Lotto Loser / Investing Winner!
20 Nov, 2022
November is the only month that I ever buy a Lotto ticket. The reason is that when my Dad was alive, he always liked receiving a Lotto ticket on his birthday. Almost five years have passed since he died, and I’ve continued to buy a single ticket for his birthday, eagerly checking it to see if Dad had better Lotto luck in death than he did in life.
Yeah, Nah. He didn’t!
No luck so far.
Dad never just waited until his birthday to receive tickets, though. Each week, since Lotto began in 1987, he would say, “Gotta go get a Lotto ticket,” and take his Lotto wallet into his local store and buy his range of tickets. Going to the store was an enjoyable weekly ritual. My Dad was always up for a yarn and loved chatting with the staff. If they got tired of him (and others) requesting ‘a winning ticket’ and rebuking them over the fact the last ticket didn’t win, despite being promised they would, the staff never let on. Then he enjoyed the anticipation of checking his tickets. Just in case, this was THE week that he won.
Rickshaw’s for everyone!
Although Mum recalls him having some ‘reasonable wins’ of hundreds of dollars from time to time, it was rare for him to win those. Mum has no idea what he used to spend each week (my estimate is about $20-$30) but recalls one of his wins of a few hundred dollars. He instantly donated the winnings to a worthy cause. Via a respected global charity, he bought someone in India a rickshaw. She was pretty annoyed, but given his track record of generosity, she was not at all surprised. Given the amount of money he would have spent on Lottery tickets and all the worthy causes they, in turn, support, she rightly thought that perhaps his own family might have been a worthy cause in this instance.
I worked for the Lotteries Commission for four years. It was a great job, and it was particularly fascinating to find out the sales figures when the prize pool got high. People would go nuts for Lotto. For some players, it was an enjoyable experience they could easily afford. For others, notably, when the jackpot got high, they spent more money than they had, which is never a good thing.
Because of my time spent working there, I know that very few people win big. Many win a small prize, but most win nothing at all. Those losers, like my Dad, put their spending down to ‘making a weekly donation’. And they would try again next week. From time to time, I still come across people who have been playing their own numbers since Lotto began 35 years ago and are too far in to stop now. Imagine if they canned it this week, and their numbers came up.
What are the odds?
These days, the extent of my spending on Lotto is an annual purchase of a ‘Lucky Dip’. Given what I now know about investing, spending my hard-earned $7 at the Lotto counter HURTS. Because I know I’m not going to win and am throwing my money away. My odds of winning are a mere 1 in 383,838. I’ve had a lot of good luck in my life, but I’ve never thought Lotto would be lucky for me.
This week, the people who have been buying Lotto week in and week out for all these years got me thinking. My Dad was always one of those people, and he purchased a lot more than a Lucky Dip each week, of that, I am sure. So as I checked my Dad’s ticket this year, circling far too few numbers on the piece of yellow paper to make me even a tiny bit hopeful, I asked myself how much money there might be if I took that weekly Lotto spend and invested it instead.
If I began to buy a share investment, instead of Lotto, when my Dad died almost five years ago, how much would I have today?
Imagine if, instead of buying a Lucky Dip, I purchased one unit in the Sharesies Smartshares US 500 (USF) fund instead? What might the outcome be? I don’t need to imagine it; I can create a fictitious investment.
Because I’ve been recovering from Covid and taking things very slowly this week, I had the time to enter five years of a weekly purchase into Sharesight, where I bought one unit of the US 500 ETF fund at that day's price. The lowest buy was $6.905. The highest was $12.882. This is because the share price has steadily increased over the years. I’ve assumed a tax rate of 17.5% and have excluded brokerage fees. But to give you an idea, a $10 buy on Sharesies costs $0.04. Sharesight calculates the current value, including all dividend payments.
It would be a fun exercise to keep me occupied. And it was!
Would I have more or less?
A bit hard to say, given that I didn’t ALSO buy a Lotto ticket. But for those who wonder, as I did, you would certainly have a lot more money than you put in - $ 711.43, to be precise.
My fictitious Lotto vs US 500 investment in Sharesight.
If I had invested my weekly Lotto ticket money instead, I would have purchased 265 units with a current value of $3,144.76. This is a 12.8% return of $711.43. A capital gain of 12%.
As well as an increase in share price pushing up the value of my fictitious investment, the fund also paid me dividends twice a year, not a great deal (because the overall investment is small), but still worth it. Better than a ‘bonus ticket’!
Fictitious investment in Sharesight showing the dividend returns over 5 years.
Note: Distributions are paid twice a year.
I would far rather invest my money than gamble it.
Playing Lotto is akin to an experiment I’ve seen done with kids.
Offer them one chocolate biscuit, which they can eat right now. Or, offer them two chocolate biscuits if they are prepared to wait for 20 minutes.
What would you do? What would my Dad have done?
My Dad kept eating the chocolate biscuits as soon as he got them.
He kept buying Lotto as long as he could. Even though he rarely won. And, given he developed Alzheimer's, I don’t even want to entertain the thought that he may have won, but he misplaced his tickets! It is entirely possible.
I don’t mind Lotto if you can afford to play. For many, it’s a bit of fun with a slim chance of winning. Though I worry for those who have developed the problem of thinking that it is their path to riches, buying week in and week out, or feeling they can’t stop because their numbers might come up this week.
The cure for this is, if you do stop purchasing, never check the Lotto numbers again.
I’ll never know how much money Dad poured into Lottery products over his life when that money could have been invested into something that would have compounded and grown his family's wealth instead. Times were often tight in our household, and where I could see that his kind heart thought that winning big might solve our problems, the reality was that he, like many others, would have just burned through the winnings anyway.
What is the moral of this blog post?
Would you like one chocolate biscuit or two? Do you want to live in this moment or plan to win over the long term? I’ve worked out that those who can think long-term have greater wealth.
My made-up experiment of a small investment of $6-$12 each week over five years grew to $3,144. Imagine if I invested more. Thankfully, I don’t need to imagine; instead of buying a weekly lottery ticket, I continue to purchase a long-term investment instead. And slowly and steadily, I’m winning the race.
If you are looking for that buzz you get from winning, take it from me; receiving a dividend payout has the same effect! The more you have invested, the greater the payout.
As for my annual Lotto ticket, I’ll keep you posted on the outcome. But I suspect I’ll continue to hear “not a winning ticket” for the foreseeable future, don’t you?
