Investing inside the Lottery over Mutual Funds???

Even though I am not a smart investment advisor and don't hold myself out as one, clients continue to 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 within my profit sharing plan or type of pension?



Contrary to popular belief, none of these are wise investments. Why? Among other reasons, each of them involve putting money into a good investment vehicle over which they have got little control concerning investment and timing and most people end up choosing Mutual Funds as his or her investment within these plans. In fact, putting your dollars into the Lottery will be a better investment.



Really? The Lottery as an 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 folks are putting in money in hopes of winning the important one? Where most of the money visits someone else and the chances are strong that I will miss part or every one of my money?



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



A couple of years ago, I was playing a financial program for the radio on my way into work. The interviewer was asking the representative of a big Mutual Fund about the performance from the Fund. The Rep responded that this Mutual Fund had risen in value by an average of 20% annually for the prior couple of years. But once the interviewer asked in regards to the average return to the average investor within the Fund, the Rep responded how 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 likelihood of winning as well as the exact amount that is won!



But what concerning the great tax features of putting my money in to a 401(k) or even an IRA? Yeah, right! Get a tax deduction if you are young and in the relatively low tax bracket to help you pay taxes for the money you are taking out when you find yourself retired and in a very 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 a 401(k) or IRA versus the ordinary income tax rates around the earnings whenever you pull them from your 401(k) or IRA.



So congratulations, you are thinking that you should just spend money on Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes when the Fund Managers trade them even when you don't see the bucks! You have to pay taxes however the Fund may actually have gone down in value! And what in regards to the lost opportunity cost of that money that you will be now paying in taxes you could have put in other investments? At least while using Lottery, you know the exact amount of taxes you can expect to pay if you win and also you only have to pay taxes should you do win.



Yes, you say, though 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 have zero control over the stock exchange and neither does the Fund Manager. The market fails, the same is true your Fund. At least you recognize that you're gambling once you play the Lottery. You don't have the government, banking institutions and your employer telling you how the Lottery is an excellent investment. And your employer doesn't go so far as to match the sum you put in the Lottery enjoy it might with your 401(k). Nobody is lying to you about the Lottery being gambling, but those involved with positions of authority are lying to you in regards to the chances of success inside a Mutual Fund!



But surely, you say, there exists a better possibility of making money in a Mutual Fund than there is inside Lottery? Hardly. There may be less of a potential for losing all the money you put right into a Mutual Fund than there's losing every one of the money you put to the Lottery. But you are never likely to win big in a Mutual Fund. In fact, Mutual Funds are made to minimize your returns by setting up a "balanced portfolio." If they could minimize your risk with 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 which aren't typically employed in Mutual Funds. At least using the Lottery, you have a chance of winning big. And you can sleep during the night, since you aren't wondering if the odds of winning 're going down overnight as a consequence of something that occurs in Tokyo.



You say that you do not like the idea that a majority of of your Lottery gamblings 're going to support government programs? Where do you think almost all of the earnings out of your Mutual Fund are inclined? No, not to support government programs, but rather to support neglect the advisor's and also the Mutual Fund manager's retirement? You take all of the risk, you put in most of the capital, but most of the earnings from your Mutual Fund go for the Fund manager and 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 litigant to rely about the Lottery for their retirement. But neither would I advise them to depend upon Mutual Fund investments. For my dollar, read more the Lottery is a lot more fun and at least I know I'm gambling. But in the event you want to retire, look at other investments and work with someone who would prefer to put inside time that will 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, and not likely in case you want to rely on such risky investment strategies as Mutual Funds.



Warmest Regards,



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