Investing inside Lottery over Mutual Funds???

Even though I am not an investment advisor and never hold myself out as one, clients always 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 pension plan?



Contrary to popular belief, none of such are wise investments. Why? Among other reasons, they all involve putting money into a great investment vehicle over which they have little control regarding investment and timing and quite a few people end up choosing Mutual Funds as his or her investment within efforts. In fact, putting your money into the Lottery has to be better investment.



Really? The Lottery as a good 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 individuals are putting in cash in hopes of winning the important one? Where most of the money would go to someone else and also the chances are strong that I will miss part or every one 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 in the 401(k) or IRA. After all, exactly what are my odds of retiring on Mutual Fund investments? Not very high, actually.



A year or so ago, I was hearing a financial program on the radio on my way into work. The interviewer was asking the representative of a substantial Mutual Fund in regards to the performance from the Fund. The Rep responded how the Mutual Fund had risen in value by about 20% per year for the prior two years. But once the interviewer asked regarding the average return to the normal investor inside Fund, the Rep responded how the average investor had actually lost 2% annually. Why? Because in the timing of moving in and out from the market. Compare this towards the Lottery, where everyone knows the exact likelihood of winning and also the exact amount that is won!



But what regarding the great tax benefits of putting my money in to a 401(k) or perhaps an IRA? Yeah, right! Get a tax deduction when you're young and in a relatively low tax bracket in order to pay taxes about the money you are taking out when you are retired and in a very higher tax bracket? Yeah, that's a good deal. Or, consider 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 you are thinking that you ought to just put money into Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds result in capital gains taxes if 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 about the lost opportunity cost of that money that you will be now paying in taxes that one could have place into other investments? At least with the Lottery, you know the exact amount of taxes you will pay in the event you win and 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 do i think the a Mutual Fund. You don't have any control over the stock exchange and neither does the Fund Manager. The market fails, does your Fund. At least you recognize that you are gambling if you play the Lottery. You don't have the 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 total amount you put in to the Lottery enjoy it might together with your 401(k). Nobody is lying to you concerning the Lottery being gambling, but those who work in positions of authority are lying to you concerning the chances of success inside a Mutual Fund!



But surely, you say, there's a better probability of making money in a very Mutual Fund than there is within 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's losing all the money you put in to the Lottery. But you are never going to win big in a very Mutual Fund. In fact, Mutual Funds are meant to minimize your returns by making a "balanced portfolio." If they could minimize your risk from the market itself, this might be okay. But the problem is the fact that nobody can minimize the risk of 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 consequence of something that occurs in Tokyo.



You say you do not 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 the Mutual Fund 're going? No, not to support government programs, but to support neglect the advisor's and the Mutual Fund manager's retirement? You take every one 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 while using Lottery, the funds are getting to worthy causes, like the Arts.



Of course, I would never advise complaintant to rely about the Lottery for his or her retirement. But neither would I advise them to depend upon Mutual get more info 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 that will help you retire soon and retire rich. Financial freedom is accessible to those that are willing to work and learn about it, however, not likely for individuals who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



TomArticle Source:

Leave a Reply

Your email address will not be published. Required fields are marked *