How to make $10M in 31 days

It is said that Albert Einstein once noted that the most powerful force in the universe was the principle of compounding.

You can choose between two sums of money:

• One million dollar

or

• One penny that will double every day for 30 days.

Which should you choose?

Here are a couple of hints. The penny that doubles daily would be worth $1.28 after the first week. After the second week, it would be worth $163.84.

… … …

It turns out that after 31 days, the penny would be worth $10,737,418!

This is a great exercise because it highlights the not-so-obvious power of compound returns. In the final four days, the value of the penny increases from less than $700,000 to more than $10.7 million.

From this riddle, we learn the importance of holding stocks so that we allow our investments to compound uninterrupted for long enough that the compounding effects we saw in days 27 to 30 play out in our favor.