Is the Lottery Ever a Good Investment?
Perhaps you read the title of this blog post and thought: "Duh, no." [Good job!] But, consider this: Mark Kon, a professor of Math and Statistics at Boston University calculated that someone investing $100K in the lottery at the right time had a 72% chance of turning a profit.
- Based on playing Cash WinFall, a game run by the Massachusetts state lottery
- Costs $2 to play, and, players pick six numbers
- The jackpot prize starts at $500K, and tops out at about $2.5 million
- Chances of winning the jackpot are 1 in 9.36 million
- If the jackpot reaches $2.5 million without a winner, the money is “rolled down” into lower tier prizes — i.e. matching 5 out of 6 numbers, which usually only carries a prize of about $4K, increases to $20K+ during “roll down” periods
So, if you gamble during a roll down period, are you guaranteed a win? NO.
In fact, Professor Kon said someone “investing” $10K during a roll down period would run the risk of a significant loss.
With all investments, there is some degree of risk. Here’s what makes “investing” in this particular lottery game so scary — if someone wins the “jackpot”, the value of all of the other smaller wins (i.e. matching 3, 4, or 5 balls) suddenly decreases drastically in value… meaning you could very well invest $100K and walk away with … a few dollars and a lot of worthless pieces of paper.
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