Playing the Lottery vs. Investing: Which Is Better?

Sometimes, people will compare investing to winning the lottery -- after all, how do you know if your company will hit it big or turn into a massive nothingburger? The reality is that there's a lot more subtlety in the lottery vs. investing argument, and we're going to talk about it in this article. Read on, Fools, and find out what your odds are of winning with your investments versus the lottery.

Lottery vs. investing

Playing the lottery versus investing

Let's just get this out of the way: Your odds of winning the Powerball jackpot are 1 in 292 million, every time it's played.

But, of course, that's just of winning the actual Powerball, and not of coming out ahead by a reasonable amount. But as it turns out, your odds of coming out ahead with any lottery aren't that great, either. Although prizes per capita are greater than losses per capita in states like Arizona, Florida, and Pennsylvania (just to name a few), prizes per capita are lower than losses in other states, including Delaware, Oregon, and South Dakota. This doesn't exclude big jackpot winners, so those numbers are probably running a little high for the average non-jackpot winner.

The lottery prizes paid out per dollar spent per capita in the United States range pretty widely, too, from $0.21 in South Dakota to $0.78 in Virginia; there's no state in the country where the prizes paid per dollar spent per capita exceed $1. That means, statistically, everybody loses. (Again, these numbers include those jackpot winners, so for the average person in the gas station, you're going to see a much smaller return.)

It's a game of chance, and no matter how many times you play, you'll never really be certain that your money will help you make more money. This is where investing and the lottery differ. With investing, as long as you're making informed investments, the likelihood that your portfolio will move you further along to your financial goals is high.

Sure, some stocks will be absolute dogs, like my own personal favorite terrible choice, WeWork. I did not see that coming and really should have. But some of my other investments, like Digital Realty Trust (DLR -0.8%) and UMH (UMH -0.94%), have had modest and steady gains over the last five years (plus regular dividends, which are beyond the scope of this article). When compared to a solid index fund, like Vanguard's S&P 500 ETF (VOO 0.42%), which I also happen to own, those real estate investment trust (REIT) wins are nothing – five years of steady growth in this exchange-traded fund (ETF) have produced a gain of more than 95%..

But any of these (WeWork aside) will produce more income on a more consistent basis than the lottery.

Winning approach

The winning approach

Long-term investing in solid companies that you believe in is always a better bet than gambling on the lottery. They call it gambling for a reason, after all. Investing is not a gamble; it's putting money in a company or other asset for which you can clearly see a path to growth. If you could buy into investments in the same place you bought gas station nachos, a lot more people would be really excited about stocks.

Where you put your money matters, and how long you plan to keep it there does, too. The power of compounding can take your modest investments and help them grow, even if you choose the absolutely safest investments possible, like high-yield savings accounts.

If you put $10,000 into that savings account and added just $100 a month for 30 years, if the interest rate averaged 4%, you'd have $102,539.92 at the end of that period. That's not too shabby at all. But investing in an S&P 500 index fund is even better. If you'd put that same initial $10,000 in an index fund that followed the S&P 500 really closely 30 years ago, without adding anything at all, you'd have $111,771.50. That's no joke -- it's a 1,018% increase in your investment in that time.

Related investing topics

Let's look at a stock that pretty much everyone has heard about: Microsoft (MSFT 0.37%). In September 1995, it went for about $5.66 per share. In mid-September 2025, it closed at $500.37 per share, an 8,740% increase. So, if you put $10,000 in that stock in 1995, you'd have $884,046 today. It's a bit of an outlier, outpacing the S&P 500 index by nearly ninefold, but a lot of people did put their faith in Microsoft and came out ahead.

And, of course, that's the other thing about investing in the stock market versus buying lottery tickets -- coming out ahead is not just possible, but probable, given the right basket of stocks over a long investing time horizon. Again, if you're living in one of the best states for lottery returns, you're still losing 22% of your money on average, unless you're the one of the few people that year who may hit it big.

And while hope may spring eternal, hope is not what you want to hinge your entire future on.

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