Nov 27, 201202:32 PMFinancial Perspectives
with Michael Dubis, CFP
Powerball investment looking better
We view investments on a risk-adjusted-for-return basis. The Powerball jackpot is likely going to exceed $500 million this Wednesday.
The odds of winning are 175 million-to-1, with an approximately 60% to 70% chance that a winner will be selected. That suggests to me that it might finally be worth the risk to invest $2 for a potential $500 million return.
Before making this investment, you should understand the risks, however:
- There’s a very high probability of a total loss of your investment.
- Your transaction costs will likely be more than $2 because you will need to get to the gas station to purchase your ticket.
You must be willing and able to accept these risks and costs.
My wife and I are each investing $2 into this “opportunity” nonetheless. We feel comfortable with the downside.
We may explore using part of our annual gifting allowance and gift $2 to our children so that they can invest in this as well. Please discuss the reasonableness of this strategy with your attorney or tax advisor in advance. (Note, by discussing with your tax advisor, your transaction costs increase considerably.)
Michael Dubis is a fee-only certified financial planner and president of Michael A. Dubis Financial Planning, LLC. He is also an adjunct lecturer at the University of Wisconsin Business School James A. Graaskamp Center for Real Estate. Mike can be reached at firstname.lastname@example.org. This article contains the opinions of the author. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products or services described in this website or that of the author’s. Mike Dubis does not guarantee the relevancy, appropriateness, or accuracy of any outside information or links. Mike Dubis does not render or offer to render personalized investment advice or financial planning advice through this medium. All references that might be made to an investment or portfolio's performance are based on historical data and one should not assume that this performance will continue in the future. THIS COMMUNICIATION MAY NOT BE USED BY YOU AS A RELIANCE OPINION WITH RESPECT TO ANY FEDERAL TAX ISSUE DISCUSSED HEREIN AND IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY YOU FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON YOU BY THE INTERNAL REVENUE SERVICE.
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