Forget the Lottery: Smart Investors Put Their Money Here Instead

Key Points

• A total of 45 U.S. states have lotteries, with some advertising that you have to be in it to win it.

• Although the thought of winning the lottery is exciting, the chance of you winning is shockingly small.

• History suggests you'll be a long-term winner if you put your money in the Vanguard S&P 500 ETF instead.

• 10 stocks we like better than Vanguard S&P 500 ETF ›

The Powerball jackpot just reached a massive $1.7 billion, which is an incredible sum of money. It's still only the third highest jackpot in lottery history. Although you'll often hear that you have to be in it to win it, you're probably best off avoiding the lottery and buying the Vanguard S&P 500 ETF (NYSEMKT: VOO) instead. Here's why.

They want you to buy lottery tickets

The math on the lottery is not good for lottery participants. From a dollars-and-cents perspective, lotteries brought in $103 billion from ticket sales in 2023. The cash paid out to winners was roughly $69 billion. That means that around $30 billion was raised from lotteries. But that cash has to cover operating expenses, so the total amount that states get is much less than that $30 billion sum. In the end, on average, lotteries provide just 2.3% of state revenues.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

Looking at lotteries in a different way, your chance of winning generally depends on how many people end up playing. So just when the jackpot is the biggest, drawing the most attention from consumers, is when you have the lowest likelihood of winning. Winning the entire $1.7 billion that's on offer from the Powerball today has odds of around 1 in 292 million.

The insidious piece of the story is that the odds of winning "a prize" are actually pretty attractive, at roughly 1 in 25. But the prize that most people win will be rather small. What that does, however, is keep you in the game because it makes you believe you could win the big prize. Of course you could, indeed, win the big prize, but the odds of that are 1 in 292 million. Or, to put it another way, you're far more likely to be a loser than a winner when it comes to the lottery.

Think long term and build your wealth

The truth is, if you're playing the lottery, you're just giving your money to the lottery operators. Sure, if you really enjoy it (perhaps there's a company pool going that builds co-worker camaraderie, for example), then have at it. But don't buy a lottery ticket if what you really want to do is create wealth. Buying a lottery ticket is spending, not saving.

^SPX data by YCharts.

If what you really want to do is build your wealth, you need to start by saving money. Then you need to invest for the long term. One of the best options for that is an S&P 500 index fund like the Vanguard S&P 500 ETF. In fact, this is an investment choice that would get the nod from none other than world-famous investor Warren Buffett, the CEO of Berkshire Hathaway. He has long suggested that most investors simply buy the S&P 500 and hold it for the long term.

Why has the man known on Wall Street as the Oracle of Omaha made this suggestion? Look at the chart above. Since 1950, the S&P 500 index has increased in value by nearly 39,000%! Notably, that period includes some pretty nasty times, when stock market performance was downright terrible. But, if you had simply held firm and perhaps even invested more on a regular basis (known as dollar-cost averaging), those downdrafts would now be nothing but small blips on the long upward climb.

^SPX data by YCharts

Over the past five decades, the average return of the stock market was roughly 10% a year. To be fair, the average return is not the actual return you'll get each year. Returns are highly volatile. But, over time, the trend is very clear.

Looking at the S&P 500 index again, if you had invested $2,500 at the start of 1950 and never added another penny, your investment would be worth nearly $1 million today. In other words, given the historical market trends, your chances of getting rich by investing in the S&P 500 index are way greater than the odds of hitting the jackpot in the lottery. Your investment "jackpot" just takes some time to build up.

Luckily, most people have figured out the trick

The lottery is an exciting, headline-grabbing affair. It's something you talk about with your friends. Investing in the S&P 500 index is boring and not likely to lead to many extended conversations at your next cocktail party. People might actually avoid you so they can chat about the Powerball with more interesting guests.

But, as it turns out, over 60% of U.S. adults have some sort of investment in the stock market. So buying the S&P 500 index isn't exciting, but a lot of people seem to be aware of the benefit of investing. Like them, you should probably put your money into long-term investments in stocks and not into a lottery ticket. But feel free to conceal that fact at your next party if you want to join the Powerball conversation with all of those folks lamenting that they didn't win the jackpot -- again.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $670,781!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,023,752!*

Now, it’s worth noting Stock Advisor’s total average return is 1,052% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.