JACKPOT or CRACKPOT? The $2 “Investment” Strategy

January 13, 2016

Seems like this week’s biggest news isn’t about the markets-- it’s about Powerball. And, who are we to disagree with the hype? The site, Fivethirtyeight.com proclaims “everyone is freaking out about the 1.5 billion Powerball […] and the stats agree.”

Those stats are the nearly “billion tickets (more than three times the population of the United States)” sold overall -- “a ludicrous number!”

We admit, even we’ve got a little Patch of Land office pool going on. Here we are, savvy online platform builders. We can pick up-and-coming cities for spotlight and investment potential. We know a good project deserving of prefunding when we see one. We help you create wealth and revitalize neighborhoods.  And yet, when it comes to Powerball, we are not immune to its allure.

The New York Times has some specific advice for the next Powerball winner: “You might not realize this, but the top prize in the $1.5 billion Powerball is not actually $1.5 billion [...] If you take the prize as a one-time cash payment, you will get a mere $930 million, before taxes [...] If you want $1.5 billion, you’ll have to take it in installments over the next 30 years.”

Most people, the Times points out, won’t do that. They’ll tend to take the money and run, most of them scared off by the fact those installments are paid in “annuities.” The general population tends to associate that term “with payment streams that end when you die, (but) the Powerball prize is actually what actuaries call an annuity certain: a stream of annual payments, every year from now until 2045, regardless of what happens to you. If you die before 2045, the future payments become part of your estate, like any other asset.”

Wait -- that’s like real estate!

Frenzy aside, real estate generally remains a far more solid investment than bunches of lottery tickets. In their take on this week’s Powerball mania, Kiplinger’s has an overview of “5 Better Investments Than Powerball Tickets.”

Among them -- paying off credit cards, opening an IRA, and, number four: “Increase Mortgage Payments: A little extra goes a long way […] Put an extra $86.67 a month toward the same ($200,000) mortgage and you'll save almost $24,000 in interest and retire the loan four-and-a-half years early.”

And then you own that asset, free and clear. Which is the same vein of common sense we’ve always epitomized here at the Patch.

The Motley Fool discussed this week what Real Estate Can Teach Us About Investing. One of their guests, who oversees his own brokerage house, stated "I've never known real estate to go to zero, because there's intrinsic value to the physical, tangible asset.”

The Motley continues: “If you want to beat the statistical average… you buy one house, pay for it, that's the one you live in. You buy a second house, you pay for it, and that provides you with money every month. And if you just do those two things and forget about everything else, I would argue, you're probably in the top 5% of all savers and investors at retirement."

Here at Patch, we provide other ways for you to access that kind of “top 5%” investing, by offering prefunded loans backed by real assets in over 30 states. Admittedly, those run you more than the cost of a few Powerball tickets.

But hey, it’s not as if we’re above the fray. And what if our numbers are drawn? :)

We gotta be honest. I wouldn’t be surprised if some of our staff put their winnings in, you guessed it, real estate.

See you on the other side of the jackpot.

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