Even though I am not a great investment advisor and never hold myself out as you, clients still ask me what to do to get ready 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 pension plan?
Contrary to popular belief, none of these are wise investments. Why? Among other reasons, all of them involve putting money into an investment vehicle over which they've little control as to investment and timing and quite a few people wind up choosing Mutual Funds for their 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 chance of winning? Where millions of other people are putting in money in hopes of winning the top one? Where most of the money travels to someone else and the chances are strong that I will forfeit part or every one of my money?
Wait one minute - shall we be talking now in regards to 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 the 401(k) or IRA. After all, what exactly are my likelihood of retiring on Mutual Fund investments? Not very high, actually.
A year or so ago, I was playing a financial program around the radio walking on into work. The interviewer was asking the representative of a substantial Mutual Fund regarding the performance with the Fund. The Rep responded that this Mutual Fund had risen in value by around 20% each year for the prior two years. But once the interviewer asked about the average return to the common investor within the Fund, the Rep responded how the average investor had actually lost 2% annually. Why? Because from the timing of opting and out of the market. Compare this towards the Lottery, where everyone understands the exact odds of winning and also the exact amount that might be won!
But what regarding the great tax features of putting my money into a 401(k) or even an IRA? Yeah, right! Get a tax deduction when you find yourself young and inside a relatively low tax bracket so that you can pay taxes on the money you're taking out if you are retired and in a higher tax bracket? Yeah, this is a good deal. Or, consider 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 through your 401(k) or IRA.
So now you are thinking that you can just put money into Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes if the Fund Managers trade them even though you don't see the amount of money! You have to pay taxes however the Fund might actually have gone down in value! And what regarding the lost opportunity price of that money you are now paying in taxes that you might have placed into other investments? At least with the Lottery, you know the precise amount of taxes you will pay in case you win and you only have to pay taxes in the event you do win.
Yes, you say, though the Lottery is gambling and I haven't any control over whether I win or lose. You are right. The Lottery is gambling. But so is a Mutual Fund. You don't have any control over the stock market and neither does the Fund Manager. The market falls, does your Fund. At least you recognize that you will be gambling once you play the Lottery. You don't have the us government, financial institutions and your employer telling you the Lottery is an excellent investment. And your employer doesn't go so far as to match the total amount you put to the Lottery like it might together with your 401(k). Nobody is lying to you about the Lottery being gambling, but those in positions of authority are lying to you in regards to the chances of success in a Mutual Fund!
But surely, you say, there is a better possibility of making money in the Mutual Fund than there is inside Lottery? Hardly. There may be less of a probability of losing all the money you put into a Mutual Fund than there is certainly losing all of the money read more you put to the Lottery. But you are never going to win big inside a Mutual Fund. In fact, Mutual Funds are designed to minimize your returns by developing a "balanced portfolio." If they could minimize your risk of the market itself, this might be okay. But the problem is always that nobody can minimize the risk of the market without sophisticated hedge strategies that are not typically employed in Mutual Funds. At least while using Lottery, you have a probability of winning big. And you can sleep during the night, as you aren't wondering if the probability of winning are getting down overnight as a result of something that occurs in Tokyo.
You say that you do not like the idea that a lot of of your Lottery gamblings are getting to support government programs? Where do you think almost all of the earnings from a Mutual Fund are going? No, not to support government programs, but to support neglect the advisor's along with the Mutual Fund manager's retirement? You take every one of the risk, you add in all of the capital, but most of the earnings in the Mutual Fund go for the Fund manager plus your investment advisor. At least with the Lottery, the funds are inclined to worthy causes, such as the Arts.
Of course, I would never advise a client to rely about the Lottery for 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 should you want to retire, have a look at other investments and help someone who would prefer to put inside time to assist you retire soon and retire rich. Financial freedom is accessible to those who will be willing to work and understand it, although not likely in case you want to depend on such risky investment strategies as Mutual Funds.