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Hitting the Jackpot, or Not?

TotoslipfrontHere’s an interesting fun fact. According to The Economist, Singaporeans spent a total of S$6 billion on the lottery last year. This averages out to be about $1,250 per person (including babies and children), placing Singapore well ahead of Italy, the country with the highest total amount of money spent on lottery tickets.

To many people, there is no denying the excitement of waiting to hear the results of this week’s Toto or 4D results, hoping and praying that the ticket you purchased will hit the jackpot. On the downside, the chances of winning the top prize isn’t that great.  For Toto, there is merely a 1 in 8 million chance of winning the first prize, the odds increase to 1 in 3 million for Singapore Sweep, and 1 in 10,000 for 4D.

We can all win

Just last week, a friend told me that he didn’t want to invest in the stock market because he didn’t want to gamble with his money. Many Singaporeans seem to equate stock market investing to gambling, and are hesitant to invest in the stock market. Yet, they seem happy enough to plonk down their hard earned money on a Toto ticket, and hope that they will win $650,000 (the next Toto jackpot, as of June 10, 2013).

Instead of banking on a 1 in 8 million chance of winning $650,000, a steadier, albeit much slower, way to earn $650,000 would be to invest $7,620 per year for the past 25 years into the Straits Times Index (SGX: ^STI). Alternatively, investing that same $1,250 per year for 25 years in the STI instead of spending it on lottery tickets would have yielded $107,000 today.  Not bad at all.

Buying a lottery ticket may give you a chance to become the next overnight millionaire, but not all of us are that lucky.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Contributor Ivan Looi doesn’t own shares in any of the companies mentioned.