Investing in Premium Bonds

jenniferpa

moonrakerz wrote:

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.

Actually, I do. I was simply pointing out that when runs like this happen, you can see why people think that certain blocks are more likely to win, but I should have been more precise with my language.

Jennifer
P.S. Just no one tell my DH - statisticians can be so pedantic! :rotfl:

Mikeyorks

moonrakerz wrote:

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

Sorry, must have misread this bit ???

Mind you, they are b****y boring to read !

melbury

skiddy2k wrote:

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.


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).

Am I missing something? When did we start getting a 31st April?

skiddy2k

melbury wrote:

Am I missing something? When did we start getting a 31st April?

woopsie!! typo... someone switched the 1 and 0 on my keyboard around! he he he!

Scully's_Girl

I have to agree with equitytrader. If someone has £200 a month to invest, premium bonds shouldnt be top of your priority list. Once you get the ISA payment made, & perhaps your pension payment (especially if you get a company match) & those things done, then premium bonds should be bought with the leftover cash. Ive found that works best for me.

cynic

If you are lower rate taxpayer no point at all in going near premium bonds

Premium bonds are supposed to earn 3% tax free, so if you higher rate
taxpayer is equiv to 5% interest pre-tax. Seems like a good deal?

The way this is worked out is from the mean prize is £60, which with
24000 to 1 odds equals 3%. All correct, BUT the MEDIAN prize is £50
cos prize distribution is very very skewed, (94% of prizes are
50pounds). This only works out as 2.5%. This is equiv to 4.17%
interest pre-tax if you are higher rate taxpayer.


For the geeky statisticians obviously the more you own (30k is the
max) & the longer you hold bonds the more monthly draws you
participate in & the more you would expect your sample mean return to
converge to the population mean, but the S.D. of the distribution is
crazy large (and as it is an asymmetirical distribution not that
meaningful) so you could wait for a long time.

You may also think "but hey I cld win big"
If you have max 30k holdings then you "should" win a £50 prize every month
Your chances of winning a £100 prize are ~5% of 24,000 to one so even if you have the max £30k holding that's one time in 16 months (!) that you "should" win a £100 prize
Alright lets look at your chances of winning a £500 prize, the
most-frequently-occuring return-altering prize, your odds of doing
this are 0.45% of 24000 to 1 so even if you have
the max £30k holding that's one time in 185months (15years !) that you "should"
win a £500 prize.
Please note this is the same "should" that if you toss a coin twice you
"should" get one head and one tail and we all know that doesn't happen
like it "should"


mmmm...
the only good thing about premium bonds is that you can put in quite a
wedge i.e. 30k in one clip which compares well to ISA amounts, etc..
They may be safe as houses but the returns are not unless you view them as a long-term investment

THAT'S WHY MY FEE FOR THIS COMMENT IS GOING TO SESAME STREET