After an awful 2020, it makes sense people will want to have fun if they can (or as much as the rules will allow) this Christmas. For many, this will involve buying tickets for today’s £15m National Lottery ‘Lotto’ draw. I won’t be one of them.
Rather than dismiss me as some irksome Scrooge out to steal any sense of joy from the festive period, l implore you to keep reading. Your future (far richer) self may thank you for doing so.
National Lottery draw: The awful odds
To begin with, let’s look at some facts. Your chances of having the winning Lotto ticket by picking the correct six numbers are 1 in a little over 45m. To put things in perspective, you have a better chance of being struck and killed by lightning in the UK (1 in 19m).
Even just matching three numbers isn’t easy. Only 1 in 97 tickets manages this feat. And the prize for all that good fortune? £30.
What’s the harm?
Now, don’t get me wrong. I’m not for a minute suggesting people don’t know what they’re doing. While most of us won’t know the exact odds of winning mentioned above, we’re sensible enough to appreciate the chances are slim to exceptionally slim.
There is, of course, nothing inherently wrong with a one-time flutter at Christmas either. Just dreaming about what one could do with £15m is nice enough, particularly after the horrific year that 2020 has been.
No, the problem comes from repeatedly buying tickets. And given that many people will be feeling the pinch in 2021, due to Brexit and Covid-19, it’s quite possible some will get into the habit of doing so to increase their chances of striking it rich.
This habit could get very expensive. Right now, entering the main National Lottery draw costs £2 per line. Let’s say a person regularly plays five ‘lines’ twice a week, every week. Over the course of a year, that comes to a staggering £1,040.
I think there’s a far better route to riches.
UK shares are a better bet
Given the choice, I’d always invest that £1,040 in the best UK shares I can find over participating in the National Lottery draw. There are a couple of big reasons for this.
First, shares are more likely to make people rich than the Lotto ever will, albeit at a slower rate. History shows that stock market returns trump every other asset over the long term.
Remember that £1,040? If I were to invest this amount in the stock market in one go and generate a quite reasonable 7% annual return for 30 years, I’d have almost £8,000 at the end. If I managed to make a 10% return, I’d have a little over £18,000. Sure, there will be ups and downs along the way, but the end result is surely worth holding for.
Don’t forget, this example is based solely on the money that could have been spent gambling in a single year. Think how much better the outcome could be if I put even more money to work.
A second reason is that, right now, many London-listed stocks are still far too cheap. As seasoned investors will attest, the very best time to buy shares is when they are hated. Pick well, and the Christmas flutter you do have on a National Lottery draw will be irrelevant.
