Playing the National Lottery is something that many people look forward to every week, but your chance of winning the jackpot is so small it might as well be zero!
The laws of probability are stacked against you. According to the Lotto website, the chance of winning the jackpot is 1 in 45,057,474. My Foolish colleague Edward Sheldon recently pointed out that those odds are similar to everyone in Spain buying a UK lottery ticket and only one person winning the jackpot.
This could be £25 well invested
The chances of you being the winner are negligibly small. Playing the lottery is fun, but it’s not an investment. But how much do you spend on it? The ticket price is £2 each week, but do you stop at one ticket? Go on, be honest! I reckon two or more tickets will pass through many people’s hands and when you add scratch cards and other tempting flutters, who knows what the total could add up to each month. And all the money goes straight down the drain, apart from the odd small win to keep us hooked!
But did you know you can make a meaningful investment on the stock market each month for as little as £25? That’s the equivalent of spending about £5.77 each week, which compares to buying about three lottery tickets. And the great thing about the stock market is that money isn’t gone when you’ve invested it. In many cases, the invested money goes on to make even more money for you if you invest wisely. Indeed, investing on the stock market is how I’m getting rich – bit by bit and with more certainty than playing the lottery.
One of the great things about shares and share-backed investments is that they pay dividends. And dividends work a bit like earning interest on cash-savings accounts – the payments tend to keep on coming. And if you reinvest those dividends, you go on to earn dividends on the dividends and so on. That process is known as compounding and it’s the thing that can really make your savings and investments expand over time. I’d go as far as to say compounding is the key to getting rich.
It’s easier than you might think to get started
You don’t have to be an expert investor like Warren Buffett to get started, either. A great way to cut your teeth with investing is to put regular money into a low-cost, passive index tracker fund such as the Legal & General UK 100 Index Trust Class C — Accumulation. The fund follows the fortunes of the FTSE 100 index, which contains the UK’s largest public companies. The ‘accumulation’ part of the description means that the dividends you get are automatically reinvested back into your holding in the fund, so straight away you’re potentially compounding your money.
You can set up a monthly payment into your tracker fund for as little as £25 per month through investment platform providers such as Hargreaves Lansdown. I think that would be a better bet that throwing money at the National Lottery and you might get the investing bug. If you do, you’ve come to the right place to find out more here at The Motley Fool.