The National Lottery celebrated its 25th birthday last week. Since 1994, it’s estimated to have created 5,550 millionaires.
You might think that becoming the next big winner is reason enough to play, but I’ve got four more cracking motives why you should get in the queue for your tickets and avoid the stock market at all costs.
1. You aren’t bothered by low probability
There’s always a chance you’ll pick the right numbers and become an instant millionaire. It’s just that the odds of this happening are extremely low. Camelot itself puts the odds of selecting the right six numbers at a little over 45m to one.
The likelihood that the stock market will make you significantly better off financially is far better. In fact, this keeps getting better the longer you can leave your money alone.
Countless academic studies have shown equities have generated the best return of any asset class over the long term, beating bonds, property and gold. But of course, if hard empirical evidence isn’t your thing, then play Lotto.
2. Receiving cash is a turn-off
A single line on a single Lotto draw costs £2. If you play five lines every draw (Wednesdays and Saturdays), that means you’d pay out £1,040 every year. Assuming your numbers don’t come up, you’ve got the grand total of nothing to show for it at the end.
Now let’s compare that with a cheap fund that tracks the return of the FTSE 100. Here, not only will your money grow in value in line with the market (although it might decline in the short term), you’ll also receive regular income that can either be spent or, as we at Fool UK would heartily recommend, used to buy more stock.
Right now, a fund like that mentioned above yields 4.6%. As a guide, that’s pretty much 2.5 times what the best Cash ISA currently pays out in interest. But if having a second income stream isn’t your thing, play Lotto.
3. Good causes need your help
Since its inception, the National Lottery estimates it’s given over £40bn to good causes. This is clearly a wonderful thing. There is however, a far better way of making sure your money helps as many people as possible if this is a priority for you.
Let’s go back to that example. If you saved £86.66 a month by not playing Lotto (£1,040/12 months) and invested this cash instead, you’d have almost £100,000 to give away after 30 years (assuming an average annual return of 7% and not taking into account any fees generated over the years).
Compare this to the £31,200 you’d spend on tickets over the same time period, assuming the price of entry were to stay the same. That’s the power of compound interest. If you’re not convinced, play Lotto.
4. It’s a whole lot of fun
From picking your numbers to pondering how you’d spend your millions, the Lotto draw is all about having fun. Growing your wealth through investing looks very dull by comparison.
And that’s the way it should be. Such is the counter-intuitive nature of the stock market that the best returns are usually achieved by doing as little as possible — something our action-focused brains struggle to comprehend.
So if you’re looking for a very short-lived adrenaline rush, or a bit of entertainment, then play Lotto. If not, read on…
