There’s something better than the lottery: This is how you become a real millionaire

Far fewer people are trying to get rich through stock market investments. The probability of winning with stocks is much higher than with the lottery. With a diversified basket of Swiss stocks, the figure is 66 percent. That means profits are made in two out of three years. For comparison: The probability of winning anything with a lottery ticket (i.e. just 5 francs) is only in the low single-digit percentage range.

The jackpot in the stock market really exists

Almost all players lose money in the lottery. It would be better to use your money in the stock market instead of playing the lottery. They can really become millionaires there.

If you invested 337 francs per person of lottery shares in lottery tickets since 1979, you are almost certainly 5,000 francs poorer today. If you had deposited the lottery amount into your savings account all these years, you might now be looking forward to 14,828 francs. If there were an 8 percent annual return on the stock market, annual amounts would be over 120,000 francs. And finally this: If you entrusted the money to investing legend Warren Buffet by buying his shares in Berkshire Hathaway every year, the amount would be well over a million francs.

Anyone who plays the lottery for ten years is almost guaranteed to lose money. On the other hand, if you invest in a variety of stocks for ten years, you will almost certainly win. There have been only two decades in the past hundred years in which a broadly diversified basket of Swiss stocks could have resulted in a loss. Thanks to the 25-year investment horizon, investors have never lost money.

The blinding effect of the jackpot

However, many more people play the lottery than invest in the stock market. One reason: The theoretically possible immediate gain in the lottery is very high, but for stocks it is very small. With a minimum bet of 5 francs you can theoretically win a million francs or more per week; It’s so unlikely that you’re more likely to be struck by lightning.

For comparison: It takes more than one generation to become a millionaire with a 5-franc share on the stock exchange. It lasts 159 years with an annual return of eight percent.

Warning: probability trap

In the lottery, potential winnings are very high and possible losses are very small. This is the probability trap that players allow themselves to be trapped in. The higher the jackpot, the more people want to play the lottery. The previous record winnings in the Swiss lottery were paid out on August 23, 2014: 48,598,075 francs. Approximately 1.4 million lottery tickets were filled during that period; This figure was seven times larger than the average draw.

Even though the probability of a high win is extremely low, people are dazzled by the high amounts of winnings possible with a small bet. This can be demonstrated with a simple example.

Even though the expected value in the lottery is negative (resulting in a loss), the dizzying effect of a high jackpot works. Swiss Lotto even changed the system to keep up with Euromillions in terms of jackpot size. The number of people playing Swiss Lotto is decreasing due to the very high jackpot of its European rival. At the beginning of 2013, the Swiss lottery company reduced the probability of winning the jackpot: since then, in addition to the six correct numbers, one of the six lucky numbers must also be marked correctly.

This system change made the jackpot larger because the odds of winning dropped from 1 in 24 million to 1 in 31 million. The chance of being struck by lightning is almost 100 times more likely, and the chance of dying in a traffic accident is several thousand times more likely.

Play all combinations

But with a jackpot of around 80 million francs, it may be worthwhile to play all possible lottery combinations. So buy 15.5 million lottery tickets and fill out two tips for 5 francs. Of course, there would be smaller winnings as well as the big jackpot, so theoretically it would be worth it even if the jackpot was slightly lower.

But lottery winnings will also need to be taxed, so the jackpot will need to be even higher to make it worth playing all the combinations. And even then other lottery players can disrupt your plans. Because at best someone guesses the correct numbers and the winnings have to be shared. Just like on January 18, 1992, when he correctly predicted six out of ten winners – a record! The winning numbers at that time were: 4 6 7 16 19 28.

For all optimists, it’s worth noting that there are more unlikely things than winning the lottery than being struck by lightning about seven times. The probability is 1 in 16 quadrillion (a number with 24 zeros). But that’s what happened to American Roy Cleveland Sullivan; It entered the “Guinness Book of Records”.

Tip for (and not only) lottery winners

If you actually win, you should hire a financial advisor. It may also be responsible for asset management, but is primarily useful as a defensive wall. Lottery winners and those who have made fortunes through other means are pressured by everyone about money.

This could be the beginning of destruction. That’s why they need a financial advisor to act as an airbag. If someone asks something about money, you can resort to: “Call my advisor.” Blaming the counselor can save wealth, friendships, and your own mental health.