How to win £50 million - buying a ticket is not enough
The UK’s gone a bit Lottery mad this week. Camelot, the company that runs the National Lottery, sold 200 tickets every second in the final hour before Wednesday’s record £50.4 million draw. No one won so the jackpot rolled over again to £57.8 million. In the final hour of sales today (Saturday), the UK will spend £800 on lottery tickets every second.
The thought of becoming a millionaire overnight sets imaginations on fire, but this weekend the only certainty is that millions of dreams of early retirement, once-in-a-lifetime holidays and country homes / small London flats will be dashed.
In the build-up, commentators have reeled out the usual, useless, strategies. Of course, as a savvy Moneywise reader you’re not foolish enough to fall for them – past performance is no indicator of future performance, after all.
Two of the most popular plans directly contradict each other, which is in itself a warning. One recommends picking the numbers that have come up the most often (23, 38, 31, 25, 33 and 11), as they've earned their stripes. The other says you should pick the least-picked balls (13, 16, 20, 41, 21 and 1)* as every brightly-coloured ping pong ball has its day.
In reality, both of these approaches harm your chances of a big win**. That’s not because they’re less likely to come up – every combination has the same chance of being picked.
Instead, your chance of winning the full £50 million depends on picking a set of numbers that noone else has. Follow a popular strategy, or an obvious pattern on the selection slip and you're almost certain to pick the same as someone else, or worse, lots of people. If you pick the same number as just one other person, you get half each – and if there's three or more tickets it's even worse.
The only way to have a chance, however small, of winning the full £50 million is with a unique ticket, and to have the best chance you need to pick randomly. It turns out people are really bad at picking random numbers, which is useful when detecting fraud and catching children cheating on their homework, so the easiest way to do this is with a lucky dip.
However, even with this optimal approach, you still need to get past that one in 45.5 million challenge of matching the draw.
And then there's the question of value for money.
Across all prizes, including jackpots, Camelot pays out just 97p for every £2 that punters spend on lottery tickets.
The vast majority of tickets win nothing, and half the time a ticket doesn't even match a single number. Fewer than 1.1% of lottery tickets win a tenner, which is really just £8 when you include the ticket cost, and only 0.046% of all tickets match four or more balls.
If you want an outside chance of becoming an overnight millionaire, you're much more likely to end up ahead if you invest in Premium Bonds.
On the face of it it seems to be a less good deal - there's a paltry £1,000,000 jackpot, and just one draw a month.
If you buy a lottery ticket, 99% of the time it will be worth nothing the next day.
But if Premium Bonds don't win, they just re-enter the next draw, so the longer you have them, the bigger the chance of winning. You can withdraw all the money you've invested, plus any prizes you've won if you want to.
If you invested £200 a year in Premium Bonds, at the end of the year you'd be guaranteed your £200, plus any payouts.
If you'd instead bought 100 lottery tickets you'd end up with nothing around one-third of the time. Of the £200 you'd paid in, less than £100 would have been paid in prizes.
As a general rule, lotteries are a really bad idea*** if you’re looking to grow your wealth, which is why they’re sometimes referred to as a tax on stupidity (or desperation). The only plan to build your wealth is to spend less than you earn and save or invest the difference. Sadly it won't happen overnight.
Excuse me while I pop to the newsagent.
* Technically the numbers that have come up least are 58, 56, 54, 51, 59 and 53, but I’ve ignored them because the 50-59 balls haven't had as many opportunities – I’ve just included the numbers used since the Lottery began.
** Not by much though. Half of practically never is still practically never.
*** With one notable exception: The State of Massachusetts once ran a lottery where players could guarantee a profit through a quirk in the rollover system. It was ruthlessly exploited by MIT (Massachusetts Institute of Technology) students, and doesn’t exist anymore. It’s alleged the state knew about it but let it continue for some time, as it was receiving a cut of every ticket sold.
This blog was originally published on Friday 8 January 2016.