Even though I am not a smart investment advisor and never hold myself out as you, clients continue to 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 during my profit sharing plan or type of pension?
Contrary to popular belief, none of such are wise investments. Why? Among other reasons, all of them involve putting money into a good investment vehicle over which they've got little control as to investment and timing and many people find yourself 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 a good 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 folks are putting in profit hopes of winning the top one? Where most of the money goes to someone else along with the chances are strong that I will miss part or all of my money?
Wait a few minutes - am i talking now about the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little chance of winning. Sounds like a lot like Mutual Fund investment in the 401(k) or IRA. After all, exactly what are my probability of retiring on Mutual Fund investments? Not very high, actually.
A year or so ago, I was paying attention to a financial program for the radio on my way into work. The interviewer was asking the representative of a sizable Mutual Fund regarding the performance of the Fund. The Rep responded that the Mutual Fund had risen in value by an average of 20% a year for the prior two years. But when the interviewer asked about the average return to the typical investor inside Fund, the Rep responded how the average investor had actually lost 2% each year. Why? Because with the timing of planning and out with the market. Compare this to the Lottery, where everybody knows the exact chances of winning and the exact amount that may be won!
But what regarding the great tax benefits of putting my money right into a 401(k) or an IRA? Yeah, right! Get a tax deduction when you're young and inside a relatively low tax bracket so you can pay taxes on the money you adopt out when you find yourself retired and inside a higher tax bracket? Yeah, that's a good deal. Or, look at the difference in tax rates on capital gains and dividends in case you are not inside a 401(k) or IRA versus the standard income tax rates about the earnings whenever you pull them from the 401(k) or IRA.
So you now are thinking that you need to 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 even though the Fund may actually have gone down in value! And what regarding the lost opportunity tariff of that money that you are now paying in taxes that you might have put in other investments? At least with the Lottery, you know the precise amount of taxes you could pay should you win and also you only have to pay taxes in case 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 same goes with a Mutual Fund. You haven't any 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 federal government, financial institutions and your employer telling you that this Lottery is a great investment. And your employer doesn't go so far as to match the number you put in to the Lottery as it might together with your 401(k). Nobody is lying to you about the Lottery being gambling, but those invoved with positions of authority are lying to you concerning the chances of success in the Mutual Fund!
But surely, you say, there is a better potential for making money in a Mutual Fund than there is within the Lottery? Hardly. There may be less of a probability of losing all of the money you put in to a Mutual Fund than there is losing all the money you put into the Lottery. But you are never likely to win big in a very Mutual Fund. In fact, Mutual Funds are built to minimize your returns by developing a "balanced portfolio." If they could minimize your risk in the market itself, this might be okay. But the problem is nobody can minimize the risk with the market without sophisticated hedge strategies that are not typically employed in Mutual Funds. At least with all the Lottery, you have a chance of winning big. And you can sleep in the evening, since you aren't wondering if the odds of winning are going down overnight due to something that happens in Tokyo.
You say you never like the idea that many of your Lottery gamblings 're going to support government programs? Where do you think the majority of the earnings from a Mutual Fund are going? No, not to support government programs, but rather to support neglect the advisor's as well as the Mutual Fund manager's retirement? You take all the risk, you set in every one of the capital, but almost all of the earnings through the Mutual Fund go to the Fund manager plus your investment advisor. At least while using Lottery, the funds are getting to worthy causes, including the Arts.
Of course, I would never advise litigant to rely around the Lottery because of their retirement. But neither would I advise them to count 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, examine other investments and work with someone who is willing to put inside the time to assist you retire soon and retire rich. Financial freedom is accessible get more info to those that are willing to work and find out about it, although not likely for many who want to depend on such risky investment strategies as Mutual Funds.