Winning the lottery is a dream. A dream that many people will spend on every week. The hope of changing your life, of affording comfort, a new car, a big house or helping your loved ones.
I have the unpleasant mania of loving mathematics. Which brings me to the unpleasant task of telling you the flat reality. The vast majority of men and women who spend their entire lives on their modest income to buy the lottery come out with heavy losses.
Only a small minority 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 one chance in more than 33 million of winning the jackpot. That’s 150 times less likely than being struck by lightning next summer!
Sure to win
That’s why I worked on a model that guarantees you 100% winning. I offer the same investment discipline every week, I reduce the jackpot, I ask for a little patience, but I guarantee a result that may seem attractive.
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 contributions.
We therefore invest the $20 per week in this account. I suggest a scenario where we keep things simple. We invest in stock indices. Half in Canada in the TSX which represents the large Canadian companies and the other half in the S&P 500 which includes the largest American companies.
In the last half century, the S&P has offered an average return of 11.8% and the TSX, 9.2%. The average of the two: 10.5%. Let’s imagine that over such a long period, the past is a guarantor of the future.
You start at 25. When you retire, 40 years later, you will have… $649,000 in this account! No worse jackpot, right?
A tax
The lottery is a tax. According to solid mathematical probability models, tickets are sold knowing to within a few commas the percentage of the money that will be returned to the winner.
For example, in the case of the Lotto, this “theoretical return rate” is 48%. The other 52% goes a little to the retailer, a little more to the operating costs of Loto-Québec and the majority to the Minister of Finance. Yes, to the Minister of Finance like any other tax. One of my economics professors called it a tax on hope…
This reflection being friendly shared, I have nothing against the lottery if you have the means and the ticket adds spice to your life. And good luck!
