Merry Christmas! Buy a Lottery Ticket!

Market Movers wishes both all its readers a very merry Christmas. Today, I think, is a good day to go out and buy a lottery ticket. For one thing, buying lottery tickets can be an economically rational thing to do. But there’s another reason, too: it can help innoculate people against bad investments.

A couple of days ago I was out with a friend of mine, and we ended up talking about money and investments. I wasn’t big on investments generally, since my friend has debts: a mortgage, credit-card balances, that sort of thing. First pay off your debts, I said, then you can start worrying about where to invest your savings.

But my friend also loves to dream about becoming rich enough not to have to worry about money. And the lazy man’s way to those sort of riches is undoubtedly a really good investment: I should have bought the most expensive apartment I could afford in 1997, or I should have invested a couple of thousand dollars in [name your high-flying stock du jour here]. Then I would be a millionaire today!

Now these high-return investments are, of course high-risk investments, and the risk profile of most normal middle-class people who work for a living doesn’t really point towards that kind of risk. My friend, certainly, doesn’t have a five-figure sum in risk capital which she can afford to lose.

And so it makes sense for her to buy a lottery ticket each week. If anything, it’s an even lazier way to riches than investing in the stock market, and it’s certainly a lot easier than investing in real estate. And here’s the best bit: your total maximum losses are a tiny fraction of the losses you’re risking with investments. To be sure, the chances of your actually hitting the jackpot are, to all intents and purposes, zero. But if you think of the lottery as your ticket to possible instant wealth, you can stop thinking about your investments that way. And that will make you a better investor – which in turn means you’ll be much better off in the long run.

So go out and buy a lottery ticket without feeling guilty. It’s cheap, it’s fun, and it could make you better off even if you don’t win!