Lotto investments

Well it seems the years of investment in lotto tickets for a Nelson couple paid off:

Nelson region couple celebrating their $8.2 million Lotto win say they will retire earlier than planned.

They had a strategy:

The couple has been playing 10 lines of the same Lotto numbers, with all the variations of the Powerball numbers, for several years.

So each week they bet using the same line of numbers, repeated 10 times, and had one of each of the possible Powerball numbers (0-9). This costs $12 per week.

But let’s say they had a mortgage, and let’s say the mortgage rate was 8%. We don’t know what “several years” is, so we need a table to determine how much in today’s terms they had spent on Lotto:

In today’s terms, if they had been playing for 10 years then that is worth over $9000. That’s a healthy chunk of change, and it would certainly be welcome for the other hundreds of thousands who spend money each week. 

Where the Nelson couple were smart was in realising that the first prize is not worth much without the Powerball option, which doubles the price but triples or more the average return. Just $1 million is allocated to the first division prize each week and it’s split between 1-3 winners, from a brief scan. If it isn’t won, which is relatively rare, than the cumulative un-won amount is added to the next draw.

The Powerball minimum prize is $4 million, and it too cumulates, adding $1 million for each week is isn’t won. Saturday’s draw was preceded by 2 unwon draws for each category, so the pot was $3 million for the first division and another $6 million for the Powerball. The Nelson couple got 10 lines of the first division out of 14 won, and were the only Powerball winner. 

By picking just one combination out of 3.8 million the Nelson couple were admitting that 10 chances in 3.8 million is functionally the same as 1 chance in 3.8 million. The beauty of a lottery is that as wildly improbably outcomes happens now and then, and this helps sell more tickets to more fools.

Meanwhile I’m $9000 better off. 

About Lance Wiggs

@lancewiggs
This entry was posted in NZ Business. Bookmark the permalink.

7 Responses to Lotto investments

  1. Meanwhile I have money in the band earning 4.5% , minus 39% tax , minus 4.5% inflation.
    At least with lotto I have a chance of coming out ahead…

    Like

  2. surf says:

    @lyall: at least you’d have 9 grand in the bank.

    I’d see lotto disbanded if it were my choice.

    Many poor people buy lotto tickets, often using social welfare payments . The government collects the lotto profits (minus significant administration costs) and distributes them to charities which give back to the poor people, who can’t eat or pay their bills because they spent all their money on lotto tickets.

    Lotto is a financial drain on the poor and uneducated (and ultimately the taxpayer), and we’d be better off without it. The only people who really benefit from lotto are the lotto employees.

    Like

  3. Buying a lotto is a way of buying a dream. Until the numbers are checked the ticket you have is a potential winner. (Which means you should never watch the draw.)

    How much enjoyment can you get from $12? How many beers will that buy you? How often do you decline a beer while thinking about how much compound interest you’ll get?

    Like

    • haha, yes, they aren’t really buying a chance to win a million dollars they are buying a melting pot of emotions like excitement, tension, hope, nervousness etc, every week. The anticipation of the reward is sometimes more potent than the actual reward itself.

      Like

      • Brett Black says:

        Yes, I occasionally buy a ticket, and it certainly isn’t with the thought that I have a good chance of winning, or that it’s some kind of investment. It’s entertainment – usually from the discussions about what I’d do in the unlikely event of winning. To me that’s worth the odd spend of $12 – a bit like going to the movies.

        Like

  4. Linsay Hayward says:

    What I’ve always found the funnist with lotto is that every week there are about 150,000 Strike “bonus line” winners. Now it cost $4 for the minimum priced Strike ticket and they win a “bonus line” with a value of $1 (not that you can cash it in).

    So the 150,000 “winners” spent at least $4 to win $1. I don’t call that winning, I call that losing!

    But at least it makes thier stats look good. Alas this week 96% of so called strike winners got less than the money they paid for the ticket. Good game (place sarcmark here).

    Like

Comments are closed.