If you play the National Lottery, you have a one in 45m chance of winning the jackpot.
With odds like that, you’re more likely to lose money than win a multi-million-pound fortune over a lifetime of playing. You have a higher chance of winning in a casino than you do with the Lottery.
With that being the case, if you want to get rich, I’d avoid the National Lottery altogether and buy stocks instead.
Investing for the future
Some people think that investing in the stock market is gambling. But that’s not the case. Buying stocks means buying a part of a fully operational business, which is hopefully generating profits that should rise over time.
That’s nothing like gambling. Indeed, the National Lottery is technically classed as gambling as there’s no guarantee of a win.
What’s more, if you invest in the market using a fund or investment trust, you’re buying a basket of stocks, managed by professional investors, which substantially increases your chances of making a profit over the long term.
One of the most straightforward ways to invest in the market is to buy a passive tracker fund.
A FTSE 100 or FTSE 250 tracker allows investors to track the market for less than 1% in management fees every year. When you buy the fund, there’s no need to worry about picking stocks or rebalancing the portfolio. All you need to do is sit back and let the market work its magic.
According to my calculations, over the past two decades, the FTSE 250 has produced an annual return of around 11%. At this rate, it would take just 6.5 years to double your initial investment. This rate of return is even more impressive when you take into account the fact that you might not win anything on the National Lottery over the same time frame, even if you played twice a week for six years.
It all adds up
Getting rich with the FTSE 250 takes time, but it is straightforward. My figures tell me that an investment of just £200 a month for 30 years would grow to be worth £570,000, assuming an average annual rate of return of 11%.
On the other hand, a National Lottery player, who plays five numbers twice a week at the cost of £2 a play, would spend a total of £31,200 trying to win the jackpot. That’s a difference of £601,200 over three decades.
The bottom line
So overall, while the National Lottery might seem like an easy way to get rich, in reality, you are more likely to miss out on a fortune than win one.
As a result, I believe that most savers would be better off investing their money over the long term rather than gambling their hard-earned savings away on a game with a one in 45m chance of winning.
Rupert Hargreaves has no position in any of the shares 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.
Motley Fool UK 2020