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

[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.

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.

It’s a little more complicated. Taking it at face value and ignoring taxes/lump sum/etc. Megamillions currently has a positive expected return because there are approximately 302,000,000 combinations at a cost of $604,000,000 which is less than the current jackpot of $642,000,000. Where it gets more interesting is that only the jackpot is split up amongst multiple winners. If say 1,000 people happen to hit 2nd prize which pays $1 million, the lottery would need to pony up $1 billion in addition to the potential jackpot. Although I am not 100% sure how this affects the long term expected returns as there aren’t winners for every single drawing and I’m also sure that the the lottery companies have insurance in place to protect themselves in this type of situation.

[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.

[Taylor Larimore]

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?

mrgreen:

I suggest that investing(?) in a large Powerball jackpot is a poor bet. Here's why:

Let's say you spend $10 and your chance of winning a $1Billion pot is one in 2 Billion. Not good.

Let's say you spend $10 and your chance of winning a $1 Million pot is 1,000 times greater. Not good but much better.

Isn't it enough to win $1 Million and have a much greater chance of winning?

Gambling is for losers. Both in the casino and in investing.

Best wishes.
Taylor

[Patrick584]

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.

This is a linguistic discussion that I’d like to weigh in on. Using the average of possible outcomes is a common definition for expected return, but it is not the only reasonable definition. The lottery is a much deffferent financial vehicle and may require an out of the box definition. Especially for a single prize lottery the mode seems like a great way to define expected return coupled with the likelihood of getting the mode value (999999 in 1000000). Since most investors are buying substantially fewer tickets than the total available, the mode value describes a typical outcome and is a great definition for expected return.

[Dottie57]

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 used to participate since I didn’t want to be the last person in the department when everyone else quit.

[LadyGeek]

This thread has run its course and is locked (gambling under the pretext as an "investment"). See: Acceptable Topics and Subforum Guidelines

This is an investing and personal finance forum. We also maintain a subforum that allow our members to discuss consumer goods and services and recreational activities. Anything else is considered "Off Topic" and is not acceptable on this forum.

Gambling and sports are off-topic.