Investing in the Lottery over Mutual Funds???

Even though I am not an investment advisor and not hold myself out as you, clients continue to ask me what to do to plan 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 the are wise investments. Why? Among other reasons, they all involve putting money into a smart investment vehicle over which they've little control as to investment and timing and a lot people find yourself choosing Mutual Funds as their investment within these plans. In fact, putting your cash into the Lottery would be a better investment.



Really? The Lottery as a smart investment vehicle? Sound crazy? Gamble my retirement funds away in a government-sponsored game of chance where I have little potential for winning? Where millions of other folks are putting in profit hopes of winning the top one? Where a lot of the money would go to someone else as well as the chances are strong that I will miss part or all of my money?



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



A year or two ago, I was listening to a financial program around the radio going into work. The interviewer was asking the representative of a substantial Mutual Fund regarding the performance from the Fund. The Rep responded that the Mutual Fund had risen in value by an average of 20% each year for the prior a couple of years. But once the interviewer asked concerning the average return to the normal investor inside the Fund, the Rep responded that the average investor had actually lost 2% per year. Why? Because from the timing of planning and out from the market. Compare this for the Lottery, where everyone knows the exact probability of winning as well as the exact amount that may be won!



But what about the great tax benefits of putting my money into a 401(k) or an IRA? Yeah, right! Get a tax deduction when you find yourself young and in the relatively low tax bracket in order to pay taxes about the money you're taking out if you are retired and in the higher tax bracket? Yeah, that's a good deal. Or, look at the difference in tax rates on capital gains and dividends in the event you are not in a 401(k) or IRA versus the normal income tax rates around the earnings whenever you pull them from your 401(k) or IRA.



So you are thinking that you can 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 when you don't see the cash! You have to pay taxes although the Fund might actually have gone down in value! And what concerning the lost opportunity price of that money you are now paying in taxes you could have put in other investments? At least with the Lottery, you know the actual amount of taxes you will probably pay in the event you win and you only have to pay taxes in case you do win.



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



But surely, you say, you will find there's better possibility of making money in a Mutual Fund than there is inside Lottery? Hardly. There may be less of a chance of losing all the money you put into a Mutual Fund than there is certainly losing all the money you put in to 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 making a "balanced portfolio." If they could minimize your risk with the market itself, this might be okay. But the problem is nobody can minimize the risk of the market without sophisticated hedge strategies which aren't typically used in Mutual Funds. At least with the Lottery, you have a possibility of winning big. And you can sleep in the evening, when you aren't wondering if the likelihood of winning are going down overnight as a consequence of something that is situated Tokyo.



You say you never like the idea that most of your Lottery gamblings are inclined to support government programs? Where do you think the majority of the earnings out of your Mutual Fund are getting? No, not to support government programs, but alternatively to support ignore the advisor's as well as the Mutual Fund manager's retirement? You take most of the risk, you set in all of the capital, but almost all of the earnings through the Mutual Fund go for the Fund manager along with your investment advisor. At least with the Lottery, the funds are getting to worthy causes, such as the Arts.



Of course, I would never advise a customer to rely for the Lottery for their retirement. But neither would I advise them to rely on Mutual Fund investments. For my dollar, the Lottery is much more fun and at least I know I'm gambling. But in the event you want to retire, take a look at other investments and help someone who is willing to put inside the time to help you retire soon and retire rich. Financial freedom can be obtained to those who will be willing to work and find out about it, however, not likely for those who want to depend on such risky investment strategies as Mutual Funds.



Warmest Regards,



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