Lottery winners – listen up!

You may have heard about the 24-year-old, single Michigan mother of two who won $1 million in the state lottery, took it as a lump sum of $700,000 and after taxes, received about $500,000 cash. What angered people was that she continued to receive $200 monthly in food stamps after she got the money.

BTW, the illustration at left is not the Michigan winner – we just like art with our blogs! The picture is from Darwin’s Finance, which looks like a fairly good site, except that it is gloomier than we are.

The state cut her off after the press reported the story. But does she continue to receive state welfare money – often called AFDC Aid to Families with Dependent Children? Scholarship assistance? She looked pretty upscale in the news pix. How about SSI (Supplemental Security Income) payments? Bet she does.

Leaving aside the ethical/legal dilemma of continuing to accept money she had become ineligible to receive, we want to propose a What if?

What if she had been following IFO’s blog? She could have been running a model portfolio with pretend money, learning investment techniques, and finding out how much income she could expect. Just take a look at our own, monkey-managed model portfolio – it’s up nearly 12% today. When her $500,000 rolled in, she would have been ready to invest.

If she had put her $500,000 in IFO’s MPI on Jan 1 this year, she’d be $60,000 richer today! Say she was smart and decided to live off the dividends. The MPI dividends all come in within the same two weeks each quarter.

So, if she had bought $100,000 worth of each of the five stocks, she’d be getting ADM – $575 on Mar 7; WFC – $400 on Feb 29; TVA – $450 on Mar 14; UTX – $600 on Mar 9; and PPG – $625 on Mar 11; for a grand total of $2,650, or annual income of $10,600.

If she had invested in higher dividend payers, with say, 5% yields, she’d be getting $25,000 a year and every year, without doing a lick of productive work! She would be out of poverty, according to 2012 HHS Poverty Guidelines!

Having the financial wind at her back, she could finish school, go to work, and build on her base net worth. Later, she could travel, get married, pay for her kids’ weddings and schooling … there is no limit to what she could achieve.

Investment lesson: being smart is better than being lucky.


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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