MSE News: The seven deadly sins of premium bonds

mikey72

Gorgeous_George wrote: »

So, the odds are that you will win £25. And that's better than £60 because...

In the end, the only problem is people referring to PBs as investments rather than gambling. It is gambler's denial.

GG

You must have missed the point, the odds are

At least £1,000,000 1 in 1,168,249
At least £50 43.8%
At least £25 76.5%

so the best odds are obviously those of a lower price, as more of those are given out.
The odds of winning a higher prize are obviously worse.

Pendle_Gazza

Gorgeous_George wrote: »

... and that is your choice. So long as you make your choice having considered the pros and cons AND understand that PBs are gambling, not investing...

GG

PB's are clearly not investments, but I'd suggest they aren't really gambling as such either.

It's just like putting your money in a savings account with a minimum of 0% interest, or under the mattress. Your 'gamble' is with something you never actually had in the first place.

JamesRoberts

One thing to remember is that there is an arguably large difference between saving, investing, and gambling. Saving is for want of a better terminology is defined by capital security (Which PB's offer) and a rate of interest. Investing on the other hand I personally would view as a calculated speculation on an outcome of events. Differing levels of risk can be present of course, including risk that threatens the initial "stake". PB's don't threaten your initial stake from the point of "put 1 pound in, get 1 pound out".
Gambling is another thing altogether, In most cases your entire stake is at risk, however the returns are invariably high should your gamble be successful. With PB's, there is no risk to your stake, any more than if you kept cash under the bed as it where.

Granted, as has been pointed out, you are "gambling with your interest" but your deposit is secure and guaranteed. If your bonds happen to pay off and you hit the big time, great, if they don't, you still haven't made any capital losses.

Bottom line PB's are a government tool to add cash flow to the treasury, and offer security at the same time. To be branded as an investment in my opinion would be a little inaccurate, I might be wrong of course, but do IFA's recommend them?

PB's are a handy way to "store cash" if you have nothing better to do with it at the time, or the market is not to your liking.

dunstonh

I might be wrong of course, but do IFA's recommend them?

IFAs are the biggest introducers of products to NS&I. However, I suspect that is mostly index linked certificates and not premium bonds. It is in my case.

Granted, as has been pointed out, you are "gambling with your interest" but your deposit is secure and guaranteed. If your bonds happen to pay off and you hit the big time, great, if they don't, you still haven't made any capital losses.

True. You dont have investment risk and being NS&I you dont have provider risk. You do have shortfall risk and inflation risk though.

Gorgeous_George

JamesRoberts wrote: »

... With PB's, there is no risk to your stake,...

:wall: You gamble all of your stake :wall:

Definition_from_wiki wrote:

In gambling, a stake is the quantity of money or other goods that is risked on the outcome of some specific event.

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Since the original capital isn't risked, it cannot be a stake. You only 'stake' the 1.5% interest that the bonds (falsely) claim to pay. So, for every £100 in PBs you are gambling (staking) £1.50 per year or about 12.5 p per draw. Put £100 in a 3% savings account and you could stake twice as much on the horses without losing your capital.

GG

Batchy

Just won £25 with my £600, currently already in premium bonds, over the last 6 months, it would have needed a huge gross return, based on £100 each month just before xmas to match that.

Im one of the lucky ones judging by your probabilities. Should i feel guilty cause I have someone elses share... NOPE. lol

But Am I that bothered that I even won, not really, i'm hoping for a big win one day and its reassuring to know ernie knows my bonds are there, and now I have £25 extra chances per month free of charge. Its a good sign! lol

Batchy

Gorgeous_George wrote: »

:wall: You gamble all of your stake :wall:

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Since the original capital isn't risked, it cannot be a stake. You only 'stake' the 1.5% interest that the bonds (falsely) claim to pay. So, for every £100 in PBs you are gambling (staking) £1.50 per year or about 12.5 p per draw. Put £100 in a 3% savings account and you could stake twice as much on the horses without losing your capital.

GG

Gambling IMO has risk... IE, you lose your stake or your head if your on borrowed money, plus its addictive, ie sporting events, etc. premium bonds, its all over in a click, nothing REGULAR that you can get addicted to, its just simple.

I think your version of GAMBLING is really OPPORTUNITY COST.

IE what you could have had if you did something else, a different way or method etc.

The fact is many people were loving ICELANDIC banks and others were gutted they missed out, until its all went wrong. Is that gambling? No...
But it was seen as being virtually risk free, yes, because not many people really understood, like government councils who whacked in huge great chunks without thinking.

I think NSandI is about as safe as it gets IMO. Significantly safer than money under the bed, plus, upside of HUGE returns. You have to price it in, as it CAN happen.

To dream each night of being a millionairre, it just isnt going to happen in a AA savings account @ 3%. Simple as that really! You have to be in it to win it!

mikey72

Just checked my (winning) holding, 1.25% return over the last 6 months, and I haven't won as much this year as the end of last year, so I'm not complaining.

Gorgeous_George

Batchy wrote: »

To dream each night of being a millionairre, it just isnt going to happen in a AA savings account @ 3%. Simple as that really! You have to be in it to win it!

It 'could' be you - if you gamble that 3% interest.

Anyway, if you still don't get it, I have neither the time nor the desire to convince you.

GG

Rollinghome

I don't have any premium bonds myself, and never have, but I don't understand the almost obsessive antipathy towards them.

Little though I know about gambling it seems more cost effective as gambles go than most. Buyers know they're gambling the interest, currently at a low rate, they'd otherwise get. As the prize is tax-free the 1.25% that goes into the prize-fund is worth 1.56% to a standard-rate tax payer.

Not a lot, but seems to compare well with the 0.20% paid on NS&I Investment Accounts or the 0.30% on their Easy Access Account, both of which are taxable, so leaves me wondering why isn't the crusade directed against them?

It's a cheapish flutter for those who want it - provided they don't put a really large sum in.


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