"MegaMillions and Powerball jackpots combined are now $1B" - Good investment?

[bo105954027]

I am thinking of purchasing $10 worth of tickets for each. I understand by math it's almost equal to throwing cash in sewage. But counting in two exciting and expecting nights before the drawing time, I guess the 20 bucks investment is worthwhile?


https://www.cnn.com/2018/10/16/us/megam ... index.html

[NotWhoYouThink]

Yes, please do. The more you spend on lottery tickets the more funding goes to the states selling the tickets.

[David Jay]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

[Globalviewer58]

A winning ticket is likely so go for it. Don't be surprised if you don't match a single number on either drawing.

[furwut]

I think I get the same entertainment value by just spending $2.

[DesertDiva]

I'd love to have the money my grandfather spent on lottery tickets... <sigh>

[alex_686]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

IIRC the expected return is about $.60 on the $1.00. So not a high return, or even a positive one, but still a return.

[David Jay]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

IIRC the expected return is about $.60 on the $1.00. So not a high return, or even a positive one, but still a return.

Math, please...

Obviously the median return is zero. The mode is zero. That is one seriously fat tail on the distribution.

[stocknoob4111]

folks at work did a pool thing, I opted out as I don't subscribe to these types of things...was given a hard time since it was only a $2 contribution but it's ok. I don't gamble as it's against my principle.

[MichCPA]

I prefer to do my gambling in the form of diversified mutual funds. If I really need to be entertained I play a youtube clip of of winning at a slot machine WHILE purchasing my mutual funds.

[rasta]

Expected return is zero.

Math please.

[retiredjg]

I do't think jackpots are an investment. But $20 for entertainment once in awhile doesn't seem alike a problem to me.

[David Jay]

Expected return is zero.

Math please.

I think what I wrote above is pretty good. If both the mode (most common value) is zero and the median (the central value) is zero then zero is a logical expectation.

[Jags4186]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

IIRC the expected return is about $.60 on the $1.00. So not a high return, or even a positive one, but still a return.

Math, please...

Obviously the median return is zero. The mode is zero. That is one seriously fat tail on the distribution.

https://dqydj.com/mega-millions-expecte ... alculator/

You have a 1 in 24 chance of winning something. Minimum return on a win is 100% (lowest payout on a $1 ticket is $2). Of course expected return is >0 but must be <1 otherwise the state would be losing money. If expected return was 0 no one would ever win anything.

[HomerJ]

I do't think jackpots are an investment. But $20 for entertainment once in awhile doesn't seem alike a problem to me.

The entertainment comes from dreaming how you'd allocate all that money.*

You only need one ticket for that.


*It would be totally fun to set up a charitable foundation and make giving away most of the money your new job. I'd also do a mad money give-away with 5%-10% of it. Like finding all my old high school and college friends, and paying off their mortgages.

[Sportswhiz00]

The amount of pleasure I derive from getting lost in a fantasy about winning is worth way more than $20 to me. I probably spend $50 a month on average on lottery tickets, most often after a bad day at work.

[triceratop]

Unfortunately thanks to bogleheads.org I learned that it is not allowed to buy a lottery ticket as an asset in a self-directed Roth IRA. So, I will not be buying a ticket. If I had been able to buy inside a Roth IRA, I would play the lottery simply because of the satisfaction it would give me for playing the tax game perfectly. I'd feel self-satisfied for the rest of my life.

[Ged]

folks at work did a pool thing, I opted out as I don't subscribe to these types of things...was given a hard time since it was only a $2 contribution but it's ok. I don't gamble as it's against my principle.

I always joined the pools because if the pool won and I wasn't a member I'd be alone at work and have to pick up the pieces. That would be so annoying.

[retiredjg]

The amount of pleasure I derive from getting lost in a fantasy about winning is worth way more than $20 to me. I probably spend $50 a month on average on lottery tickets, most often after a bad day at work.

Ha ha! I guess the main reason I don't buy these tickets is because I DO NOT WANT TO WIN! I think it would make life stressful and miserable, at least for me. If I did win, I'd have to give almost all of it away ASAP.

I doubt I have a lot of company in that feeling.

[ResearchMed]

The amount of pleasure I derive from getting lost in a fantasy about winning is worth way more than $20 to me. I probably spend $50 a month on average on lottery tickets, most often after a bad day at work.

Ha ha! I guess the main reason I don't buy these tickets is because I DO NOT WANT TO WIN! I think it would make life stressful and miserable, at least for me. If I did win, I'd have to give almost all of it away ASAP.

I doubt I have a lot of company in that feeling.

No, but we'll be happy to help you out with your "need"

When you win, send me a PM for the wiring instructions

RM

[ResearchMed]

Don't forget, the probabilities aren't any higher/better now.

But *IF* you win the big one, it may be a much bigger amount (depending upon how many co-winners there are).

RM

[Nicolas]

Why buy so many tickets? Just buy one for each drawing if you must. This will raise your chances of winning to just above zero. That’s all you need to win. If luck is a lady you’ll win. Me? I won’t be buying.

[David Jay]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

IIRC the expected return is about $.60 on the $1.00. So not a high return, or even a positive one, but still a return.

Math, please...

Obviously the median return is zero. The mode is zero. That is one seriously fat tail on the distribution.

https://dqydj.com/mega-millions-expecte ... alculator/

You have a 1 in 24 chance of winning something. Minimum return on a win is 100% (lowest payout on a $1 ticket is $2). Of course expected return is >0 but must be <1 otherwise the state would be losing money. If expected return was 0 no one would ever win anything.

Which, I believe, means that the mode is zero and the median is zero.

[Masterblaster]

And just what would one do with a billion dollars - really.

[mmcmonster]

folks at work did a pool thing, I opted out as I don't subscribe to these types of things...was given a hard time since it was only a $2 contribution but it's ok. I don't gamble as it's against my principle.

My work does a pool periodically as well, generally when the numbers are over $100M.

I always get in on the pool. Not because I expect to win, but as insurance. I'm pretty sure I would feel awful if the rest of my work friends became multimillionaires and quit while I had to keep working.

[unclescrooge]

folks at work did a pool thing, I opted out as I don't subscribe to these types of things...was given a hard time since it was only a $2 contribution but it's ok. I don't gamble as it's against my principle.

It's not a gamble in this case, but an insurance policy.

If everyone participates, win and quit en masse, then your job is at risk.

[ResearchMed]

Why buy so many tickets? Just buy one for each drawing if you must. This will raise your chances of winning to just above zero. That’s all you need to win. If luck is a lady you’ll win. Me? I won’t be buying.

Right.

There is a qualitative difference between a probability of *zero* and a probability that is, well, "vanishingly small" (the so-called technical term).


After that, it's just, "Do you prefer a probability of "2 times vanishingly small" or "10 times vanishingly small", etc. ... it's not really that different.
The differences in the expected values disappear into the string of zeros...

We might see about a season ticket for, oh, $1 per week or something.
The cost is not enough to notice.
We've talked about it occasionally.

RM

[rasta]

Don't forget, the probabilities aren't any higher/better now.

the odds of winning do not change, BUT the payoff does change.

as the payoff grows, there becomes a point in which buying a ticket is not considered a bad bet

[jhfenton]

folks at work did a pool thing, I opted out as I don't subscribe to these types of things...was given a hard time since it was only a $2 contribution but it's ok. I don't gamble as it's against my principle.

I always joined the pools because if the pool won and I wasn't a member I'd be alone at work and have to pick up the pieces. That would be so annoying.

My work does a pool periodically as well, generally when the numbers are over $100M.

I always get in on the pool. Not because I expect to win, but as insurance. I'm pretty sure I would feel awful if the rest of my work friends became multimillionaires and quit while I had to keep working.

+2 I have never bought a lottery ticket myself, but when someone would organize a pool at my former workplace, I would chip in for the reasons given by Ged and mmcmonster. It would be devastating to be the only one in my group at work to not be in a lottery-winning pool.

For better or worse, no one in my current department has ever organized a pool or even mentioned buying tickets themselves.

[ResearchMed]

Don't forget, the probabilities aren't any higher/better now.

the odds of winning do not change, BUT the payoff does change.

as the payoff grows, there becomes a point in which buying a ticket is not considered a bad bet

Yes. The complete text of what you quoted from me was

Don't forget, the probabilities aren't any higher/better now.

But *IF* you win the big one, it may be a much bigger amount (depending upon how many co-winners there are).

RM

As far as it being "not considered a bad bet", the probability remains "vanishingly small".
Whether that is a "not bad bet" or not is apparently subjective.

RM

[Jags4186]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

IIRC the expected return is about $.60 on the $1.00. So not a high return, or even a positive one, but still a return.

Math, please...

Obviously the median return is zero. The mode is zero. That is one seriously fat tail on the distribution.

https://dqydj.com/mega-millions-expecte ... alculator/

You have a 1 in 24 chance of winning something. Minimum return on a win is 100% (lowest payout on a $1 ticket is $2). Of course expected return is >0 but must be <1 otherwise the state would be losing money. If expected return was 0 no one would ever win anything.

Which, I believe, means that the mode is zero and the median is zero.

Mode and median are not the same as expected return. We all know the lottery is a loser, but mode and mean could both be zero in a situation where in a 100 lot drawing the payouts could be 51 $0 payouts and 49 $1,000,000 payouts. I’d bet $1 for those odds...

Also I learned today Megamillions is now a $2 ticket

[dual]

Expected return is zero.

Math please.

I started some research but too lazy to go further but it is interesting.
See https://www.usamega.com/powerball-jackpot.asp

• The $345 million quoted is for a 30 year annuity with "annually-increasing rate schedule." The cash payout is much less, $199 million.
  
  By annuity I think it means that if you die during the payout your heirs do not receive the remaining payments.
  
  The payments are taxed by the Feds but state taxes vary. For some reason my fair state CA does not tax lottery payouts while most other states have pretty hefty taxes.
  
  The "annually-increasing rate schedule" is heavily end of period loaded. The net annual payment after taxes for CA starts at $4 Million the first year then increases to $16 Million the 30th year.
  
  Someone mentioned here that there are other payouts than the grand prize so expected return = probability of winning*amount won would be complex although the grand prize probably accounts for the lion's share of the returns so to a first approximation you could probably ignore the small payouts.

[Cycle]

I'm not sure if I should do lump sum payout or spread it out. Probably lump sum, so I can have a good buffer in my emergency fund.

[Nicolas]

And just what would one do with a billion dollars - really.

Exactly, it's much too much money. It has the potential to thoroughly ruin your lfe. Remember Jack Whittaker.... https://en.m.wikipedia.org/wiki/Jack_Wh ... ry_winner)

[stocknoob4111]

A better use for the $2 is to buy myself a cheap beer at the grocery store and drink it... at least I get some value for my money rather than the equivalent of burning it. It's amazing that people think the odds of winning are even reasonable.. in reality it's so small that it could be considered zero for all practical purposes.

And if my co-workers won I would genuinely be happy for them... they took the chance and won impossibly small odds, I would not feel any different.

[Shallowpockets]

I organized a pool for the lottery once at work. Buy in was $5. We got 12 people. So your $5 was a greater chance. Some one opted out. Reason, they wanted to buy their own ticket.
Not sure of his reasoning, but if you are going to buy $5 worth of tickets you would do better in the pool
Now I know it is maybe politically incorrect, but that person was less than stellar in the mental "analysis department.

We did not win.

To answer OP's question, go ahead and buy your $20 worth of tickets. Heck, it's only twenty dollars. Come on.
People gnash their teeth here on BH forum with the most trivial sorts of decisions to make.

[bligh]

And just what would one do with a billion dollars - really.

Exactly, it's much too much money. It has the potential to thoroughly ruin your lfe. Remember Jack Whittaker.... https://en.m.wikipedia.org/wiki/Jack_Wh ... ry_winner)

I don't play the lottery (well maybe like once a year or something, for fun, with no real expectation of winning) ... but I am sorry, I refuse to believe that I would behave anything like this if I were to ever come across a windfall - Even one that big.

[Grt2bOutdoors]

I do't think jackpots are an investment. But $20 for entertainment once in awhile doesn't seem alike a problem to me.

The entertainment comes from dreaming how you'd allocate all that money.*

You only need one ticket for that.


*It would be totally fun to set up a charitable foundation and make giving away most of the money your new job. I'd also do a mad money give-away with 5%-10% of it. Like finding all my old high school and college friends, and paying off their mortgages.

Jay is that you buddy? Can you pay off my mortgage?

A noble gesture but if you pay off those mortgages you’ll have everyone chasing you for money.

[RickBoglehead]

I am thinking of purchasing $10 worth of tickets for each. I understand by math it's almost equal to throwing cash in sewage. But counting in two exciting and expecting nights before the drawing time, I guess the 20 bucks investment is worthwhile?


https://www.cnn.com/2018/10/16/us/megam ... index.html

Getting eaten by an Orca is more likely than winning. Lotteries are for fools.

[Grt2bOutdoors]

A better use for the $2 is to buy myself a cheap beer at the grocery store and drink it... at least I get some value for my money rather than the equivalent of burning it. It's amazing that people think the odds of winning are even reasonable.. in reality it's so small that it could be considered zero for all practical purposes.

And if my co-workers won I would genuinely be happy for them... they took the chance and won impossibly small odds, I would not feel any different.

The market went down 1,300+ points last week. I assure you that many felt their money was burning up right before their eyes. Even though you and I know there is real value in “investing” for long term goals. Shorter term goals say not to invest in equities yet many do it daily, one could say they are burning their money by doing so. Those who bought last Monday, would agree at least for now, even after today’s run-up.

[ihelosec]

IIRC the expected return is about $.60 on the $1.00. So not a high return, or even a positive one, but still a return.

Math, please...

Obviously the median return is zero. The mode is zero. That is one seriously fat tail on the distribution.

https://dqydj.com/mega-millions-expecte ... alculator/

You have a 1 in 24 chance of winning something. Minimum return on a win is 100% (lowest payout on a $1 ticket is $2). Of course expected return is >0 but must be <1 otherwise the state would be losing money. If expected return was 0 no one would ever win anything.

Which, I believe, means that the mode is zero and the median is zero.

Mode and median are not the same as expected return. We all know the lottery is a loser, but mode and mean could both be zero in a situation where in a 100 lot drawing the payouts could be 51 $0 payouts and 49 $1,000,000 payouts. I’d bet $1 for those odds...

Also I learned today Megamillions is now a $2 ticket

Median and mode are not relevant to calculating the expected return. Expected return is defined as the weighted average of all possible outcomes. The formula for the expected return on a Mega Millions ticket is shown in this article under the heading "Putting it all together." To use the formula, you would have to estimate the number of tickets sold.

[Grt2bOutdoors]

I'm not sure if I should do lump sum payout or spread it out. Probably lump sum, so I can have a good buffer in my emergency fund.

You could take the lump sum, then purchase a ladder of US Treasury zero coupon bonds each expiring over a 26 year period, at the end after paying a ton of taxes on “phantom income” you will then have close to the nominal amount quoted. Or you could purchase an annuity from an insurance company who will then help themselves to a healthy spread. Nah....just take the lump sum, but just to be safe put 10% of it in 1 Year US Treasuries and roll it over if you don’t need the money.

[Gryphon]

I guess the main reason I don't buy these tickets is because I DO NOT WANT TO WIN! I think it would make life stressful and miserable, at least for me. If I did win, I'd have to give almost all of it away ASAP.

I doubt I have a lot of company in that feeling.

I feel the same way. After the first million or so, I wouldn't have any use for the money. And the media circus surrounding such a huge payoff would be awful. I'm happy to miss out on the whole thing. Fortunately, that can be done for free.

[HomerJ]

The amount of pleasure I derive from getting lost in a fantasy about winning is worth way more than $20 to me. I probably spend $50 a month on average on lottery tickets, most often after a bad day at work.

But you should get the exact same amount of fantasy dreaming with one ticket.

[software]

Math, please...

Obviously the median return is zero. The mode is zero. That is one seriously fat tail on the distribution.

https://dqydj.com/mega-millions-expecte ... alculator/

You have a 1 in 24 chance of winning something. Minimum return on a win is 100% (lowest payout on a $1 ticket is $2). Of course expected return is >0 but must be <1 otherwise the state would be losing money. If expected return was 0 no one would ever win anything.

Which, I believe, means that the mode is zero and the median is zero.

Mode and median are not the same as expected return. We all know the lottery is a loser, but mode and mean could both be zero in a situation where in a 100 lot drawing the payouts could be 51 $0 payouts and 49 $1,000,000 payouts. I’d bet $1 for those odds...

Also I learned today Megamillions is now a $2 ticket

Median and mode are not relevant to calculating the expected return. Expected return is defined as the weighted average of all possible outcomes. The formula for the expected return on a Mega Millions ticket is shown in this article under the heading "Putting it all together." To use the formula, you would have to estimate the number of tickets sold.

I understand what you are saying David, but I think you are confusing most probable return with “expected return”, which has a specific definition.

[petulant]

The expected value of a lottery ticket can indeed be more than the cost of the ticket once the jackpot gets to be large enough. That still doesn't make it a good bet due to the standard deviation of outcomes. For example, if a lottery ticket is $1, the only prize is a jackpot worth $2,000, and you have a 1 in 100 chance of winning, the expected value is $20, which beats the ticket price of $1. In terms of the percentage return on "investment," the expected return is 1900%. The standard deviation is, however, 20000%. The standard deviation on actual lottery outcomes is also very high. For comparison, the standard deviation of stock returns in a year is about 16% (depending on sample period).

[alwayshedge]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

While I agree the word investment has no application here, the expected return is not zero.

[White Coat Investor]

“Investment”

You used that word twice. There is no “investment” here. There is an entertainment purchase. Perhaps you could even stretch the word “speculation” to cover this.

But not investment. Expected return is zero.

No it's not. It's negative. Half the money goes to the states, so your expected return on $1 is $0.50. You expect a 50% loss. If you bought all the tickets, that's what you'd get.

[White Coat Investor]

I am thinking of purchasing $10 worth of tickets for each. I understand by math it's almost equal to throwing cash in sewage. But counting in two exciting and expecting nights before the drawing time, I guess the 20 bucks investment is worthwhile?


https://www.cnn.com/2018/10/16/us/megam ... index.html

Getting eaten by an Orca is more likely than winning. Lotteries are for fools.

Is that true? I mean, people win the lottery every year. When was the last time someone was eaten by an Orca? According to Wikipedia, it has never happened in the wild.

https://en.wikipedia.org/wiki/Killer_whale_attack

[westcoast]

Why so serious, it’s entertainment go buy the tickets. This thread inspired me to go buy $20 in lottery tickets as I drink $20 worth of microbrew beer.