Investing in the Lottery over Mutual Funds???

Even though I am not a good investment advisor rather than hold myself out together, clients still 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 within my profit sharing plan or type of pension?



Contrary to popular belief, none of these are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they have little control concerning investment and timing and most people find yourself choosing Mutual Funds as their investment within efforts. In fact, putting your hard earned money into the Lottery has to be better investment.



Really? The Lottery as a great 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 people are putting in cash in hopes of winning the large one? Where most of the money travels to someone else and also the chances are strong that I will suffer part or all my money?



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



A year or two 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 in regards to the performance in the Fund. The Rep responded the Mutual Fund had risen in value by about 20% per year for the prior 2 yrs. But if the interviewer asked regarding the average return to the common investor inside Fund, the Rep responded that this average investor had actually lost 2% annually. Why? Because from the timing of planning and out with the market. Compare this for the Lottery, where everyone should know the exact probability of winning as well as the exact amount that could be won!



But what in regards to the great tax benefits of putting my money into a 401(k) or even an IRA? Yeah, right! Get a tax deduction when you're young and in the relatively low tax bracket to help you pay taxes about the money you're taking out when you are retired and in a very higher tax bracket? Yeah, this is a good deal. Or, consider the difference in tax rates on capital gains and dividends if you are not inside a 401(k) or IRA versus the standard income tax rates for the earnings when you pull them out of your 401(k) or IRA.



So you now are thinking that you ought to just purchase Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes when the Fund Managers trade them while you don't see the bucks! You have to pay taxes although the Fund may actually have gone down in value! And what in regards to the lost opportunity tariff of that money that you're now paying in taxes that you could have placed into other investments? At least with all the Lottery, you know the complete amount of taxes you can expect to pay in the event you win so you only have to pay taxes should you do win.



Yes, you say, however the Lottery is gambling and I have no control over whether I win or lose. You are right. The Lottery is gambling. But same goes with a Mutual Fund. You have zero control over stock market trading and neither does the Fund Manager. The market goes down, the same is true your Fund. At least you recognize that you will be gambling if you play the Lottery. You don't have the us government, loan companies and your employer telling you how the Lottery is a great investment. And your employer doesn't go so far regarding match the total amount you put to the Lottery enjoy it might together with your 401(k). Nobody is lying to you about the Lottery being gambling, but those involved with more info positions of authority are lying to you regarding the chances of success in a very Mutual Fund!



But surely, you say, there exists 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 right into a Mutual Fund than there is losing most of the money you put into the Lottery. But you are never likely to win big inside a Mutual Fund. In fact, Mutual Funds are built 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 that nobody can minimize the risk of the market without sophisticated hedge strategies that are not typically employed in Mutual Funds. At least with all the Lottery, you have a potential for winning big. And you can sleep during the night, since you aren't wondering if the chances of winning are inclined down overnight as a result of something that occur in Tokyo.



You say you don't like the idea that most of your Lottery gamblings are inclined to support government programs? Where do you think a lot of the earnings out of your Mutual Fund are going? No, to never support government programs, but alternatively 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 a lot of the earnings in the Mutual Fund go to the Fund manager plus your investment advisor. At least with all the Lottery, the funds are getting to worthy causes, like the Arts.



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



Warmest Regards,



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