Premium Bond Winner ?

eskbanker

Type_45 said:

eskbanker said:

Type_45 said:

pbcpdeveloper said:

Type_45 said:

So it's like playing the lottery, only it ties up large amounts of your capital and you've even less chance of winning?

No, you lose your stake money playing the lottery, you get every penny back with Premium Bonds.

But other than that, it ties up large amounts of capital and you've even less chance of winning than playing the lottery.

Obviously PBs and the National Lottery are different propositions but clearly it makes no sense to compare them on the basis of ignoring a massively significant aspect of the variance!  Put £50K into lottery tickets and your average end result will be £25K (if the split between prizes and good causes is still 50/50, I haven't checked), whereas put £50K into PBs and, as well as getting your entire £50K back at the end, you'd also expect to achieve alternating monthly returns of £25 and £50 on average.

Who said anything about putting £50k on the lottery? Where did that come from?

£1 can win millions with the lottery. At about the same odds (practically speaking) of winning a million on PB.

Good luck trying to win millions with half of a lottery ticket....!

£50K was a figure that corresponds with the maximum PB holding but it isn't particularly significant - the point is that starting with a pot of £x, your expected outcome from the lottery would be £x/2 but with PBs it would be £x plus a bit more (and in each case there would be a minuscule chance of a big prize).

Your odds comparison is obviously flawed because it doesn't factor in the return of the capital, which, as above, is a critical component of the evaluation of the two products - you can't just compare the lottery proposition with part of the PB one!

Type_45

eskbanker said:

Type_45 said:

eskbanker said:

Type_45 said:

pbcpdeveloper said:

Type_45 said:

So it's like playing the lottery, only it ties up large amounts of your capital and you've even less chance of winning?

No, you lose your stake money playing the lottery, you get every penny back with Premium Bonds.

But other than that, it ties up large amounts of capital and you've even less chance of winning than playing the lottery.

Obviously PBs and the National Lottery are different propositions but clearly it makes no sense to compare them on the basis of ignoring a massively significant aspect of the variance!  Put £50K into lottery tickets and your average end result will be £25K (if the split between prizes and good causes is still 50/50, I haven't checked), whereas put £50K into PBs and, as well as getting your entire £50K back at the end, you'd also expect to achieve alternating monthly returns of £25 and £50 on average.

Who said anything about putting £50k on the lottery? Where did that come from?

£1 can win millions with the lottery. At about the same odds (practically speaking) of winning a million on PB.

Good luck trying to win millions with half of a lottery ticket....!

£50K was a figure that corresponds with the maximum PB holding but it isn't particularly significant - the point is that starting with a pot of £x, your expected outcome from the lottery would be £x/2 but with PBs it would be £x plus a bit more (and in each case there would be a minuscule chance of a big prize).

Your odds comparison is obviously flawed because it doesn't factor in the return of the capital, which, as above, is a critical component of the evaluation of the two products - you can't just compare the lottery proposition with part of the PB one!

No, it's not flawed. It very much is true.

£2 (or whatever a lotto ticket costs) has about as much chance in reality of winning a million (and many times more than that) as a £50k in PB has.

At no point did I think, or state, that £50k would need to spent on lotto tickets. £2 is all you need. 


If you've got £50k, and you have no plans for it, it should be invested. You'd need the risk tolerance of a church mouse to keep it in PBs.

eskbanker

Type_45 said:

eskbanker said:

Type_45 said:

eskbanker said:

Type_45 said:

pbcpdeveloper said:

Type_45 said:

So it's like playing the lottery, only it ties up large amounts of your capital and you've even less chance of winning?

No, you lose your stake money playing the lottery, you get every penny back with Premium Bonds.

But other than that, it ties up large amounts of capital and you've even less chance of winning than playing the lottery.

Obviously PBs and the National Lottery are different propositions but clearly it makes no sense to compare them on the basis of ignoring a massively significant aspect of the variance!  Put £50K into lottery tickets and your average end result will be £25K (if the split between prizes and good causes is still 50/50, I haven't checked), whereas put £50K into PBs and, as well as getting your entire £50K back at the end, you'd also expect to achieve alternating monthly returns of £25 and £50 on average.

Who said anything about putting £50k on the lottery? Where did that come from?

£1 can win millions with the lottery. At about the same odds (practically speaking) of winning a million on PB.

Good luck trying to win millions with half of a lottery ticket....!

£50K was a figure that corresponds with the maximum PB holding but it isn't particularly significant - the point is that starting with a pot of £x, your expected outcome from the lottery would be £x/2 but with PBs it would be £x plus a bit more (and in each case there would be a minuscule chance of a big prize).

Your odds comparison is obviously flawed because it doesn't factor in the return of the capital, which, as above, is a critical component of the evaluation of the two products - you can't just compare the lottery proposition with part of the PB one!

No, it's not flawed. It very much is true.

£2 (or whatever a lotto ticket costs) has about as much chance in reality of winning a million (and many times more than that) as a £50k in PB has.

At no point did I think, or state, that £50k would need to spent on lotto tickets. £2 is all you need. 


If you've got £50k, and you have no plans for it, it should be invested. You'd need the risk tolerance of a church mouse to keep it in PBs.

Sounds like you've really fallen for the 'it could be you' hype, but to be fair they are different products aimed at different target markets, so forget the £50K thing if you haven't understood why it isn't significant. 

The lottery is just a straight out-and-out gamble, so for those who feel that a tiny chance of a big prize is a suitable return for a negligible non-returnable stake, the lottery may well be appropriate.

On the other hand, PBs are a valid home for those who wish to keep a pot of money in safe cash deposit form - they always have been but are particularly valuable in recent times when the average return has outperformed comparable easy access savings.  You're entitled to your view about what's the best thing to do with £50K but best not generalise on behalf of others....

pbcpdeveloper

The minimum stake for the lottery is £2 a week, play the lottery for a year and the reality is your will end up down £104.

The minimum stake for Premium Bonds is £25, play Premium Bonds for a year and the reality is you will end with £25.

(I am not totally sure what the question is anymore).

eskbanker

pbcpdeveloper said:

I am not totally sure what the question is anymore

I think the question is: "how is it that a product as simple as Premium Bonds can generate such a motley collection of myths, old wives tales, superstitions, misunderstandings and misconceptions?"

Swipe

Type_45 said:

If you've got £50k, and you have no plans for it, it should be invested. You'd need the risk tolerance of a church mouse to keep it in PBs.

That all depends on how much you already have invested. With a signifiant % of my cash in equities I'd rather have £50K in premium bonds than £50K in bonds at the current moment in time.

Type_45

Swipe said:

Type_45 said:

If you've got £50k, and you have no plans for it, it should be invested. You'd need the risk tolerance of a church mouse to keep it in PBs.

That all depends on how much you already have invested. With a signifiant % of my cash in equities I'd rather have £50K in premium bonds than £50K in bonds at the current moment in time.

What's your "significant percentage" in equities? £10k?

Swipe

Type_45 said:

Swipe said:

Type_45 said:

If you've got £50k, and you have no plans for it, it should be invested. You'd need the risk tolerance of a church mouse to keep it in PBs.

That all depends on how much you already have invested. With a signifiant % of my cash in equities I'd rather have £50K in premium bonds than £50K in bonds at the current moment in time.

What's your "significant percentage" in equities? £10k?

85% so work it out

Type_45

Swipe said:

Type_45 said:

Swipe said:

Type_45 said:

If you've got £50k, and you have no plans for it, it should be invested. You'd need the risk tolerance of a church mouse to keep it in PBs.

That all depends on how much you already have invested. With a signifiant % of my cash in equities I'd rather have £50K in premium bonds than £50K in bonds at the current moment in time.

What's your "significant percentage" in equities? £10k?

85% so work it out

You have £283k in equities?

Type_45

pbcpdeveloper said:

The minimum stake for the lottery is £2 a week, play the lottery for a year and the reality is your will end up down £104.

The minimum stake for Premium Bonds is £25, play Premium Bonds for a year and the reality is you will end with £25.

(I am not totally sure what the question is anymore).

The question is this:

Is £50k in bonds for a year a cop out when you win next to nothing....   as oppose to £50K in a passive tracker such as VLS100 in which you will gain about 25% interest (£12,500 interest)?