Even though I am not a smart investment advisor rather than hold myself out together, 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 within my profit sharing plan or type of pension?
Contrary to popular belief, none of those are wise investments. Why? Among other reasons, each will involve putting money into a great investment vehicle over which they've little control about investment and timing and a lot people end up choosing Mutual Funds for their investment within diets. In fact, putting your 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 probability of winning? Where millions of other individuals are putting in take advantage 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 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 inside a 401(k) or IRA. After all, precisely what are my odds of retiring on Mutual Fund investments? Not very high, actually.
A couple of years ago, I was playing a financial program on the radio going into work. The interviewer was asking the representative of a substantial Mutual Fund concerning the performance in the Fund. The Rep responded that the Mutual Fund had risen in value by around 20% a year for the prior 2 yrs. But in the event the interviewer asked about the average return to the common investor inside Fund, the Rep responded the average investor had actually lost 2% annually. Why? Because of the timing of moving in and out from the market. Compare this on the Lottery, where everyone understands the exact likelihood of winning along with the exact amount that may be won!
But what regarding the great tax advantages of putting my money right 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 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 a very 401(k) or IRA versus the ordinary income tax rates on the earnings whenever you pull them from the 401(k) or IRA.
So congratulations, you are thinking that you can just purchase Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds lead to capital gains taxes if the Fund Managers trade them even if you don't see the money! You have to pay taxes even though the Fund might actually have gone down in value! And what in regards to the lost opportunity expense of that money you are now paying in taxes that you could have put in other investments? At least with all the Lottery, you know the precise amount of taxes you will probably pay should you win and you also only have to pay taxes if you do win.
Yes, you say, but the Lottery is gambling and I have no control over whether I win or lose. You are right. The Lottery is gambling. But so is a Mutual Fund. You have zero control over the stock market and neither does the Fund Manager. The market fails, so does your Fund. At least you recognize you are gambling once you play the Lottery. You don't have the us government, loan companies and your employer telling you the Lottery is an excellent investment. And your employer doesn't go so far concerning match the number you put in to the Lottery like it might with your 401(k). Nobody is lying to you concerning the Lottery being gambling, but those invoved with 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 a Mutual Fund than there is in the Lottery? Hardly. There may be lottery games missouri less of a probability of losing all of the money you put into a Mutual Fund than there is losing all of the money you put to the Lottery. But you are never gonna win big in a very Mutual Fund. In fact, Mutual Funds are meant 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 nobody can minimize the risk of the market without sophisticated hedge strategies which aren't typically used in Mutual Funds. At least with the Lottery, you have a probability of winning big. And you can sleep through the night, because you aren't wondering if the odds of winning 're going down overnight due to something that happens in Tokyo.
You say that you do not like the idea that a majority of of your Lottery gamblings are getting to support government programs? Where do you think the majority of the earnings from the Mutual Fund 're going? No, to not support government programs, but rather to support your investment advisor's and also the Mutual Fund manager's retirement? You take every one of the risk, you place in all the capital, but most of the earnings from the Mutual Fund go for the Fund manager as well as your investment advisor. At least with the Lottery, the funds are getting to worthy causes, like the Arts.
Of course, I would never advise a customer to rely around the Lottery for 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, have a look at other investments and assist someone who is willing to put inside the time to assist you retire soon and retire rich. Financial freedom can be obtained to those who're willing to work and discover it, however, not likely for those who want to count on such risky investment strategies as Mutual Funds.