Should I put £100,000 in a L&G Tracker Fund

dunstonh

The annual prize fund interest rate (if you get average) is 1.50%.

Generally, premium bonds are a waste of money unless you are a higher rate/additional rate taxpayer looking for more tax free homes for your money.

Linton

To return to the OP....

As has been said just having one investment is a seriously bad idea. You need a broad range.

Secondly, assuming by an L&G tracker you mean a fund that tracks one of the FTSE100, FTSE350, or FTSE all share indexes, by investing in a tracker you will putting your wealth in an invertment whose performance has been mediocre over the past 10 years.

I have seen no predictions that they will be much better in the future. Furthermore they have historically been subject to major fluctuations.

You can do much better!

Nanpy

I've got maxed PBs and made £450 over the last six months, equivalent to about 3% and as a higher rate tax payer that's not bad tax free. But I've definitely been lucky. Sub 2% should be the norm. They USED to be a reasonable place to park spare money if you were a risk-averse higher rate tax-payer. Not so much now, but my brother won a grand on them once so I keep them maxed just in case...

At 55 I'd weigh my investments towards bonds or savings and bung maybe a qtr into two or three trackers. I favor the L&G Pacific Index fund but I'd look at Tech and Healthcare trackers. Maybe agri-business but that's all getting a bit more specialized.

Stochasticity

Flyboy152 wrote: »

I have a reasonable sum invested in premium bonds. I get on average three and a half per cent return, tax free (equivalent to five point eight gross). With the chance of winning the big one. If I get fed up with it, I can always get my money back. With interest rates at an historic low, I am not doing too badly. It is all part of a diverse and balanced investment portfolio. I think most people see a similar return.

A 3.5% average return from premium bonds is known as complete and utter sheer luck. I wouldn't count on that holding up.

The average return on premium bonds is 1.5% and that's heavily, heavily skewed by the small number of enormous prizes on offer. In any given year you have no better than a 2% chance of getting a return of 3.5% or better. That is, 98% of the time, you'll do worse. And, over a five year or ten year period, your chances of getting a 3.5% annual return are well under 1%.

The vast majority of people do not see a similar return at all.

Aegis

Flyboy152 wrote: »

You mean this?

http://www.moneysavingexpert.com/savings/premium-bonds-calculator/#result



Not really 1.48% is it.

You have to use the calculator and post your results, the calculation is done locally for you and won't save for everyone else to use. The text around it is simply a disclaimer that this calculator is based on stochastic modelling methods, therefore there may be some small discrepancy between the calculated values and the actual returns seen in 1 year.

If you use the "How lucky am I" version of the calculator, you will be able to see that, from a stochastic modelling calculation of the number of premium bonds currently issued, only 1.48% will achieve a result equal to or greater than your return. There may be some margin of error in that calculation, but due to the sample size and the number of available prizes, it's not going to be all that many.

All in all, most people don't even come close to your level of return at the moment. The majority underperform against decent cash accounts.

bendix

Premium Bonds are not an investment or an asset class. They are a mildly entertaining and completely unimaginative place to put money used primarily by grandmothers who grew up in the 1940s and 50s and know no better and, of course, DiggerUK.

Nuff said.

Hughesy84

Wait another 6-8 games and then when its more or less in the bag - stick it ALL on United to win the league!!! lol

geoffgeofftygeoff

bendix wrote: »

Premium Bonds are not an investment or an asset class. They are a mildly entertaining and completely unimaginative place to put money used primarily by grandmothers who grew up in the 1940s and 50s and know no better and, of course, DiggerUK.

Nuff said.

Brilliant

Nanpy

Stochasticity wrote: »

The average return on premium bonds is 1.5% and that's heavily, heavily skewed by the small number of enormous prizes on offer.

Naw. There are about thirty billion quids worth of premium bonds

Every month there is a million pound prize and a million other prizes of at least 25 quid. The big value prizes are swamped by the hundreds of thousands of smaller amounts.

But I broadly agree with everyone's 1.5% number. However that's still equivalent to 2.5% to a higher rate tax payer with a chance of winning a big prize every month. I'm lucky that my PBs are a small part of my total investments. If you were relying on it for an income, then no, not a good choice.

Aegis

Nanpy wrote: »

Naw. There are about thirty billion quids worth of premium bonds

Every month there is a million pound prize and a million other prizes of at least 25 quid. The big value prizes are swamped by the hundreds of thousands of smaller amounts.

But I broadly agree with everyone's 1.5% number. However that's still equivalent to 2.5% to a higher rate tax payer with a chance of winning a big prize every month. I'm lucky that my PBs are a small part of my total investments. If you were relying on it for an income, then no, not a good choice.

In total there are1,814,596 prizes on offer for February, from a prize pool of £54.4 million. The £1 million prize on its own therefore represents 2% of the prize pool, with the total value of the high-value prizes (£5,000 or more) coming to £3.3 million, or 6% of the prize pool split among 169 bonds.

The remaining prizes are then shared among the other 1,814,427 winning bondholders. There's going to be a significant distortion when such a huge (relative) proportion of the prize fund goes to such a small proportion of winners.