Different Viewpoint on Premium Bonds

Malthusian

Thrugelmir wrote: »

What if you were allowed to reinvest your winnings?

You aren't. We're talking about investing the maximum holding of £50,000 so you can't reinvest winnings.

In any case it wouldn't make any difference to any of the considerations in this thread. The expected interest is 1.4% regardless of whether you compound it or spend it.

Malthusian

jrs101 wrote: »

How did you calculate the 45000 years?

(65,634 ÷ 65,635) ^ 45,000 = roughly 50%, to the nearest 5 millennia.

In English: The probability of not winning the jackpot in one year is 65,634 ÷ 65,635. The probability of not winning it in two years is the probability of not winning it in year one times the probability of not winning it in year two. The probability of not winning it in three years is that number, times the probability of not winning in year 3. And so on.

To get the resulting number down to 50% you have to multiply it by itself roughly 45,000 times.

The strategy someone else suggested of only buying a small number of bonds to buy the fantasy is a good one. The point of paying the lottery is to fantasise about winning a million quid. And to massively overpay for that fantasy. The fantasy doesn't change if you buy 100 tickets instead of one. You can only sail one imaginary yacht. If you are going to play the lottery, it therefore makes sense to spend as little as possible to qualify for the jackpot.

Reaper

Malthusian wrote: »

If you are going to play the lottery, it therefore makes sense to spend as little as possible to qualify for the jackpot.

I have a £1 Premium Bond bought for me when I was born. You can't buy them that small any more.

Still waiting for my big win! Or any win for that matter.

Thrugelmir

Malthusian wrote: »

You aren't. We're talking about investing the maximum holding of £50,000 so you can't reinvest winnings.

Over 45,000 years the maximum holding may possibly be increased.

Daz2009

So,assuming you've got 50k in cash you don't need anytime soon,what would you do with it ? Saying spend it is not an acceptable reply here

eskbanker

Daz2009 wrote: »

So,assuming you've got 50k in cash you don't need anytime soon,what would you do with it ? Saying spend it is not an acceptable reply here

That's one of those 'how long is a piece of string?' questions that depends on a large number of variables, but among the range of options that may be better than typical PB returns (dependent on personal tax status) are:

• 1.5% in top easy-access savings (Marcus)
• 1.9% in notice accounts
• 2-2.7% in fixed-rate savings for up to five years
• similar figures to the above but for up to £20K pa in ISAs
• investing in funds, etc, for medium to long term money
• pensions (dependent on age, etc)

quirkydeptless

Daz2009 wrote: »

So,assuming you've got 50k in cash you don't need anytime soon,what would you do with it ? Saying spend it is not an acceptable reply here

I would start a thread on this forum called...


"I've got 50k in cash I don't need anytime soon, what should I do with it ?"

Daz2009

quirkydeptless wrote: »

I would start a thread on this forum called...


"I've got 50k in cash I don't need anytime soon, what should I do with it ?"

Considering a few have said on this thread they could think of better places to put 50k I thought this was a suitable place to put it

chucknorris

poppy10 wrote: »

Any easy access savings account is going to pay well below inflation. Even the chart-topping Marcus account only pays 1.5%. The only way to keep up with inflation is to gamble in the stock market, or to lock your money away for a fixed term and hope that inflation and interest rates don't rise even further in the time you have fixed for

and that is exactly why our portfolio is worth more than £6m, by as you say 'gambling' on the stock market' (and other investments). How much is your portfolio worth by avoiding to do so?

Malthusian

Thrugelmir wrote: »

Over 45,000 years the maximum holding may possibly be increased.

Or Premium Bonds may be abolished. Or NS&I might change the expected interest rate to 0.1%. Both are more likely than the maximum holding being increased above inflation. If you are running projections you can only work with the maths as it stands now.

Note that in these projections we are implicitly assuming that eventually, the jackpot and the maximum holding are increased in line with inflation (albeit "bumpily"). Otherwise the probability of "winning the jackpot" is considerably lower because in 45,000 years £1 million 2019-pounds will be near-worthless. But the Government wouldn't waste its time running a lottery where you bet infinitesimal amounts of money to win tiny jackpots, so if we assuming that Premium Bonds will be run indefinitely, then you can also assume all figures are increased in line with inflation.