During a recent reservist In-Camp Training, I had meaningful conversations with my buddies. Over the years, 10 years in total, our conversations evolved from talking about furthering our studies and girlfriends to discussing our education and finding a job, and eventually to investing and starting a family.
One of my conversations with a close buddy was about investments. This was quite prevalent during this reservist because I’m writing for DollarsAndSense. What struck me when I spoke to him was that my friend believed that buying a 4D ticket from Singapore Pools was akin to making an investment.
Read Also: Step-By-Step Guide On Getting Started On Investing In Singapore
He told me that it’s quite similar because after betting a few times, you’re bound to strike it big. He shared that he was keeping a close eye on his winnings, and he was only a few thousand dollars down after winning and losing over the past 10 years. And that this amount would be easily covered if he won big within the next few years.
I explained to him that he could not be further away from the truth. The fact is that many people do not know how or where to start investing. And 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.
The Problem Is That Betting On 4D Means You Lose Money The Second You’ve Made A Bet
The second you pay for your 4D bet, you’ve already lost money. We’ll explain this to you.
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 variations to winning 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.
Chance of your number being 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
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
Here’s the payout and expected value for your bets:
| Prizes | Every $1 on Small bet | Expected Return on $1 bet | Every $1 on Big bet | Expected Return on $1 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 will 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.
This Should Never Be Compared To Investing
This is a far cry from what you’re hoping to achieve with investments. When you invest you’re hoping to accumulate money. While you may lose money if you’re not sure what you’re doing or if you’re investing wrongly, it definitely isn’t a foregone conclusion.
This is why you should start brushing up your knowledge when it comes to investments rather than contemplating lucky numbers or understand the payout system for 4D. DollarsAndSense has compiled a reading list for you to get started.
How Much More Money My Friend Would Have Accumulated In 10 Years If He Invested Instead
I’m definitely not trying to call anyone out here. I am the first to admit I do indulge in a friendly wager every so often (especially in poker), but I do not confuse it with investing. Putting your money in these types of wagers is purely for entertainment purposes, and you should know your limit (and it should be a very tiny one compared to your salary).
Every week, there are three 4D draws – Wednesday, Saturday and Sunday. Let’s assume my friend bet $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, he would have received $4,832.10 from his bets.
In contrast, if he had just stuffed his money into biscuit tins, he would have $2,967.90 more. Leaving it in the bank would mean he earned a minuscule 0.01% return and have $7,804.29. Of course, this is not meant to wow you, just show you that he was better off doing nothing with his money.
If he had invested his money, a safe investment that even beginners can carry out with almost no knowledge is the Straits Times Index (STI) exchange traded fund (ETF). The STI ETF is made up of the top 30 listed stocks in Singapore, comprising some of the biggest companies including DBS, Singtel, Keppel Corp and CapitaLand.
Read Also: What You Need To Know About Singapore’s First REIT ETF Before Investing In It
In the past 10 years, the STI ETF has delivered 2.07% per annum. This can be seen as a very conservative amount as the world was plagued by the Global Financial Crisis within this timeframe. Just to show you some variation, STI ETF has delivered 7.27% per annum in the past 15 years and 5.19% in the past 5 years.
No one can predict downturns, and the past 10 years hasn’t been the best for investments. Nevertheless, my friend would have still been able achieve close to double of his investment. This is because he would not have put in a lump sum at the beginning, and continuously add to his position, allowing him to ride out the volatility of the markets.
A simple calculation on FSMOne’s portal shows that in the past eight years alone, his investments would have doubled. It shows for eight years because the particular investment has only been around for eight years. You can use FSMOne’s investment calculator your own, and crunch the numbers for diverse investments, not just the STI ETF on its portal.
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