Funds vs lottery: There’s a chance you could become a millionaire, but would you be happy to part with more than R69 000 over 20 years?

This year, a 35-year-old woman from Soweto became a multimillionaire thanks to a gamble on the Ithuba National Lottery, which celebrates its 20th anniversary this month. She won a whopping R114 million by playing Powerball.

She’s not the only person to take a flutter and win, of course, as Ithuba has collectively paid hundreds of millions of rands in jackpot prizes across the various National Lottery games. She’s just one of the lucky ones. In reality, there is a one in 13 983 816 chance of matching all six balls correctly.

What’s more, if you’d invested the money you spent on tickets instead, you would’ve gained a sizeable nest egg. Exclusive figures crunched for City Press by Old Mutual show that a typical National Lottery gambler could be between R28 961 and R69 273 worse off had they forgone investing in one of Old Mutual’s funds and rather gambled consistently for two decades without winning anything.

If the punter had simply put the cash under a mattress, they would’ve been more than R6 000 worse off.

Gontse Tsatsi, Old Mutual Investment Group head of retail distribution, explains: “If you bought one row of numbers for every lotto draw since March 11 2000, you would have spent R6 290.50. This takes the R1 increase on March 28 2009 into account.”

Of course, inflation also has a role to play.

“The purchasing power of R151 today was R47.42 20 years ago. In other words, the goodies in your shopping trolley that amounted to R47.42 20 years ago will cost you R151 today,” says Tsatsi.

Rita Cool, a certified financial planner at Alexander Forbes, says she’s glad the numbers show that investors would’ve done better in equities over 20 years.

“After three horrible years in the markets, people now say: ‘I want to be in cash.’ It’s just over the past few years that it’s been bad, but this demonstrates that, over the long term, equities outperform cash.”

BUT ISN’T INVESTING ALSO A GAMBLE?

If you draw similarities between gambling and investing, you could be forgiven, as both demand that you take an element of risk, and there are no guarantees that you won’t lose all your money.

But Tsatsi points out that gambling is far more speculative, with the primary intent being on winning money where there is a probability of losing everything.

“Investing is the act of allocating money to an asset with the intention of consistently generating an income or growing the invested money to achieve a specific investment goal.”

Tsatsi admits that investing doesn’t give a predictable return due to market and economic movements, but he maintains that it pays off over the long term.

“Investing in a unit trust with a clear mandate sets out what assets the fund will invest in, and the fund fact sheet explains the associated risks, as well as the expected investment time horizon an investor should remain invested to achieve the expected performance objective.

“There is no diversification in purchasing a lotto ticket – you can perhaps spread the risk a bit, but that would mean buying more rows of numbers to increase the probability of winning.”

AGAINST THE ODDS

But if you had gambled in the National Lottery for the past 20 years, would you really have come back with nothing? Tsatsi thinks it could be possible to have won a few thousand rand.

“If the stats show you could win 50% for every amount spent on a lotto purchase, this suggests a total winnings of R3 145.25.” But he adds that the odds are low: “The missing part to this is the probability factor of choosing the right numbers. The table illustrates the probability factors – bearing in mind you need a minimum of three numbers to receive a payout.”

SO, SHOULD YOU PLAY THE LOTTO?

Cool points out that you can’t put small amounts into a fund such as the ones that Old Mutual offers because they often come with minimum investment terms. Even tax-free savings accounts (TFSAs) come with a minimum investment of about R200, says Cool.

“You can’t actually invest those small amounts anywhere. You have to save in your piggy bank and then put a lump sum in savings. Your first port of call should be a TFSA. Build up the funds, then put them in a unit trust.”

She points out that the lotto is effectively a tax, but that if you’re just having an innocent flutter – one that you can afford – then there’s little harm done.

“You may lose the amount you gamble in the lotto in the couch cushions or buying a donut. There are worse ways to lose or spend the money. If you’re going to put money on the lotto, make sure you have the money to lose. Some people enjoy it; it’s when it becomes an addiction or when you’re using your rent money to buy tickets that it becomes a problem.”

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