70 million in Lotto Max. To make sure you win

Winning the lottery is a dream. A dream that many people will die every week. Hope to change your life, provide relief, buy a new car, a big house, or help your loved ones.

I have an unpleasant obsession with love for mathematics. Which brings me to the unpleasant task of telling you the flat truth. The vast majority of men and women who spend their entire lives on their modest income buying the lottery come out with huge losses.

Only a small minority of jackpot winners are exceptions. It's nice to tell their story (sometimes not). But we forget how rare those who are lucky enough to jump on this side of the fence are.

In Lotto Max, you have a 1 in over 33 million chance of winning the jackpot. This is 150 times less likely than being struck by lightning next summer!

Definitely to win

That's why I worked on a model that guarantees you 100% win. I offer the same investment discipline every week, lower the jackpot, ask for a little patience, but guarantee an outcome that may look attractive.

Let's take someone who invests $20 a week in the lottery. I suggest opening an investment account with no transaction fees and setting up an RRSP or TFSA. I am addressing the majority who do not reach the maximum contributions.

So we invest $20 weekly in this account. I suggest a scenario where we keep things simple. We invest in stock indices. Half are in Canada on the TSX which represents large Canadian companies and the other half are in the S&P 500 which includes the largest US companies.

In the past half-century, the S&P has offered an average return of 11.8% and the TSX 9.2%. Average between them: 10.5%. Let us imagine that during this long period, the past was the guarantor of the future.

You start at 25. When you retire, in 40 years, you'll have… $649,000 in this account! There's nothing worse than hitting the jackpot, right?

tax

The lottery is a tax. According to powerful mathematical probability models, tickets are sold with the knowledge of what percentage of the money will be returned to the winner within a few intervals.

For example, in the case of Lotto, the “theoretical return rate” is 48%. The other 52% goes a little to the retailer, a little more to Loto-Québec's operating costs and the majority to the Minister of Finance. Yes, to the Minister of Finance, like any other tax. One of my economics professors described it as a tax on hope…

Being friendly and common minded, I have nothing against the lottery if you have the means and the ticket adds spice to your life. And good luck!