Winning the Lottery
Q: Why shouldn't I play the lottery? -- K.R., via the Internet
A: A: Well, you can if you want. However, before you do, there are a few things you should know. And then, a little farther on, we're going to tell you how to win the lottery.
The recent odds of winning the California Super Lotto game were 1 in 18 million. So if you bought 50 tickets a week, you ought to win once every 6,923 years. And that means you'd be due to win today if you'd started playing around 5000 B.C.! With your pals Caesar and Brutus!
To put it another way, you have a far greater chance of dying from flesh-eating bacteria -- one in a million -- than you do of winning that jackpot. Scratching your chin in disbelief? Or could that skin irritation be the first sign of the bacteria doing its horrid work?
Now, you're as human as the next Fool, so if you weaken and want to play once in a while just for fun, go ahead. You're certainly not alone. In this country we spend an average of more than $96 million on lotteries every day. That's more than $35 billion a year. That's more than we spend on movie tickets, and more than we spend on all spectator sports combined. It's eight times more money than Coca-Cola makes in a year selling a billion soft drinks a day.
Somebody is makin' some serious money here, but it isn't you.
So how, you ask, can I actually win the lottery? Well, it's like this: If you were to take five measly bucks a week and, instead of tossing them at lottery tickets, you were to invest them in a simple strategy called the Foolish Four, how would you do? Over the past 25 years, this strategy has returned 22 percent annually. But let's be a bit more conservative than that, and assume an 18 percent annual return. At the end of 30 years, you'd have $290,759.86.
Not bad. But if you kept that up for another 10 years, you would actually have a jackpot of $1,742,364.63.
Imagine that someone came up to you and said, "If you'll pay me five bucks a week, I'll see that you win a fat lottery jackpot in 40 years." Gee ... retirement taken care of. Sounds pretty appealing.
Of course, we're talking about investing, and returns vary from year to year. So we couldn't say for sure exactly how much you would win -- we don't know exactly how much that jackpot will be. No one does. But it's a darned good bet that it would be somewhere in that ballpark -- maybe lower, maybe higher -- and that your odds of winning are one heck of a lot better than buying those little Powerball slips each week.
So that, ladies and gentlemen, is how you win the lottery: with patience, with compound interest, and without buying a ticket!
WHAT NOW? Would you like to know more about this extremely simple investing technique that has returned 22 percent a year over the past 25 years? Come take a look at the Foolish Four. Until next week, Fool on!
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