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Consider the following scenario. The odds for the Big Game were reported in
the local paper as "one in more than 76 million." The exact figure from the
Big Game website is 76,275,360. The lottery tickets cost $1 each. The final jackpot was
reported as $350 million. If I had enough money, I could have gone to the
lottery commission, plunked down a check for $76,275,360, and bought one of
every possible ticket in that game. (I'm not sure the local 7-11 could handle
that transaction.) I'd be assured of winning at least a share of the big
prize. Even if I had to share it with the other two "real" winners of that
jackpot, a third of $350 million is still more than $116 million. Not a bad
return on my investment, eh? If my calculation is right, that's better than
53%!
Not only that, but by virtue of buying every possible ticket, I automatically
win all of the other prizes too. Using numbers from the website, I calculated
that the total additional winnings would be $12,528,147. This brings the
total theoretical return on investment up to over $128 million dollars.
Now I don't personally have that kind of money. But a lot of lottery players
pool their money together and buy a larger block of tickets, thereby
spreading the risk at the cost of a lower potential return. Hmm, sounds like
a mutual fund to me.
Therefore, I propose starting the American Lotteries Mutual Fund. The purpose
of the fund will be to pool the investments of the fund shareholders, with
the sole purpose of purchasing 100% of the possible tickets in lotteries
whose jackpots plus residual prizes total at least, say, 200% of the buy-in.
As always, the wise Foolish fund manager will backtest the investment
strategy against all of the lotteries and payouts to make the percentages
reasonable.
So who wants to buy some ALMFX shares?
(As always, you should review the fund's prospectus before investing any
money, blah, blah, blah.)
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