My Foolish colleague Edward Sheldon pointed out recently that according to The National Lottery website, the chance of winning its jackpot is 1 in 45,057,474. The odds of getting five numbers plus the bonus ball are also 1 in 7,509,579.
Of course, people do win the lottery. But if you buy a ticket and punt your numbers, you’ve probably got more chance of a great uncle you’ve never heard of leaving you a couple of million in his will than you have of winning the lotto jackpot!
Low probability and massive risk
Yet as a nation, we’re pumping millions into lotto tickets. One long-standing joke I’ve often heard over the years is that the lotto works like a tax on people who don’t understand the laws of probability! Yet, sadly, I’ve spent a bob or two on lotto tickets in my time, but it almost goes without saying that I’ve never won the jackpot.
But one saving and investment error I did manage to sidestep was buying Bitcoin, or any other cryptocurrency for that matter. But would it have been a mistake if I had done? After all, on its way to almost $20,000 per coin, Bitcoin put in gains measured in the hundreds of percent between 2015 and 2017, before unwinding and falling back during 2018. If I’d bought in 2015 and sold near the top, it could have been just as good as winning the lottery.
However, timing buys and sells on a fast-moving speculative vehicle like Bitcoin is hard to do. And many rode the cryptocurrency all the way up and all the way down again. However, the big problem as I see it now is that Bitcoin today is still hundreds of percent higher than it was at the beginning of 2015. That’s a lot of downside potential facing Bitcoin speculators. I truly believe it’s better to put your money into company shares than to risk your hard-earned on either the National Lottery or on Bitcoin.
A decent long-term bet
Shares, in general, have a good reputation because, over the long-haul, they’ve outperformed all other major classes of asset. However, you can still lose money on a share investment, but there are ways to dial down the risk. For example, if you go all-in on just one share you’ll be taking on a lot of single-company risk. If anything goes wrong with the underlying business, your entire investment could go down with the ship. You can reduce that kind of risk by spreading your money across several investments, which is a tactic often referred to as diversification.
Another tactic that helps reduce the risk in your portfolio is to seek out the shares of companies with good-quality underlying businesses. You can find out all about how discover firm’s like this by hanging around The Motley Fool. I’ve learnt a lot by tuning into the daily articles and by exploring the website. If you like the idea of aiming to get rich by investing in shares, you’ve come to the right place!
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.