Yahoo Finance Here’s How Much More You Would Have If You Invested Instead Of Gambled in 4D In The Last 10 Years
For some, the lure of 4D, being relatively cheap and very accessible, is unavoidable. This is especially so when everyone knows “a friend” who has won big.
Worse still, some may believe that buying a 4D ticket from Singapore Pools is akin to making an investment. While I’ll be the first to agree that we cannot win the prize money if we don’t buy a ticket, gambling is far from investing.
Gambling is best left to the realm of entertainment – and we should treat money that we gamble as spent on entertainment purposes.
Betting On 4D Means You Lose Money The Second You’ve Made A Bet
The instant you buy your 4D bet, you’ve already lost money. Your expected value is negative.
There are two main types of bets people can make in 4D – Small and Big. For those of you who don’t know, a Small bet means you’re betting on your number to be in the top three places – 1st prize ($3,000), 2nd prize ($2,000) and 3rd prize ($800). A Big bet, means you’re betting your number will be one of the 23 numbers that win a prize – 1st prize ($2,000), 2nd prize ($1,000) and 3rd prize ($490), and the 10 Starter prizes ($250) and 10 Consolation prizes ($60).
You can see that there are several ways to win a bet. However, at the end of the day, all this hinges on your number actually being selected as one of the winning numbers. This means you can calculate the chances of your number being a winning one and the expected return of your bet.
The chance that your number is a winning one: 1 in 10,000 (numbers range from 0000 to 9999)
Small Bet
Expected value of 1st prize: 1/10,000 X $3,000 X $1 = $0.30
Expected value of 2nd prize: 1/10,000 X $2,000 X $1 = $0.20
Expected value of 3rd prize: 1/10,000 X $800 X $1 = $0.08
Total expected value = $0.30 + $0.20 + $0.08 = $0.58
This means you are guaranteed to lose $0.42 for every dollar you of a Small Bet on 4D over the long term.
Big Bet
Expected value of 1st prize: 1/10,000 X $2,000 X $1 = $0.20
Expected value of 2nd prize: 1/10,000 X $1,000 X $1 = $0.10
Expected value of 3rd prize: 1/10,000 X $490 X $1 = $0.049
Expected value of Starter prize: 10/10,000 X $250 X $1 = $0.25
Expected value of Consolation prize: 10/10,000 X $60 X $1 = $0.06
Total expected value = $0.20 + $0.10 + $0.049 + $0.25 + $0.06 = $0.659
This means you are guaranteed to lose about $0.34 for every dollar of a Big Bet made on 4D over the long term.
Personally, I’ve lost every dollar I’ve ever bet on 4D (not that I make frequent bets).
Here’s the payout and expected value for your bets:
Prizes | Every $1 on Small Bet | Expected Return on $1 Small Bet | Every $1 on Big Bet | Expected Return on $1 Big Bet |
1st Prize | $3,000 | $0.30 | $2,000 | $0.20 |
2nd Prize | $2,000 | $0.20 | $1,000 | $0.10 |
3rd Prize | $800 | $0.08 | $490 | $0.049 |
Start Prize | $250 | $0.25 | ||
Consolation Prize | $60 | $0.06 | ||
Expected Return |
| $0.58 |
| $0.659 |
For every $1 you wager on 4D, you are guaranteed to lose $0.42 on a Small Bet, and $0.341 on a Big Bet. This clearly shows that you’ve already lost money on your bet from the second you place it because the payouts are not attractive enough.
How Much More Money My Friend Would Have Accumulated In 10 Years If He Invested Instead
I’m not trying to call anyone out here. In fact, I will be the first to admit I do indulge in a wager every so often (the lure of winning millions with a $2 bet is great, even if my chances are very poor).
But, this should not be confused with investing. Putting your money in these types of wagers is purely for entertainment purposes, and you should know your limit (which should be a very tiny one compared to your salary).
Every week, there are three 4D draws – Wednesday, Saturday and Sunday. Let’s assume we place a bet of $5, in equal proportion for Small and Big bets, on each draw for the past 10 years. This would mean that he would have gambled $7,800, and on average, we would have “won” $4,832.10 from the bets.
In contrast, if we had just left our money in our bank, we would have at least $2,967.90 more. Of course, we may also have earned an interest return on some of the high interest rate savings accounts. In short, we are better off doing nothing with our money.
If we had invested in a diversified investment that even beginners can start doing with almost no knowledge, we would be almost guaranteed to earn a positive return. For example, we can make simple investments in the Straits Times Index (STI) exchange traded fund (ETF) or invest via a robo advisor platform.
The STI ETF is made up of the top 30 listed stocks in Singapore, comprising some of the biggest companies including DBS, OCBC, UOB, Singtel, Keppel Corp and CapitaLand Investment.
Via robo advisory platforms, we can gain global exposure. We can invest in the S&P 500, comprised of the top 500 blue-chip stocks in the US and even exposure to stock markets worldwide.
In the past 10 years, the STI ETF has delivered approximately 3.7% per annum, while more global exposure to the S&P 500 would have given us a return of 11.9% per annum.
By leveraging on a dollar cost averaging (DCA) strategy, we would also be investing in more units when prices are lower and less units when prices are higher. By continuously adding to our portfolio, we can ride out the volatility of the markets.
We can use a handy calculator on the FSMOne portal shows to see historical investment returns (if we had made the investment). This calculator can be very useful as it shows the potential return we may have earned via numerous investments that we could have made.
This article was first published on 4 September 2017 and has been updated to include new information.
The post Here’s How Much More You Would Have If You Invested Instead Of Gambled in 4D In The Last 10 Years appeared first on DollarsAndSense.sg.
