Premium bonds - interesting stats since the beginning of the year

DaveMM

Sad I know - someone asked me the question so I did a check - it may \ may not prove interesting, so thought I would share ......

Just from the 2022 draws

ScarletBea

Aren't premium bonds basically gambling? There's zero guarantee that you'll win anything/get any interest, isn't there?

DaveMM

Gambling loses your initial stake - this way you don't - but you may \ will not get the same rate of return so it lowers the value of your investment

Ebe_Scrooge

Yep, this one crops up a lot.  Premium bonds aren't gambling in the traditional sense, in that your "stake money" is safe.  The "gamble" comes in the amount of returns.  You could get lucky and win a reasonably big prize.  You could win nothing, in which case you'd have been better off sticking the money in a high-street bank and earning 0.1% or whatever interest.

The debate in terms of "investing" usually involves talk of the stock market - where you can potentially realise much bigger returns, but equally you could lose a large portion (or possibly all) of your investment.

If you invest or "put" your money anywhere that doesn't give a return of at least equal to inflation, you're losing money in real terms.  Premium bonds are often seen as a kind of "half-way house" - your investment is safe, and many people do win prizes that equate to more than you'd get in a high-street bank, with zero risk.  So yeah, if you want zero risk, it's a guaranteed return of <whatever interest rate is on offer at the bank>, or the chance of a much bigger return if you win big on ERNIE.

Albermarle

You could get lucky and win a reasonably big prize.  

Problem is you need to be pretty lucky just to win one £500 prize . I think even if you held the max £50K , you would win a £500 prize  on average around once every 30 years, and a Million pound prize on average every 43,000 years.

You really have to rely on getting the average number of £25 prizes with the odd £50 thrown in . For some people the fact they are tax free helps .

Nebulous2

I'm 'pretty lucky' then. Invested in two tranches a month apart last year - £39k in total and won £1000 3-4 months in. That saw my return for the first year finish up at 3.4% 

talexuser

We have all our cash in premium bonds. Here are real world results for 50k:

Me
2018  £600
2019  £575
2020  £850
2021  £325
2022  £150 so far

OH
2018  £500
2019  £875
2020  £550
2021  £450
2022  £75 so far

all £25s and a very few £50s along the way.

JohnnyB70

ScarletBea said:

Aren't premium bonds basically gambling? There's zero guarantee that you'll win anything/get any interest, isn't there?

You will always get your initial investment back. You’re of course entitled to view it as gambling, but it’s less risk than an ISA invested in the FTSE 100.

DaveMM

for the bigger prizes it looks like holding the full allowance does provide more chance of a higher prize

JohnnyB70

DaveMM said:

for the bigger prizes it looks like holding the full allowance does provide more chance of a higher prize

Well yes, each pound has the same chance of winning, so the more you invest the greater the probability of a win.

jimexbox

talexuser said:

We have all our cash in premium bonds. Here are real world results for 50k:

Me
2018  £600
2019  £575
2020  £850
2021  £325
2022  £150 so far

OH
2018  £500
2019  £875
2020  £550
2021  £450
2022  £75 so far

all £25s and a very few £50s along the way.

Stick your 50k in chase, guaranteed £750 quid.