Investing in the Lottery over Mutual Funds???

Even though I am not a great investment advisor and never hold myself out jointly, clients carry on and 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, each of them involve putting money into an investment vehicle over which they have little control about investment and timing and quite a few people end up choosing Mutual Funds for their investment within diets. In fact, putting your cash 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 chance of winning? Where millions of other people are putting in money in hopes of winning the big one? Where most of the money goes to someone else and the chances are strong that I will miss part or all my money?



Wait a minute - are we talking now concerning the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little potential for winning. Sounds like nearly the same as Mutual Fund investment in a very 401(k) or IRA. After all, what exactly are my probability of retiring on Mutual Fund investments? Not very high, actually.



A year or so ago, I was paying attention to a financial program around the radio walking on into work. The interviewer was asking the representative of a large Mutual Fund concerning the performance of the Fund. The Rep responded how the Mutual Fund had risen in value by around 20% each year for the prior two years. But once the interviewer asked concerning the average return to the average investor within the Fund, the Rep responded that this average investor had actually lost 2% annually. Why? Because from the timing of moving in and out from the market. Compare this towards the Lottery, where everyone should know the exact chances of winning as well as the exact amount that is won!



But what regarding the great tax advantages of putting my money right into a 401(k) or an IRA? Yeah, right! Get a tax deduction when you're young and inside a relatively low tax bracket so you can pay taxes about the money you adopt out if you are retired and in the higher tax bracket? Yeah, which is a good deal. Or, look at the difference in tax rates on capital gains and dividends if you are not in the 401(k) or IRA versus the normal income tax rates about the earnings when you pull them from your 401(k) or IRA.



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



Yes, you say, nevertheless 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 goes with a Mutual Fund. You haven't any control over the stock market and neither does the Fund Manager. The market fails, so does your Fund. At least you recognize that you will be gambling when you play the Lottery. You don't have the federal government, finance institutions and your employer telling you that this Lottery is a good investment. And your employer doesn't go so far as to match the number you put into the Lottery as it might together 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 concerning the chances of success inside a Mutual Fund!



But surely, you say, there exists a better possibility of making money in the Mutual Fund than there is inside the Lottery? Hardly. There may be less of a probability of losing all of the money you put right into a Mutual Fund than there is certainly losing most of the money you put in the Lottery. But you are never gonna win big in a very Mutual Fund. In fact, Mutual Funds are built to minimize your returns by developing 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 in the market without sophisticated hedge strategies that aren't typically utilized in Mutual Funds. At least with the Lottery, you have a chance of winning big. And you can sleep in the evening, because you aren't wondering if the chances of winning are inclined down overnight because of something that is situated Tokyo.



You say you never like the idea that many of your Lottery gamblings are getting to support government programs? Where do you think here the majority of the earnings from a Mutual Fund 're going? No, not to support government programs, but rather to support your investment advisor's and the Mutual Fund manager's retirement? You take every one of the risk, you set in all the capital, but the majority of the earnings in the Mutual Fund go on the Fund manager plus your investment advisor. At least while using Lottery, the funds are getting to worthy causes, like the Arts.



Of course, I would never advise a customer to rely for the Lottery for retirement. But neither would I advise them to depend on Mutual Fund investments. For my dollar, the Lottery is a bit more fun and at least I know I'm gambling. But in the event you want to retire, look at other investments and help someone who would prefer to put within the time that may help you retire soon and retire rich. Financial freedom can be acquired to those who're willing to work and learn about it, however, not likely for many who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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