Would you take a million pounds today or let 1p double every day for a month?

This Fool considers whether a million pounds in the hand right now is preferable to letting compound interest work its magic.

| More on:
Stacks of coins

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If the National Lottery rang you up and offered you the choice of a million pounds now or 1p doubled every day for a month, which would you choose?

I asked a few friends and family members this question not long back. Nearly all said they’d take the £1m, and I can’t fault them. That sort of money could pay your energy bills for literally months!

Seriously, though, a million pounds remains a life-enhancing sum for many people, even if it doesn’t go as far as it once did. It would still pay off most mortgages and fund any luxury holiday.

But which would be the most enriching option to take? The £1m or 1p doubled? Let’s find out.

The power of compound interest

Here are the calculations for the first 15 days.


So far, so good. The million-pound option is looking like the smart bet.

Here are the next 10 days.


Things are starting to look a lot closer now, though…


The final figure is £10.7m!

Clearly, I’d have missed out on a truly life-changing sum if I’d taken the easy money.

Warren Buffett

Now, no investor is going to regularly double their money in one year let alone one day. But compound interest still works wonders at smaller rates of return.

Take investing legend Warren Buffett, for example. Between 1965 and 2022, he earned an average 19.8% annual return for his company Berkshire Hathaway. That’s double the market average.

Berkshire shares were valued at about $19 in 1965. Today, the Class A shares trade for $625,510. That’s a mind-boggling return of 3,292,057%.

To put this in context, $100 invested in 1965 would now be worth over $3.2m.

I’d buy this stock

Buffett says you should only buy a stock you’d happily hold for at least 10 years.

For me, FTSE 100 spirits giant Diageo (LSE: DGE) is one such investment. Its portfolio contains some brands that are likely to remain popular for decades, if not permanently. Johnnie Walker, Baileys, Smirnoff, Gordon’s, Tanqueray, Don Julio, and more.

More importantly, these drinks sell for a healthy profit. In its last financial year, the firm made an operating profit of nearly £6bn from revenue of £20.8bn.

Given that was in a slow year, I’m optimistic about what better economic conditions can bring.

Of course, inflation remains high and many consumers are cash-strapped. So sales could be sluggish for a while yet, which is reflected in the stagnating share price.

Still, discounting inventory issues in Latin America, its global brands are showing resilience.

Source: Diageo

As a long-term investor, I’m very bullish on the firm’s growth potential in India and China.

Meanwhile, after raising its annual dividend for over 25 years, Diageo is a Dividend Aristocrat.

As such, I think the shares can help compound returns in my portfolio for decades. I’d buy more with any spare cash.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Diageo Plc. The Motley Fool UK has recommended Diageo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

2 tempting cheap shares to consider buying for long-term returns and growth

These cheap shares are being held back by wider market issues. Buying some now could be a shrewd move ahead…

Read more »

Investing Articles

Could Premier African Minerals be a millionaire-maker penny stock?

Shares of Premier African Minerals (LSE:PREM) have crashed over the past year. Is this a golden opportunity for me to…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Which FTSE defence stock should I buy? Here’s what the charts say

FTSE shares like BAE Systems have been flying higher over the last couple of years as the geopolitical situation has…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Here’s why investors should consider buying Scottish Mortgage shares today

After a steady rise in recent times, this Fool thinks Scottish Mortgage shares could be worth considering. Here he explains…

Read more »

Young black man looking at phone while on the London Overground
Growth Shares

This FTSE 250 stock keeps blowing broker forecasts out of the water

Jon Smith considers the ever-increasing share price targets for a FTSE 250 stock that has risen by 120% in the…

Read more »

A mixed ethnicity couple shopping for food in a supermarket
Investing Articles

Marks and Spencer shares could rise 29%, according to this broker

Marks and Spencer shares currently sport a P/E ratio of just 10, and one well-known City broker believes the company…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 of the best FTSE 100 beginner stocks to consider buying

The Footsie offers people just beginning their investment journey some of the best stocks to buy. Here are two to…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Here’s why the Aviva share price suddenly dived

The Aviva share price suddenly dropped by over 6% the other day. But there's a simple explanation for this sudden…

Read more »