Is Buying A Lottery Ticket An Investment?

This is a guest post from Tino Sundin

Let me tell you a little story. About fifteen years ago, I invested $3000 into a certain company on the Toronto Stock Exchange. I had absolutely no experience with the stock market or any financial sense whatsoever. In fact, I knew nothing about the company that I invested in. To top it all off, I couldn’t even afford to invest that kind of money. I was a student at the time and that was almost all of the money I had. But I did it. $3000.

Why did I invest almost all of my money in a company I knew nothing about? I don’t know, it might have been greed. I wanted to become rich. See, a friend of mine, a guy that went to the same school as me, suggested I do it. His dad invested in it and told him it was a sure-shot. The company used to be listed on the exchange at $28. Then it fell to just 30 cents, which is the price I bought it at. My friend explained to me that the company would end up going back to $28 within a year. If his prediction came true, my $3000 investment would pay me $280,000 within a year. I was seeing dollar signs in my eyes. I was excited.
So what happened to my investment? After I bought at 30 cents, the stock kept dropping. It kept dropping until, finally, a few months later, the company went bankrupt. I lost all my money. I was devastated. It was at that time that a friend suggested to me that I would have been better off if I had just invested my $3000 in the lottery instead. That was the first time I ever heard of anyone mention the words “investment” and “lottery” in the same sentence. Is buying a lottery ticket really an investment? Hmm. I started to think about that. Normally, people would consider buying a lottery ticket a form of gambling. But then I thought, “Isn’t what I just did a gamble?” After all, I put $3000 into a company I knew nothing about. How was that any different then buying 3000 lottery tickets? Then I thought that I would have been better off by buying 3000 lottery tickets because, even if I didn’t win the jackpot, I’d have at least won a few secondary prizes. But that was just me thinking with a clouded mind. Buying a lottery ticket is not really an investment. Most lotteries have a prize payout ratio of about 50%. That means that for every dollar people spend on tickets, about half of it gets paid out in prizes. Over the long term, more than 99% of regular lottery players will have lost money on the lottery. That’s not an investment. The $3000 investment that I made fifteen years ago wasn’t really an investment because I was just gambling it blindly based on hearsay. Most people that make real investments will have a positive gain over the long term. That’s the difference. The lottery is just about spending a dollar on a hope and a dream – A hope and a dream become instantly rich. It’s not an investment. Very few people, relatively, get to experience the thrill of winning a jackpot, though.

About the Author: Tino Sundin writes a lottery blog, featuring big jackpot winners from all over the world.

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