Premium bonds - any point investing under £1000's

boingy

Exodi said:

boingy said:

The reality is that neither PB nor the lottery will make you a millionaire unless you are very, very lucky.

Indeed, the sad reality is that the lottery is, as Ambrose Bierce puts it, a tax on people who are bad at math.

It capitalises on the fact we as humans are exceptionally bad at comprehending large numbers.

While I can visit the lottery website and see that the odds of winning the jackpot are 1 in 45,057,474 (or 139,838,160 for the EuroMillions), I've never seen tens of million people at one time, so I couldn't possibly comprehend how infinitesimally small my chances are. My brain (and the lottery) might rationalise it as "well somebody has got to win it, why couldn't it be you?" or "it's only a couple of quid".

But, but, Exodi. It could be YOU!   (need a pointy finger emoji)

I remember back when the lottery launched some TV programme had a boffin-type with a whiteboard and he said in practical terms you are about as likely to find a winning ticket as buy one. Gotta love those TV boffins.

Albermarle

Exodi said:

boingy said:

The reality is that neither PB nor the lottery will make you a millionaire unless you are very, very lucky.

Indeed, the sad reality is that the lottery is, as Ambrose Bierce puts it, a tax on people who are bad at math.

It capitalises on the fact we as humans are exceptionally bad at comprehending large numbers.

While I can visit the lottery website and see that the odds of winning the jackpot are 1 in 45,057,474 (or 139,838,160 for the EuroMillions), I've never seen tens of million people at one time, so I couldn't possibly comprehend how infinitesimally small my chances are. My brain (and the lottery) might rationalise it as "well somebody has got to win it, why couldn't it be you?" or "it's only a couple of quid".

But in reality, it's not dissimilar from walking into the casino every week and putting a couple of quid on a single number on a roulette table. The only difference is there isn't 36 other numbers on this roulette table, there are 45 million - most would agree that roulette is not a good financial decision (and the ROI is similar for lottery winners as it is in casinos, money in =/= money paid out) but the lottery seems to skillfully evade being tarred by the gambling brush by donating to charities and building youth centres and stuff.

I'd actually go so far as to say that premium bonds are in the same vein as my previous comment, and I would not personally recommend people use them in place of traditional savings products (except in the case there is a specific reason to do so - e.g. they are held in a tax free wrapper) - but then I understand that life is short and I don't want to be the 'fun-police' removing peoples hope of becoming overnight millionaires (however remote).

Similarly there was a post a while back with someone questioning whether there were actually any Million prizes paid by PB's, as they had never met anybody who had won one. If you do the maths, it is highly unlikely you would ever meet such a person, and if you did many would not say anything anyway.
As you say most people are not very good at dealing with big numbers, probabilities etc

PixelPound

Exodi said:

boingy said:

The reality is that neither PB nor the lottery will make you a millionaire unless you are very, very lucky.

Indeed, the sad reality is that the lottery is, as Ambrose Bierce puts it, a tax on people who are bad at math.

It capitalises on the fact we as humans are exceptionally bad at comprehending large numbers.

While I can visit the lottery website and see that the odds of winning the jackpot are 1 in 45,057,474 (or 139,838,160 for the EuroMillions), I've never seen tens of million people at one time, so I couldn't possibly comprehend how infinitesimally small my chances are. My brain (and the lottery) might rationalise it as "well somebody has got to win it, why couldn't it be you?" or "it's only a couple of quid".

But in reality, it's not dissimilar from walking into the casino every week and putting a couple of quid on a single number on a roulette table. The only difference is there isn't 36 other numbers on this roulette table, there are 45 million - most would agree that roulette is not a good financial decision (and the ROI is similar for lottery winners as it is in casinos, money in =/= money paid out) but the lottery seems to skillfully evade being tarred by the gambling brush by donating to charities and building youth centres and stuff.

I'd actually go so far as to say that premium bonds are in the same vein as my previous comment, and I would not personally recommend people use them in place of traditional savings products (except in the case there is a specific reason to do so - e.g. they are held in a tax free wrapper) - but then I understand that life is short and I don't want to be the 'fun-police' removing peoples hope of becoming overnight millionaires (however remote).

Sounds like you've watched something similar to https://www.youtube.com/watch?v=jVlaVLa0zwo

On gambling, including the National Lottery, the government should force the gambling commission to be a bit stronger than the old "when the fun stops, STOP", after all with cigarettes they don't just say "hey these are bad for you" but have graphic images. Really it should be the only bet what you are prepared to lose. This should be in big letters (or bigger than standard small print) on all Lottery websites, advertising, tickets, etc - only spend what you are prepared to lose.

Of course the odds of winning the lottery are lower than dying in a plane crash etc https://www.independent.co.uk/news/uk/home-news/11-things-that-are-more-likely-than-winning-the-lottery-a6798856.html but doesn't stop people playing for the allure (e.g. of seeing how close your numbers were), but I was more meaning because of how discussions of Premium Bonds on here and elsewhere go.

The minimum prize is £25, and whilst the annual prize fund is going up to 4.0% you're still likely on average to get zero for a £1000 investment over a year. Since my initial post I've gone on a bit of a youtube binge and reading a few articles. So I now gather as an "investment vehicle" you are better off putting money into savings (in an easy access above 4%) unless you have maxed out your Personal Allowance (more so for higher rates with their lower allowance) and any cash ISA. 

My initial query is because there is point of the more you have the more you are likely to win, with such as ML article saying £10,000 before you get an average return above 0%. My £10,000 is in a few Easy Access (with a couple of it going into a fix soon), and I'm not about to divert it into PB (even though winning a few £25 or £50 might be more exciting than seeing £400-£500 guaranteed - I'd prefer the guaranteed.

That said I might still buy some say £100, as checking every month might be worth sacrificing the 50p or whatever interest over the month.

PixelPound

Albermarle said:

Exodi said:

boingy said:

The reality is that neither PB nor the lottery will make you a millionaire unless you are very, very lucky.

Indeed, the sad reality is that the lottery is, as Ambrose Bierce puts it, a tax on people who are bad at math.

It capitalises on the fact we as humans are exceptionally bad at comprehending large numbers.

While I can visit the lottery website and see that the odds of winning the jackpot are 1 in 45,057,474 (or 139,838,160 for the EuroMillions), I've never seen tens of million people at one time, so I couldn't possibly comprehend how infinitesimally small my chances are. My brain (and the lottery) might rationalise it as "well somebody has got to win it, why couldn't it be you?" or "it's only a couple of quid".

But in reality, it's not dissimilar from walking into the casino every week and putting a couple of quid on a single number on a roulette table. The only difference is there isn't 36 other numbers on this roulette table, there are 45 million - most would agree that roulette is not a good financial decision (and the ROI is similar for lottery winners as it is in casinos, money in =/= money paid out) but the lottery seems to skillfully evade being tarred by the gambling brush by donating to charities and building youth centres and stuff.

I'd actually go so far as to say that premium bonds are in the same vein as my previous comment, and I would not personally recommend people use them in place of traditional savings products (except in the case there is a specific reason to do so - e.g. they are held in a tax free wrapper) - but then I understand that life is short and I don't want to be the 'fun-police' removing peoples hope of becoming overnight millionaires (however remote).

Similarly there was a post a while back with someone questioning whether there were actually any Million prizes paid by PB's, as they had never met anybody who had won one. If you do the maths, it is highly unlikely you would ever meet such a person, and if you did many would not say anything anyway.
As you say most people are not very good at dealing with big numbers, probabilities etc

Have you ever met a Lottery Millionaire, there are 6,800 https://www.national-lottery.co.uk/life-changing/winner-millionaire-map even if premium bonds had had 2 millionaire winners per month over the same timescale, there'd only be a tenth as many.

Jami74

nic_c said:

I do like a flutter on the Lottery (spend minimal under £20pm) and wondered if I'd be better going into PB now I've realised the minimum is £25. Sort of give me that "in it to win it" fix, but knowing I get my stake back. I know I get less than my stake back at present from any lottery wins, and some months I'll spend zero on lottery and use it for some other forms of entertainment

Yep! I gave up my occasional lottery ticket last year and when the urge to gamble is really strong, I buy some premium bonds. I've only got £125 of premium bonds and I haven't won anything - but nor have I lost anything (yeah, yeah, I know about inflation) and I still get that little glimmer of hope each month and think about how I could spend a million pounds. It's certainly not a percentage of my savings, and now that interests rates have gone up on savings accounts I feel like a winner every month.

Millyonare

PBs are a genius bit of marketing. By telling citizens they "win" cash, and not boring "interest", it puts a totally different perception on what is mostly a rubbish investment. The "win" transforms Premium Bonds from a rubbish savings account to an exciting gamble for the middle classes. Whoever dreamt up and signed off the "win" tagline in the 1950s was a genius.

boingy

Millyonare said:

PBs are a genius bit of marketing. By telling citizens they "win" cash, and not boring "interest", it puts a totally different perception on what is mostly a rubbish investment. The "win" transforms Premium Bonds from a rubbish savings account to an exciting gamble for the middle classes. Whoever dreamt up and signed off the "win" tagline in the 1950s was a genius.

He was called Ernie, and he was paid so badly that he had to do a milk round to make ends meet. 
(I should put that on Wikipedia...)

PixelPound

boingy said:

Millyonare said:

PBs are a genius bit of marketing. By telling citizens they "win" cash, and not boring "interest", it puts a totally different perception on what is mostly a rubbish investment. The "win" transforms Premium Bonds from a rubbish savings account to an exciting gamble for the middle classes. Whoever dreamt up and signed off the "win" tagline in the 1950s was a genius.

He was called Ernie, and he was paid so badly that he had to do a milk round to make ends meet. 
(I should put that on Wikipedia...)

https://www.theguardian.com/money/gallery/2019/mar/01/the-evolution-of-ernie-the-national-savings-investment-machine
Ernie, the size of a van, could generate 2,000 random numbers per hour, taking 10 days to produce all the winners.
Ernie 4 arrived in 2004 weighing in at just 10kg, and could produce 1m numbers per hour.
Ernie 5 has a processing chip smaller than the size of a pea and can complete the entire draw in just 12 minutes, and is 45 times faster than Ernie 4.

DietIrnBru

It’s a Daily Mail type thread given their love of pumping out PB articles based on the latest press release from NS&I.

The chances of winning with a small holding are tiny, more logical return from a savings account, pension contribution or even a Lotto Hotpicks (I say that as I put on £1 a week and happen to have won £6 last night). 

If you the maximum holding - after maxing out more effective saving mechanism - fill your boots. Otherwise you’re buying penny shares. 

Sg28

DietIrnBru said:

It’s a Daily Mail type thread given their love of pumping out PB articles based on the latest press release from NS&I.

The chances of winning with a small holding are tiny, more logical return from a savings account, pension contribution or even a Lotto Hotpicks (I say that as I put on £1 a week and happen to have won £6 last night). 

If you the maximum holding - after maxing out more effective saving mechanism - fill your boots. Otherwise you’re buying penny shares. 

Oh not lotto! Such a waste of money. You would be better off putting the money on a red or black.