Alot of people will tell you that playing the lottery is a terrible investment and that you have better odds of getting struck by a lighting or bit by a shark. But Financial advisor, Forbes contributor, and author of The Sudden Wealth Solution: 12 Principles to Transform Sudden Wealth Into Lasting Wealth, Robert Pagliarini disagrees. He disagrees so strongly that he kindly explained how "sudden wealth," the term he gave to lottery winners are better off because they played the lottery.
Before you run to your financial advisor or write a long explanation as to why this article is full of madness, something must be clarified. Yes, as a conventional financial tool, the lottery incredibly lousy. In fact, putting the price of a lottery ticket on your bank will generate as much immediate wealth as purchasing the lottery. That is to say, none at all unless you win. But that is not the way you should approach the game.
Let's say that you grab all the money you will spend throughout your life purchasing that single lottery ticket, and place it in a mutual fund that yields 2% annually, which is the standard rate. On a good year, your money might just beat the inflationary rate. On a bad year, you will have a negative interest rate, and you will be paying the bank to keep that money stored. That is a very lousy deal. And on top of that, you have to pay fees to keep your money in the bank!. What if instead of doing that, you invest that money in lottery tickets, but in a wise manner? Sounds, crazy. It is not crazy at all.
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If you play a single lottery every day for 30 years, the chances for you to win are infinitely small. However, if you purchase several tickets from big and small lotteries, your chances to win go up by a tenfold. The reason for that, as Mr Pagliarini explained, is that if you want to win the largest PowerBall jackpot that week, the odds are against you. But if you play several small lotteries on top of the PowerBall, you'll be more encouraged to keep chasing the big prize while at the same time building a financial cushion by winning the small amounts. And those small amounts yield, by percentage, higher returns than if you invest your money in safe stocks or mutual funds. How high? Mr Pagliarini argues that number is 30% to 40% greater than safe investments in any given month.
Winning the lottery is a game of numbers as much as it is a game of chance. The reason why people feel that winning is hard is that they do not hedge their bets. Winning three $1 lottery tickets that paid $100 in a month is a higher return than putting that same money in your bank account. Winning the big jackpots is hard. But if you hedge your lotto tickets you can increase your wealth faster than what any traditional investment is capable of doing.