What would you do if you won the Euromillions jackpot?
Pay off the mortgage? Help your friends and family? A new car? A nice holiday for a month or two? I’m sure everyone has mentally spent the jackpot winnings before.
Of course, this encourages us to play more. When we visualise what we’d do with the money, the prize seems almost in reach. Only one ticket away.
But it never is. According to the Euromillions website, the chance of winning the jackpot is 1 in 139,838,160. Therefore, your chances of hitting the megabucks is slim.
At £2.50 a go, if you play two lines of Euromillions twice a week you’ll be out of pocket by £1,040 (unless, of course, you win). Over the years, this amount adds up, keeping you further and further away from financial independence and retiring early.
Euromillions, like Bitcoin, seems like an easy way to get-rich-quick. Legendary investor, Warren Buffett, has a rule: “don’t lose money”. Playing the lottery, being an easy way to throw money away, flies in the face of this advice.
I’d rather put the money towards buying shares in quality FTSE 100 companies, which I believe can offer good returns over a long period of time. It might take longer, and the returns might not be quite as high as the Euromillions jackpot, but I think you stand a much better chance of getting rich by buying stocks over a long period of time.
I think the following company could be a good place to start.
In the past six months, drinks giant Diageo’s (LSE:DGE) share price has taken a bit of a dive, with the value dropping by roughly 7%.
Initially, this could get value investors excited, those who are looking to pick up a great company at a reasonable price. But there’s more to the picture.
The long-term performance of Diageo tells a different story, with the share price having doubled since June 2012. Of course, past results may not repeat themselves, but I believe this displays what the company is capable of.
With a price-to-earnings ratio of 24 and a prospective dividend yield of 2%, in my view the shares are certainly not in the bargain buy category. Yet, I feel like this is a fair price for a company that is continuing to grow. Added to the list of positives is the household brands in its portfolio, such as Smirnoff, Johnnie Walker, and Guinness. In terms of an economic moat, I believe Diageo’s strong portfolio will mean any threat from competitors is limited. Diageo is undergoing cost cutting measures at the moment, with profitability already increasing from 28% in 2014 to 32% last year, outpacing revenue growth.
Overall, I think putting money into buying shares of Diageo rather than buying up Euromillions lottery tickets will make you richer in the long term.
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T Sligo has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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.