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  • FIRST POST
    • nigecooper
    • By nigecooper 8th Feb 18, 3:06 PM
    • 1Posts
    • 0Thanks
    nigecooper
    Premium Bonds
    • #1
    • 8th Feb 18, 3:06 PM
    Premium Bonds 8th Feb 18 at 3:06 PM
    Martin keeps saying that your chance of winning a prize with Premium Bonds in a year is zero if you only have £1000. I understand his argument about the median win but it is misleading. A more accurate description would be to say that, if you have £1000 of bonds, you should only expect to win once every two years with average luck. Equally, holding £1, you would expect to win once every 2000 years!
    Last edited by nigecooper; 08-02-2018 at 3:07 PM. Reason: error in odds
Page 2
    • dont_use_vistaprint
    • By dont_use_vistaprint 10th Feb 18, 12:03 PM
    • 28 Posts
    • 8 Thanks
    dont_use_vistaprint
    What makes you think your view is different from Martin's? The MSE piece goes to great lengths to explain the facts and compares PBs to various other options but doesn't conclude that they're a bad idea in all circumstances, just that there are usually ways of achieving a better return for most people.
    Originally posted by eskbanker
    My understanding from the article (and it was a little while ago I read it) was that:

    > The conclusion was they are really not a good choice
    > No discussion of luck, which is important in many investments, he focussed on just the statistical / probability analysis
    > Mostly just compared them to savings , which they are clearly not. If you want a steady fixed return they are not fo you


    That's mostly why I think my view is different to his.
    • eskbanker
    • By eskbanker 10th Feb 18, 12:35 PM
    • 6,274 Posts
    • 6,347 Thanks
    eskbanker
    My understanding from the article (and it was a little while ago I read it) was that:

    > The conclusion was they are really not a good choice
    > No discussion of luck, which is important in many investments, he focussed on just the statistical / probability analysis
    > Mostly just compared them to savings , which they are clearly not. If you want a steady fixed return they are not fo you


    That's mostly why I think my view is different to his.
    Originally posted by dont_use_vistaprint
    In which case it's probably worth reading the article again, and in particular quotes like
    The nearest thing Premium Bonds have to an interest rate is their annual prize rate, which is currently 1.4%. The interest rate describes the "average" payout, but it is just a vague watermark.
    and
    All my comparisons with savings products above are based on somebody who has average luck and indeed that is the sensible way to assess this. However it is impossible to ignore the fact that some will have better than average luck, and indeed that does need to be factored in to your decision.
    and
    You're actually likely to get quite a lot less than 1.4%, and there's a negligible chance of winning a million. If you know and you're OK with this, then investing in Premium Bonds isn't a bad plan.
    • Turtle
    • By Turtle 10th Feb 18, 3:11 PM
    • 939 Posts
    • 2,536 Thanks
    Turtle
    I think lots of people hold them for the chance of winning a big prize, which is no different to those doing the lottery and people don't tend to bang on about that being stupid.

    We've got a number of current accounts and regular savers earning decent interest and a S&S ISA each. So I feel quite comfortable holding a few thousand pounds in PBs and if I don't win, I'll live with that.

    • Eco Miser
    • By Eco Miser 10th Feb 18, 3:53 PM
    • 3,421 Posts
    • 3,176 Thanks
    Eco Miser
    I think lots of people hold them for the chance of winning a big prize, which is no different to those doing the lottery and people don't tend to bang on about that being stupid.
    Originally posted by Turtle
    I have a few Premium Bonds, for the miniscule chance of a big win, since I'm already got lots of investments and savings to provide an income supplement.

    I like people who do the lottery. They paid my salary for six years, refurbished my local war memorial and now have guaranteed a group I belong to will continue another year. I wouldn't do the lottery myself though. That would be stupid.
    Eco Miser
    Saving money for well over half a century
    • TonyMMM
    • By TonyMMM 10th Feb 18, 3:56 PM
    • 2,562 Posts
    • 2,790 Thanks
    TonyMMM
    I have regular savings accounts, plus current accounts, ISAs (cash & S&S), and use premium bonds as an easy(ish) access account to park cash waiting to move into fully subscribed other accounts. Usually have between 20-30k in there.

    Return about 1.3% tax free, which is OK.
    • ValiantSon
    • By ValiantSon 10th Feb 18, 10:23 PM
    • 762 Posts
    • 620 Thanks
    ValiantSon
    I disagree with Martin's thoughts on this. I like them as part of a balanced portfolio because the worst that can happen is you make no gains, unlike stocks,
    Originally posted by dont_use_vistaprint
    Who was comparing them to investments in equities? I certainly wasn't, and I don't think anyone else was. They were being compared to savings products, however, which pay a guaranteed return.

    the best that can happen is you get lucky and make killing, like the lottery or gambling, but for slightly smarter people,
    Originally posted by dont_use_vistaprint
    Why do you think people who play the lottery aren't as smart as you? That seems a rather arrogant and conceited view.

    and unlike bonds and savings which give no opportunity for decent gains.
    Originally posted by dont_use_vistaprint
    The chance of gains is actually greater with a savings account, and it depends on the type of bonds you purchase, but even holding UK gilts still means that you will be paid the coupon, unlike premium bonds were you could easily end up with nothing, and a "stake" that is reducing in value.

    I hold 10K and Im hoping for a bit of luck! If it was less I probably wouldn't bother and if I don't get a few £25's Ill shift them to real bonds.
    Originally posted by dont_use_vistaprint
    Good luck.
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