Even though I am not a good investment advisor and don't hold myself out jointly, clients always 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 in my profit sharing plan or monthly pension?
Contrary to popular belief, none of those are wise investments. Why? Among other reasons, they all involve putting money into a good investment vehicle over which they've little control as to investment and timing and quite a few people turn out choosing Mutual Funds his or her investment within efforts. In fact, putting your hard earned money into the Lottery has to be better investment.
Really? The Lottery as a smart investment vehicle? Sound crazy? Gamble my retirement funds away in the government-sponsored game of chance where I have little potential for winning? Where millions of other people are putting in take advantage hopes of winning the big one? Where most of the money visits someone else and the chances are strong that I will miss part or all of my money?
Wait a moment - are we 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 similar to Mutual Fund investment in a very 401(k) or IRA. After all, what exactly are my probability of retiring on Mutual Fund investments? Not very high, actually.
A few years ago, I was playing a financial program on the radio going into work. The interviewer was asking the representative of a large Mutual Fund concerning the performance of the Fund. The Rep responded how the Mutual Fund had risen in value by about 20% per year for the prior a couple of years. But when the interviewer asked concerning the average return to the average investor within the Fund, the Rep responded that this average investor had actually lost 2% per year. Why? Because from the timing of planning and out in the market. Compare this towards the Lottery, where everyone should know 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 right into a 401(k) or perhaps an IRA? Yeah, right! Get a tax deduction if you are young and in a very relatively low tax bracket so you can pay taxes around the money you're taking out when you find yourself retired and in a higher tax bracket? Yeah, this is a good deal. Or, look at the difference in tax rates on capital gains and dividends in case you are not in a 401(k) or IRA versus the ordinary income tax rates around the earnings once you pull them through your 401(k) or IRA.
So now you are thinking that you ought to just spend money on Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds bring about capital gains taxes in the event the Fund Managers trade them even though you don't see the money! You have to pay taxes although the Fund might actually have gone down in value! And what about the lost opportunity price of that money you are now paying in taxes that one could have placed into other investments? At least with the Lottery, you know the exact amount of taxes you will pay if you win and you also only have to pay taxes if you do win.
Yes, you say, however 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 with a Mutual Fund. You don't have any control over trading stocks and neither does the Fund Manager. The market decreases, the same is true your Fund. At least you recognize that you will be gambling when you play the Lottery. You don't have government entities, finance institutions and your employer telling you the Lottery is an excellent investment. And your employer doesn't go so far concerning match the amount 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 inside a Mutual Fund!
But surely, you say, there is a better chance of making money in a Mutual Fund than there is inside Lottery? Hardly. There may be less of a probability of losing most of the money you put in to a Mutual Fund than there is losing all of the money you put in to the Lottery. But you are never gonna win big in the Mutual Fund. In fact, Mutual Funds are designed to minimize your returns by developing a "balanced portfolio." If they could minimize your risk from the check here market itself, this might be okay. But the problem is always that nobody can minimize the risk from the market without sophisticated hedge strategies which aren't typically utilized in Mutual Funds. At least with the Lottery, you have a probability of winning big. And you can sleep during the night, when you aren't wondering if the likelihood of winning are inclined down overnight due to something that is situated Tokyo.
You say you do not like the idea that a majority of of your Lottery gamblings 're going to support government programs? Where do you think a lot of the earnings from your Mutual Fund are getting? No, not to support government programs, but instead to support neglect the advisor's and the Mutual Fund manager's retirement? You take all the risk, you place in all of the capital, but a lot of the earnings from the Mutual Fund go towards the Fund manager plus your investment advisor. At least with the Lottery, the funds are going to worthy causes, like the Arts.
Of course, I would never advise litigant to rely for the Lottery for his or her 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, look at other investments and work with someone who is willing to put within the time to assist you retire soon and retire rich. Financial freedom is accessible to those who are willing to work and find out about it, however, not likely in case you want to rely on such risky investment strategies as Mutual Funds.