The Lottery

The topic of the lottery is greatly on my mind. Is playing the lottery a good thing, especially if you're a Christian?

How are the statistics of being struck by lightning derived? Are the number of storms that have lightning documented, as well as the number of people within those storms? Then, you take the number of people killed or injured when struck by lightning? However, what were each of these people doing? I'm sure there are other variables that play into being. Certain areas of the U.S. probably have a lower chance of being struck by lightning than other areas. And, probably a big one is what you're doing - whether you're making yourself more susceptible to being struck than not.

I read somewhere that the 2000 U.S. Census population was 280 million. Yes, that was 10 yrs ago and it's more than that now. It said the odds of being struck by lightning is 1/700K.

Somewhere else I read that to win the Lotto, which is 40 balls and 6 are chosen, the odds end up being 3,838,380.

The math is: 40 x 39 x 38 x 37 x 36 x 35 = 2,763,633,600. This is for the 6 balls and possibilities.

Because the order of the balls does not matter, you divide that # by the 6 possibilities: 6 x 5 x 4 x 3 x 2 x 1 = 720.

2,763,633,600 x 720 = 3,838,380 are the odds of 1 lottery ticket

I have a friend who does about $10/month. This would be 3,838,380/10 = 383,838. Thus, his probability of winning is 1/383,838 = 0.0000026.

Whether you look at it from the odds or probability, it doesn't seem very good.

For example, if you flip a coin, your probability is: 1/2 = 0.50. That's really good.

The odds of getting struck by lightning in 2000 were 5.5 times more likely than winning the lotto. Personally, I don't know anyone struck by lightning. And, you could probably increase your chances of being struck by lightning by standing on a hill as being the highest point and carrying a long metal rod during a heavy lightning storm.

How do you increase your chances of winning in the lotto? Putting more money in. If you increased your amount by 5 times to $50, the probability of winning is 0.0000130263288 or, 1 in 76,767 chances. Still, those odds are pretty far off.

My friend has been playing the lottery for at least 10 years, maybe more. Under that premise, and since I'm a trader, let's see what could've happened to the money he used to play the lottery which he's had no real return on. Yes, he may have won $100 or so cumulative. Can't remember what he said.

He puts $10/wk in a savings account for the 36 months. Let's say there is no interest. At the end when he closes his account and opens a cash only options account at BrokersXpress, he has $360. Every month for the remainder of the 7 yrs left, he continues to add $10 of what he would've put in the lottery into his BX account. The minimum opening account is $200.

During those 36 months, he takes time to learn how to trade options. Yes, this will cost money, but he has a different account where he saved up money from giving up coffee for 5 years prior. He was spending $3.50/day every day. In 5 years with no interest, this equates to $6370. Every month he puts about $106 into his training/education (that's his coffee fund). At the end of these 3 years of training, he's spent $10,192 to learn from the right people BEFORE investing a dime into any trades.

Initially, you can't buy options like GOOG or any of those, but he has to by inexpensive options of lower priced stocks. He makes only 1 trade a month with commissions at $14.95/trade. Yes, he can probably get lowered commissions elsewhere for options with a small starting account of $360. But, I don't know those brokers, so I'm using only what I know. Since his account is so small, he doesn't have negotiating power to reduce his fees right now.

Also, during his training, the limiting beliefs on money, relationships, success, etc. were resolved. He developed good habits of money & trade management, did at least 2 yrs of simulated real time, end of day trading. He's learned to manage his emotions and has good money habits of discipline, self-control, organization and does not have a get-rich quick scheme mindset.

Let's say he makes now 10% on his money each month before commissions. Initially, he's just making 1 trade a month. He doesn't increase to 2 trades/month until he's bringing in $200 profits before commissions. This doesn't happen until month 67 of when he started saving the $10/month to invest. By now, his account is up to $3,477.34. Basically from month 37 to 67, he's only making 1 trade/month. That's basically 2.5 yrs he's been able to form good trading disciplines, self-control, managing his emotions.

Because he is wise with his money, he's also been looking for a different broker that has better tools and commissions, he decides to switch to a broker that will charge him only $1.25/contract/trade. He's significantly reduced his commissions from $29.90 roundtrip for 1 contract to $2.50. I actually pay less than this, but we'll say for the sake of this example.

During these 30 months, he's spent another $3185 in training/help to better himself in trading. The total is now $13,377 in education in trading, rather than learn the hard way. He continues to make 10% on the total of his account, only adding another contract when he makes an additional $200.

In month 86, he's making nearly $2K a month and up to 10 contracts. His account is up to $21,224.87. This is now 7 yrs down the road since he began his trading education and just a little over 4 yrs since he started actually funding any trades. Mind you, the $10/month investment at month 86 = $860. He's made a little over $20K AFTER commissions.

Year 8 (month 96) = $54.6K
Year 9 (month 108) = $169.3K
Year 10 (month 120) = $524.3K (total $10/month investment = $1200 for 10 yrs, $19.1K on education/training for trading)

At the end of his 10 yrs of investing in the lottery, he has nothing to show for it but to be bankrupt and in debt. If he had been smart and taken this route, he would have conservatively near a 1/2 million. Even if he stopped at Year 9, that's still a lot of money.

Though I do not play the lottery as my friend, I've had my own bad choices with money, trading, etc. I did not have the patience and learned the hard way on MANY things in trading, wiping out my accounts multiple times. It's sort of like the Tortoise & the Hare.

There were areas I took my time to learn properly, but other factors impeded me like impatience, lacking of knowledge and understanding, wanting to go faster than where I actually was mentally/emotionally. Pride!! (Yes, the Bible says pride comes before a fall and boy, did I fall hard).

Anyway, this is long enough. I'll have another article that expounds more on some of the mindsets here.
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