Investing in the Lottery over Mutual Funds???

Even though I am not a good investment advisor and not 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 in my profit sharing plan or type of pension?



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



Really? The Lottery as an investment vehicle? Sound crazy? Gamble my retirement funds away inside a government-sponsored game of chance where I have little possibility of winning? Where millions of other people are putting in money in hopes of winning the important one? Where a lot of the money travels to someone else along with the chances are strong that I will suffer part or all of my money?



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



A couple of years ago, I was listening to a financial program about the radio going into work. The interviewer was asking the representative of a large Mutual Fund about the performance with the Fund. The Rep responded the Mutual Fund had risen in value by an average of 20% per year for the prior two years. But in the event the interviewer asked regarding the average return to the common investor within the Fund, the Rep responded the average investor had actually lost 2% annually. Why? Because with the timing of planning and out of the market. Compare this towards the Lottery, where everybody knows the exact likelihood of winning along with the exact amount that could be won!



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



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



Yes, you say, nevertheless the Lottery is gambling and I have zero control over whether I win or lose. You are right. The Lottery is gambling. But so is a Mutual Fund. You haven't any control over stock market trading and neither does the Fund Manager. The market goes down, so does your Fund. At least you recognize that you are gambling when you play the Lottery. You don't have the federal government, banking institutions and your employer telling you the Lottery is a great investment. And your employer doesn't go so far regarding match the number 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 in a Mutual Fund!



But surely, you say, there is a better potential for making money in a Mutual Fund than there is in 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's losing all of the money you put into the Lottery. But you are never gonna win big in the Mutual Fund. In fact, Mutual Funds are meant 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 the fact that nobody can minimize the risk of the market without sophisticated hedge strategies that are not typically utilized in Mutual Funds. At least with the Lottery, you have a probability of winning big. And you can sleep at night, as you aren't wondering if the odds of winning are going down overnight due to something that happens in Tokyo.



You say you do not like the idea that a majority of of your Lottery gamblings are inclined to support government programs? Where do you think almost all of the earnings from the Mutual Fund are inclined? No, never to support government programs, but instead to support your investment advisor's along with the Mutual Fund manager's retirement? You take most of the risk, you put in every one of the capital, but a lot of the earnings in the Mutual Fund go to the Fund manager along with your investment advisor. At least using the Lottery, the funds are going to worthy causes, more info including the Arts.



Of course, I would never advise a customer to rely around the Lottery for his or her retirement. But neither would I advise them to depend upon 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 assist someone who would like to put inside time to assist you retire soon and retire rich. Financial freedom is available to those that are willing to work and find out about it, and not likely for individuals who want to depend upon such risky investment strategies as Mutual Funds.



Warmest Regards,



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