According to the National Lottery’s website, the chances of winning a lottery jackpot are 1 in 45m. The likelihood of matching two numbers is much higher. It is just one in 10.3. On average, the overall odds of winning any Lotto prize are 1 in 9.3, which means you have a near 90% chance of losing your bet rather than winning anything.
With this being the case, I think anyone who is truly serious about making a life-changing sum of money will avoid the National Lottery altogether and instead invest their money in the stock market.
Investing for the future
Investing in the stock market might seem like a daunting prospect at first, but it shouldn’t be. Today there is a range of different tools and funds you can use to make investing as simple as possible.
Most online brokers offer a regular monthly investment plan, and there are hundreds of passive investment trackers on the market that track a single stock index, so you don’t have to worry about picking stocks or monitoring the performance of managers. All you need to do is sit back, relax, and watch your money grow.
My favourite low-cost investment fund is the FTSE UK Equity Income Index Fund from fund powerhouse Vanguard. This fund owns the 128 blue-chip income stocks that make up the UK Equity Index. It used to charge management fees of 0.22% per annum, but has recently cut the cost to just 0.14%, making it one of the best low-cost options for income investors on the market.
The best pick
In my opinion, if you are looking for a ready-made income portfolio, it is very difficult to beat this Vanguard offering. It currently supports a dividend yield of 5.4%, and the distribution is paid twice a year.
But this is much more than just an income investment. As the value of the shares that make up the index have risen over time, so has the index, providing capital growth for investors as well.
Over the past 10 years, the fund has turned every £10,000 invested into £25,900, a compound annual growth rate of nearly 10%.
At this rate of return, my figures show that it will be pretty straightforward to make £1m by investing in the FTSE UK Equity Income Index Fund. I calculate it will take 30 years of saving £500 a month to accumulate a £1m savings pot based on an average annual return of 10%.
If you have a bit longer to save, the monthly deposit requirement will fall substantially. My figures show a monthly deposit of £200 is required to hit the £1m target over 40 years of saving.
And if you have five decades to save, you could make a million with as little as £150 a month.
The bottom line
So that’s why I would avoid the National Lottery altogether and invest my money in the stock market instead. When you invest in the market you’re not guaranteed a return, but the odds are that if you have a long enough time horizon, your investment will make a return. However, with the National Lottery, there’s a 90% chance you’ll come away with nothing.
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Rupert Hargreaves owns no 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.