Let’s compare the idea of lottery syndicate playing with the investment strategy of mutual funds. Obviously the two potential wealth systems are completely different but I suggest that some of the basic concepts are comparable. Rana Pratap Singh KBC
A mutual fund is a managed portfolio of stocks and financial instruments that the individual investors purchase shares in. The investors are pooling their money to buy stocks but they are also renting the services of a fund manager. The manager takes care to achieve the desired growth of the fund and to maintain the level of safety for the capital. Conversely, a lottery syndicate is a group of lotto purchasers banded together to get a better chance of winning the lottery. The syndicate itself is the fund manager but the management involved is only administrative because the growth aspect of the syndicate is built into the syndicate’s fundamentals.
The mutual fund’s value fluctuates with the market and people buying shares at a set time each month can get better overall price due to what is called ‘dollar cost averaging’. Similarly in syndicate lottery playing, money keeps getting reinvested. In other words, the smaller wins keep increasing the total pool of cash in play and this can ultimately bring a much larger jackpot win too.
Individual investors playing the stock market can usually only begin with buying shares in one company at a time. There’s a chance of gaining but there’s also the risk of only having the ticket on the one horse. Mutual funds improve those odds by giving the investor a share in many potentially winning stock market ‘tickets’. A lotto syndicate does precisely the same thing. Instead of having just the one set of numbers that are unlikely to be drawn, the lotto syndicate player gets a cut in a pool of numbers that is much bigger, and also more likely to come up and return a prize.
So what is the real bottom line of both lottery syndicates and mutual funds? Let’s put it this way for the mutual finds versus a single stock. If you bought a particular gold-mining stock and that company hit a rich strike, then your shares and your profits would skyrocket and you would make big money. If another company nearby hit the gold, then you don’t get much of anything. If you had bought into a mutual fund of gold companies then your fund would be worth much more now. You wouldn’t make as much as having that share of the specific winner but you would have made good money on your fund and your odds of winning were vastly improved by being in the fund.
And for the lotto syndicate verses the single lottery ticket? Well, it’s the same thing. One winning ticket is worth much more but those winning tickets are rare and the losing tickets are worth nothing. With a syndicate ticket the odds of having a small win are vastly increased. A losing ticket is still worth nothing but with syndicate lottery playing, you’re less likely to be holding one of those.