Advised to put £10k into premium bonds, am I right to disagree?

atush

UsernameAlreadyExists wrote: »

It's not gambling though? It's exactly as safe as "cash" but with a chance of a prize?

yes it is gambling, as it doesn't meet nor beat inflation unless you are lucky enough to win a huge prize. which is highly unlikely
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100-500-1000 is fine. A bit of a fun and a gamble (as long as you know the money 'invested' is losing ground to inflation each year). Certainly better than the lottery (in that respect).

But I think 10K is toohigh. Why not put it in an instant access acct at 2-2.5% and buy lottery tickets with 1/4 of your interest? you'd be better off and still have a flutter.

I say this as a holder of 100 bonds, and won 100 quid in my first month. Didn't make me more likely to invest more.

dunstonh

Premium Bonds are like putting your money in a savings account and each month drawing the interest and using it all to buy lottery tickets. If you wouldnt do that then you shouldnt have premium bonds. Higher rate taxpayers though may find PBs a viable option due to tax free status on wins and with average win rate, it turns out to be not bad for them.

CKhalvashi

HappyMJ wrote: »

It makes much more sense just to stick it in the best savings account and pay tax on it. The best savngs accounts currently pay about 3% fixed for 2 years. After tax at 20% the return would be 2.4%. The return on the premium bonds averages out at about 1.5%.

Which by comparison, as a 50% taxpayer on UK income, would leave me in a better position. At 40% you're at breakeven.

CK

HappyMJ

CKhalvashi wrote: »

Which by comparison, as a 50% taxpayer on UK income, would leave me in a better position. At 40% you're at breakeven.

CK

That's if you win more prizes than average...the actual returns on £30,000 invested over 10 years with average luck should return £2,500 or about 0.83% per year. Someone wins bigger prizes every month and their returns will be much higher. Averaging them all out especially the million pound prizes and this gets the return of 1.5%.

CKhalvashi

HappyMJ wrote: »

That's if you win more prizes than average...the actual returns on £30,000 invested over 10 years with average luck should return £2,500 or about 0.83% per year. Someone wins bigger prizes every month and their returns will be much higher. Averaging them all out especially the million pound prizes and this gets the return of 1.5%.

It will depend foremost on the actual portfolio you hold, and your attitude to risk.

We've geared ourselves in the last few years to Private Equity in failing companies (paid £2 for two companies, invested about £20k and current equity is around £200k, company worth around £750-800k on the open market).

The above is one of the highest risk strategies that you can get, however, but we're limiting tax exposure to 10% on any sale from profits (it's going on the market in January) under the CGT rules.

As I mentioned, it depends on many factors, and to an extent, what you can afford to lose.

CK

Masomnia

CKhalvashi wrote: »

It will depend foremost on the actual portfolio you hold, and your attitude to risk.

We've geared ourselves in the last few years to Private Equity in failing companies (paid £2 for two companies, invested about £20k and current equity is around £200k, company worth around £750-800k on the open market).

The above is one of the highest risk strategies that you can get, however, but we're limiting tax exposure to 10% on any sale from profits (it's going on the market in January) under the CGT rules.

As I mentioned, it depends on many factors, and to an extent, what you can afford to lose.

CK

Good trick if you can do it! :eek:

CKhalvashi

Masomnia wrote: »

Good trick if you can do it! :eek:

I know the local game for the industry extremely well. Don't do it unless you don't!

CK

Eco_Miser

atush wrote: »

But I think 10K is toohigh. Why not put it in an instant access acct at 2-2.5% and buy lottery tickets with 1/4 of your interest? you'd be better off and still have a flutter.

There are current accounts paying 3% on that amount.

MrsCautious

Thanks again for all your input and guidance. The IFA coming in Jan will set me right, I'm sure. I have learned a lot from this forum. In terms of 3 % on a current account, I have a Vantage at LTSB, I could set up two more but seems a lot of messing about. I have put some money into fixed rate savings accounts, set up so that the interest goes into a building society account paying 4.1%. When my children go to university, I am considering buy to let for where they live, but that depends on a lot of factors, including if they study in the same place. For me, as a basic rate tax payer, I think there are better homes for my money than PBs. Thanks also for helping me get clear in my own mind about my attitude to various things, I'm not a fan of any form of gambling (including the lottery) after seeing disastrous effects of gambling on a family very dear to me, that may sound ridiculous to some, but makes sense to me.

atush

Yes, I thought of that for my twins, but they ended up at different Uni's a hundred miles from each other. So probably wont now.