Investing in Premium Bonds

where2save

I'm thinking of investing the maximum £30k in Premium Bonds. Obviously based on the "Random Number" approach to picking the winners, it shouldn't matter what size blocks of bonds I buy.

However, it's interesting to read some people believe that buying £5k blocks stands you a better chance.

Would you buy them all together or stagger the purchases in smaller blocks? I was going to invest them all this month on the 30th but I'm umm-ing and ahh-ing a bit now.

pkrnts

What the hell does it matter?

You buy premium bonds, the machine picks 1 winner for every 24,000 bonds in the pool. Machines can't think for themselves yet, they are programmed to select random bonds from a seed number which is as random as a computer can get.

I don't get the theories, I'd imagine they stem from the wild thoughts of the mathematically and logically challenged.

tomstickland

The national savings web site lists premium bonds as having an average return of 3%. I'd put the money into 5% ISAs and instant access accounts myself.

jenniferpa

I know intellectually it's just random chance, but I do find it a bit odd that of 9 prizes won in the last 6 months, 6 of them have been from one £5000 block. It strange coincidences like that that give rise to the belief that certain amounts are more liekely to win than others. Having said that, these were only £50 prizes. Perhaps smaller blocks would give a better percentage of higher prizez LOL

Jennifer

Mikeyorks

where2save wrote:

I'm thinking of investing the maximum £30k in Premium Bonds. Obviously based on the "Random Number" approach to picking the winners, it shouldn't matter what size blocks of bonds I buy.

However, it's interesting to read some people believe that buying £5k blocks stands you a better chance.

Would you buy them all together or stagger the purchases in smaller blocks? I was going to invest them all this month on the 30th but I'm umm-ing and ahh-ing a bit now.

Some people also believe that 'new' Bonds are more inclined to win, and you should therefore reinvest every 6 months. But the people who administer the machine, think differently :-

http://www.nsandi.com/products/pb/surprisingfacts.jsp#randomness

i.e that each individual Bond has an equal chance? Your choice!!

I'd put the money into 5% ISAs and instant access accounts myself.

It's a safer and steadier bet. But it takes 10 whole years to feed £30k into ISAs. (But only 4+ if you go Maxi ISA ?) And, in my case, I opted for Prem Bonds as the £30k, otherwise invested, pushed me into the HR tax band - where I preferred to no longer be. If only to get out of the annual SA tax return completion.

My Prem Bonds over the past year have paid out slightly over 3%. And this month alone (Apr - use your Holder No to view the draw online if you're getting cheques through the post. As opposed to having prizes re-invested if you don't hold the max) is 2 x £100 and 3 x £50. Not momentous - but I do get a steady trickle of small prizes each month.

But - I certainly would not have invested in Prem Bonds had it not been for my, recently retired, tax position

loobs40

My partner hopes to get redundancy next month. He is very cautious and risk averse, so I thought about putting a full £3000 into a cash isa, and about 20k into Premium bonds. Anything left over to go into standard savings accounts.

Is there a best time in the month to purchase premium bonds ?

skiddy2k

statisticaly, it doesnt matter how large the blocks are... you have the save chance if you have one £30,000 or 6x£5,000... if you look ar past winners and see alot of them had £5,000 and very few had £30,000, it can simply mean that more people have £5,000 blocks.

loobs40 wrote:

Is there a best time in the month to purchase premium bonds ?

YES!!! it says on premium bonds small print "Your Bonds become eligible to take part in prize draws once you have held them for a full calendar month following the month you bought them." Winning numbers are found on the 1st working day or each month.
therfore, the best time to purchase new Bonds is on the last working day of the month (a Bond bought on April 31st will enter its first draw on June 1st). The best time to cash in Bonds is on the second day of the month (after the draw).

moonrakerz

jenniferpa wrote:

I know intellectually it's just random chance, but I do find it a bit odd that of 9 prizes won in the last 6 months, 6 of them have been from one £5000 block. It strange coincidences like that that give rise to the belief that certain amounts are more liekely to win than others. Having said that, these were only £50 prizes. Perhaps smaller blocks would give a better percentage of higher prizez LOL

Jennifer

Sorry Jennifer, but this shows that you don't really understand what "random" means. It is "odd" because it IS random. If you (or me !) were to sit down and generate a list of random numbers - they wouldn't be random. This is because you would be producing numbers which you thought didn't follow a certain pattern, in your attempt to be random.

For example:-
If you wrote 1234 as your first random number, you probably wouldn't use 1,2,3,or 4 or consecutive numbers in your second random number because you would think it was too much like the first number. If it was truly random it could well be that 1234 MIGHT be the next number, but you would never select it as your next number.
This is why you can actually buy books of random numbers - to ensure that they are truly random. Mind you, they are b****y boring to read !

Interesting thought - how do you pick a random number at random from a book of random numbers ?

equitydealer

tomstickland wrote:

The national savings web site lists premium bonds as having an average return of 3%. I'd put the money into 5% ISAs and instant access accounts myself.

Yes but you can't get a £1m tax free win from your ISA!

I think premium bonds are good investment in a diversified portfolio. First priority is obviously £3k into a mini cash ISA. Spread the rest into fixed rate cash bonds, shares, premium bonds etc gives the best chance of maximising returns into the future.

Mikeyorks

moonrakerz wrote:

For example:-
If you wrote 1234 as your first random number, you probably wouldn't use 1,2,3,or 4 or consecutive numbers in your second random number because you would think it was too much like the first number. If it was truly random it could well be that 1234 MIGHT be the next number, but you would never select it as your next number.
This is why you can actually buy books of random numbers - to ensure that they are truly random. Mind you, they are b****y boring to read !

Interesting thought - how do you pick a random number at random from a book of random numbers ?

Wow. And the auditors who check, each month, that ERNIE is living up to his name - simply check there is no discernible pattern. But please don't send them your book - otherwise we'll be waiting for ever for the prizes to arrive!

moonrakerz

Mikeyorks wrote:

But please don't send them your book - otherwise we'll be waiting for ever for the prizes to arrive!

It's not MY book, I just know they exist !!!!