Even though I am not a great investment advisor and not hold myself out as you, clients continue to ask me what to do to plan 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 such are wise investments. Why? Among other reasons, all of them involve putting money into an investment vehicle over which they've got little control as to investment and timing and quite a few people find yourself choosing Mutual Funds as their investment within diets. In fact, putting your hard earned 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 potential for winning? Where millions of other everyone is putting in money in hopes of winning the important one? Where the majority of the money travels to someone else and also the chances are strong that I will lose part or most of my money?
Wait a minute - am i talking now about the Lottery or about Mutual Funds? Hmm, a government sponsored program where I have little potential for winning. Sounds like a lot like Mutual Fund investment in the 401(k) or IRA. After all, precisely what are my likelihood of retiring on Mutual Fund investments? Not very high, actually.
A few years ago, I was hearing a financial program around the radio walking on into work. The interviewer was asking the representative of a large Mutual Fund in regards to the performance in the Fund. The Rep responded how the Mutual Fund had risen in value by around 20% annually for the prior 2 yrs. But in the event the interviewer asked concerning the average return to the common investor in the Fund, the Rep responded the average investor had actually lost 2% annually. Why? Because of the timing of moving in and out with the market. Compare this to the Lottery, where everybody knows the exact probability of winning and the exact amount that may be won!
But what regarding the great tax advantages of putting my money right into a 401(k) or perhaps an IRA? Yeah, right! Get a tax deduction when you find yourself young and in a relatively low tax bracket so that you can pay taxes on the money you adopt out when you are retired and in a higher tax bracket? Yeah, which is a good deal. Or, take into account the difference in tax rates on capital gains and dividends if you are not inside a 401(k) or IRA versus the standard income tax rates for the earnings when you pull them out of your 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 cause capital gains taxes when the Fund Managers trade them while you don't see the amount of money! You have to pay taxes although Fund could actually have gone down in value! And what about the lost opportunity cost of that money that you're now paying in taxes you could have put into other investments? At least using the Lottery, you know the actual amount of taxes you could pay in the event you win so you 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 don't have any control over the stock exchange and neither does the Fund Manager. The market falls, the same is true your Fund. At least you recognize that you're gambling whenever you play the Lottery. You don't have the us government, finance institutions and your employer telling you how the Lottery is an excellent investment. And your employer doesn't go so far concerning match the total amount 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 about the chances of success in the Mutual Fund!
But surely, you say, there exists a better potential for making money inside a Mutual Fund than there is within the Lottery? Hardly. There check here may be less of a chance of losing all of the money you put into a Mutual Fund than there exists losing every one of the money you put to the Lottery. But you are never planning to win big inside a Mutual Fund. In fact, Mutual Funds are made to minimize your returns by creating 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 found in Mutual Funds. At least while using Lottery, you have a chance of winning big. And you can sleep in the evening, since you aren't wondering if the probability of winning are inclined down overnight due to something that is situated Tokyo.
You say that you do not like the idea that a lot of of your Lottery gamblings 're going to support government programs? Where do you think a lot of the earnings from a Mutual Fund are inclined? No, to never support government programs, but alternatively to support neglect the advisor's along with the Mutual Fund manager's retirement? You take all the risk, you add in most of the capital, but most of the earnings from the Mutual Fund go on the Fund manager along with your investment advisor. At least using the Lottery, the funds are going to worthy causes, for example the Arts.
Of course, I would never advise a customer to rely on the Lottery because of their retirement. But neither would I advise them to depend upon Mutual Fund investments. For my dollar, the Lottery is a bit more fun and at least I know I'm gambling. But in case you want to retire, have a look at other investments and help someone who would prefer to put inside time that may help you retire soon and retire rich. Financial freedom is available to those who're willing to work and learn about it, however, not likely for many who want to rely on such risky investment strategies as Mutual Funds.