using Lottery, the funds 're going to worthy causes, for example the Arts.



Of course, I would never advise a customer to rely around the Lottery for their retirement. But neither would I advise them to count on Mutual Fund investments. For my dollar, the Lottery is a lot more fun and at least I know I'm gambling. But in case you want to retire, take a look at other investments and work with someone who will to put inside the time that may help you retire soon and retire rich. Financial freedom can be acquired to those who are willing to work and discover it, although not likely for many who want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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