Winning the lottery is a dream. A dream that many people would fulfill every week. Hope to change your life, to get a break, a new car, a bigger house or to help your loved ones.
I have an unpleasant obsession with loving mathematics. Which brings me to the unpleasant task of telling you the flat reality. Most of the men and women who spend their whole life on their modest income to buy lottery come out with huge losses.
Only a small portion of jackpot winners are exceptions. Their story is beautiful to tell (and sometimes not). But we forget how rare those are who are lucky enough to jump on this side of the fence.
In Lotto Max, you have a chance to win a jackpot of over $33 million. That’s 150 times less likely to be struck by lightning next summer!
victory is certain
That’s why I worked on a model that guarantees you 100% win. I provide the same investment discipline every week, I reduce the jackpots, I ask for a little patience, but I guarantee a result that may seem tempting.
Let’s take a person who invests $20 per week in the lottery. I suggest opening an investment account with no transaction fees and creating an RRSP or TFSA. I am addressing the majority who do not reach the maximum contribution.
So we invest $20 per week in this account. I suggest a scenario where we keep things simple. We invest in stock indices. Half is in the TSX in Canada which represents the largest Canadian companies and the other half is in the S&P 500 which includes the largest US companies.
Over the past half century, the S&P has produced an average return of 11.8% and the TSX has produced an average return of 9.2%. Average of both: 10.5%. Let’s imagine that over such a long period of time, the past is the guarantor of the future.
You start at 25. When you retire 40 years from now, you’ll have $649,000 in this account! There’s no worse jackpot than that, right?
one tax
Lottery is a tax. According to solid mathematical probability models, tickets are sold knowing within a certain period of time what percentage of the money will be returned to the winner.
For example, in the case of Lotto, this “theoretical return rate” is 48%. The other 52% goes to the retailer, a little to Loto-Quebec’s operating costs and most to the Finance Minister. Yes, to the Finance Minister like any other tax. One of my economics professors called it based on hope…
This reflection is shared friendly, if you have the means and the ticket adds excitement to your life, I have nothing against lotteries. and good luck!