Even though I am not a great investment advisor and don't hold myself out together, 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 within my profit sharing plan or monthly pension?
Contrary to popular belief, none of these are wise investments. Why? Among other reasons, all of them involve putting money into a great investment vehicle over which they've got little control about investment and timing and most people end up choosing Mutual Funds as his or her investment within efforts. In fact, putting your money into the Lottery will be a 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 possibility of winning? Where millions of other everyone is putting in take advantage hopes of winning the big one? Where the majority of the money would go to someone else and also the chances are strong that I will forfeit part or all my money?
Wait a minute - shall we be talking now in regards to the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little possibility of winning. Sounds like as being similar to Mutual Fund investment in a very 401(k) or IRA. After all, precisely what are my odds of retiring on Mutual Fund investments? Not very high, actually.
A year or two ago, I was hearing a financial program on the radio walking on into work. The interviewer was asking the representative of a big Mutual Fund concerning the performance from the Fund. The Rep responded that this Mutual Fund had risen in value by around 20% per year for the prior couple of years. But once the interviewer asked concerning the average return to the normal investor inside the Fund, the Rep responded that the average investor had actually lost 2% annually. Why? Because from the timing of opting and out from the market. Compare this on the Lottery, where everyone understands the exact likelihood of winning and the exact amount that is won!
But what about the great tax attributes of putting my money in to 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 you can pay taxes about the money you take out if you are retired and in a higher tax bracket? Yeah, which is a good deal. Or, consider 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 standard income tax rates for the earnings when you pull them from the 401(k) or IRA.
So congratulations, you are thinking that you ought to just put money into Mutual Funds outside your 401(k) or IRA? Wrong again. Mutual Funds result in capital gains taxes if the Fund Managers trade them even if you don't see the money! You have to pay taxes although the Fund could actually have gone down in value! And what about the lost opportunity price of that money that you're now paying in taxes that one could have place into other investments? At least with all the Lottery, you know the actual amount of taxes you could pay if you win and you only have to pay taxes should you do win.
Yes, you say, nevertheless the Lottery is gambling and I haven't any control over whether I win or lose. You are right. The Lottery is gambling. But do i think the a Mutual Fund. You have zero control over the stock market and neither does the Fund Manager. The market goes down, does your Fund. At least you recognize that you are gambling when you play the Lottery. You don't have the federal government, loan companies and your employer telling you that this Lottery is a superb investment. And your employer doesn't go so far about match the sum you put to the Lottery want it might along with your 401(k). Nobody is lying to you in regards to the Lottery being gambling, but those invoved with positions of authority are lying to you concerning the chances of success inside a Mutual Fund!
But surely, bola you say, there's a better possibility of making money in a Mutual Fund than there is in the Lottery? Hardly. There may be less of a probability of losing most of the money you put right into a Mutual Fund than there is losing all of the money you put in the Lottery. But you are never planning to win big in a Mutual Fund. In fact, Mutual Funds are meant 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 nobody can minimize the risk with the market without sophisticated hedge strategies that aren't 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 inclined down overnight as a result of something that occur in Tokyo.
You say that you do not like the idea that a lot of of your Lottery gamblings are going to support government programs? Where do you think almost all of the earnings out of your Mutual Fund 're going? No, to not support government programs, but to support neglect the advisor's along with the Mutual Fund manager's retirement? You take all the risk, you set in all of the capital, but almost all of the earnings from the Mutual Fund go for the Fund manager and your investment advisor. At least with all the Lottery, the funds are inclined to worthy causes, such as the Arts.
Of course, I would never advise a customer to rely about the Lottery because of their 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, have a look at other investments and work with someone who would prefer to put inside time to help you retire soon and retire rich. Financial freedom can be obtained to those that are willing to work and understand it, and not likely for those who want to depend on such risky investment strategies as Mutual Funds.