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  • FIRST POST
    • nigecooper
    • By nigecooper 8th Feb 18, 3:06 PM
    • 1Posts
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    nigecooper
    Premium Bonds
    • #1
    • 8th Feb 18, 3:06 PM
    Premium Bonds 8th Feb 18 at 3:06 PM
    Martin keeps saying that your chance of winning a prize with Premium Bonds in a year is zero if you only have 1000. I understand his argument about the median win but it is misleading. A more accurate description would be to say that, if you have 1000 of bonds, you should only expect to win once every two years with average luck. Equally, holding 1, you would expect to win once every 2000 years!
    Last edited by nigecooper; 08-02-2018 at 3:07 PM. Reason: error in odds
Page 2
    • dont_use_vistaprint
    • By dont_use_vistaprint 10th Feb 18, 12:03 PM
    • 49 Posts
    • 18 Thanks
    dont_use_vistaprint
    What makes you think your view is different from Martin's? The MSE piece goes to great lengths to explain the facts and compares PBs to various other options but doesn't conclude that they're a bad idea in all circumstances, just that there are usually ways of achieving a better return for most people.
    Originally posted by eskbanker
    My understanding from the article (and it was a little while ago I read it) was that:

    > The conclusion was they are really not a good choice
    > No discussion of luck, which is important in many investments, he focussed on just the statistical / probability analysis
    > Mostly just compared them to savings , which they are clearly not. If you want a steady fixed return they are not fo you


    That's mostly why I think my view is different to his.
    • eskbanker
    • By eskbanker 10th Feb 18, 12:35 PM
    • 7,096 Posts
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    eskbanker
    My understanding from the article (and it was a little while ago I read it) was that:

    > The conclusion was they are really not a good choice
    > No discussion of luck, which is important in many investments, he focussed on just the statistical / probability analysis
    > Mostly just compared them to savings , which they are clearly not. If you want a steady fixed return they are not fo you


    That's mostly why I think my view is different to his.
    Originally posted by dont_use_vistaprint
    In which case it's probably worth reading the article again, and in particular quotes like
    The nearest thing Premium Bonds have to an interest rate is their annual prize rate, which is currently 1.4%. The interest rate describes the "average" payout, but it is just a vague watermark.
    and
    All my comparisons with savings products above are based on somebody who has average luck and indeed that is the sensible way to assess this. However it is impossible to ignore the fact that some will have better than average luck, and indeed that does need to be factored in to your decision.
    and
    You're actually likely to get quite a lot less than 1.4%, and there's a negligible chance of winning a million. If you know and you're OK with this, then investing in Premium Bonds isn't a bad plan.
    • Turtle
    • By Turtle 10th Feb 18, 3:11 PM
    • 941 Posts
    • 2,544 Thanks
    Turtle
    I think lots of people hold them for the chance of winning a big prize, which is no different to those doing the lottery and people don't tend to bang on about that being stupid.

    We've got a number of current accounts and regular savers earning decent interest and a S&S ISA each. So I feel quite comfortable holding a few thousand pounds in PBs and if I don't win, I'll live with that.

    • Eco Miser
    • By Eco Miser 10th Feb 18, 3:53 PM
    • 3,444 Posts
    • 3,234 Thanks
    Eco Miser
    I think lots of people hold them for the chance of winning a big prize, which is no different to those doing the lottery and people don't tend to bang on about that being stupid.
    Originally posted by Turtle
    I have a few Premium Bonds, for the miniscule chance of a big win, since I'm already got lots of investments and savings to provide an income supplement.

    I like people who do the lottery. They paid my salary for six years, refurbished my local war memorial and now have guaranteed a group I belong to will continue another year. I wouldn't do the lottery myself though. That would be stupid.
    Eco Miser
    Saving money for well over half a century
    • TonyMMM
    • By TonyMMM 10th Feb 18, 3:56 PM
    • 2,648 Posts
    • 2,921 Thanks
    TonyMMM
    I have regular savings accounts, plus current accounts, ISAs (cash & S&S), and use premium bonds as an easy(ish) access account to park cash waiting to move into fully subscribed other accounts. Usually have between 20-30k in there.

    Return about 1.3% tax free, which is OK.
    • ValiantSon
    • By ValiantSon 10th Feb 18, 10:23 PM
    • 1,844 Posts
    • 1,704 Thanks
    ValiantSon
    I disagree with Martin's thoughts on this. I like them as part of a balanced portfolio because the worst that can happen is you make no gains, unlike stocks,
    Originally posted by dont_use_vistaprint
    Who was comparing them to investments in equities? I certainly wasn't, and I don't think anyone else was. They were being compared to savings products, however, which pay a guaranteed return.

    the best that can happen is you get lucky and make killing, like the lottery or gambling, but for slightly smarter people,
    Originally posted by dont_use_vistaprint
    Why do you think people who play the lottery aren't as smart as you? That seems a rather arrogant and conceited view.

    and unlike bonds and savings which give no opportunity for decent gains.
    Originally posted by dont_use_vistaprint
    The chance of gains is actually greater with a savings account, and it depends on the type of bonds you purchase, but even holding UK gilts still means that you will be paid the coupon, unlike premium bonds were you could easily end up with nothing, and a "stake" that is reducing in value.

    I hold 10K and Im hoping for a bit of luck! If it was less I probably wouldn't bother and if I don't get a few 25's Ill shift them to real bonds.
    Originally posted by dont_use_vistaprint
    Good luck.
    • dont_use_vistaprint
    • By dont_use_vistaprint 24th Feb 18, 6:12 PM
    • 49 Posts
    • 18 Thanks
    dont_use_vistaprint
    In which case it's probably worth reading the article again, and in particular quotes likeandand
    Originally posted by eskbanker
    I still disagree, it's all based on the statistical probability of winning, and banging on about crap interest rates.

    People who hold them in anything but large amounts clearly don't believe they have much statistical probability of winning anything significant or think they have are comparable to high interest savings accounts.

    Honestly, I find the article and some of the responses here against them insulting to anyone with even a slightest bit of intelligence
    • dont_use_vistaprint
    • By dont_use_vistaprint 24th Feb 18, 6:23 PM
    • 49 Posts
    • 18 Thanks
    dont_use_vistaprint
    Why do you think people who play the lottery aren't as smart as you? That seems a rather arrogant and conceited view.
    Originally posted by ValiantSon
    I never said as smart as me. But why do I think people who invest in PB's are smarter than those who don't, and who also play the lottery ? I've never done the lottery but have always been interested in what motivates people I know who do. Its nearly always a desire to get rich without having to work for it or make wise decisions with finances. I asked my friends and work colleagues and people I know about PB's and this is what I found.

    People who had cash in PB's = spending within budget, generally debt free = fairly wise when it comes to money, saving

    People without Cash in PB's and who also play the lottery = No savings and lots of Credit cards / debts, often higher earners than above = not very smart decision makers with finances.

    That's not arrogant or conceited , it's what I found
    • eskbanker
    • By eskbanker 24th Feb 18, 7:57 PM
    • 7,096 Posts
    • 7,522 Thanks
    eskbanker
    I still disagree, it's all based on the statistical probability of winning, and banging on about crap interest rates.

    People who hold them in anything but large amounts clearly don't believe they have much statistical probability of winning anything significant or think they have are comparable to high interest savings accounts.

    Honestly, I find the article and some of the responses here against them insulting to anyone with even a slightest bit of intelligence
    Originally posted by dont_use_vistaprint
    I'm not quite sure what you claim to be disagreeing with anymore! I was simply picking up on your assertion that by favouring PBs you're disagreeing with Martin's view as expressed in the article on MSE but I still don't see that article as being anti-PBs in the way you seem to be suggesting.

    Yes, it's written in the MSE house style, which largely echoes Lewis's dumbed-down and mildly condescending patter, which inevitably oversimplifies matters, but they're usually reasonably careful not to take sides and instead try to put the facts in front of readers to make their own minds up.
    • ValiantSon
    • By ValiantSon 24th Feb 18, 8:23 PM
    • 1,844 Posts
    • 1,704 Thanks
    ValiantSon
    I never said as smart as me. But why do I think people who invest in PB's are smarter than those who don't, and who also play the lottery ? I've never done the lottery but have always been interested in what motivates people I know who do. Its nearly always a desire to get rich without having to work for it or make wise decisions with finances. I asked my friends and work colleagues and people I know about PB's and this is what I found.

    People who had cash in PB's = spending within budget, generally debt free = fairly wise when it comes to money, saving

    People without Cash in PB's and who also play the lottery = No savings and lots of Credit cards / debts, often higher earners than above = not very smart decision makers with finances.

    That's not arrogant or conceited , it's what I found
    Originally posted by dont_use_vistaprint
    So you're basing it on statistically invalid anecdotal evidence. Most prejudices are formed in this way.

    Conversely, I know a number of people with well-ordered finances and no debt who also play the lottery. This is anecdotal and statistically invalid too.

    Buying premium bonds are not an investment (as you claim), and nor are they a savings product. Premium bonds enter you into a lottery in which your stake is not at risk.
    • username12345678
    • By username12345678 24th Feb 18, 10:28 PM
    • 212 Posts
    • 108 Thanks
    username12345678
    PB's can be a useful tool for some people.
    • firestone
    • By firestone 24th Feb 18, 10:50 PM
    • 226 Posts
    • 100 Thanks
    firestone
    If you are happy with the risk why worry,at the end of the day there the only gamble i know of where if you lose you get your stake back so no harm no foul
    • ValiantSon
    • By ValiantSon 24th Feb 18, 11:05 PM
    • 1,844 Posts
    • 1,704 Thanks
    ValiantSon
    PB's can be a useful tool for some people.
    Originally posted by username12345678
    I don't think that anyone said otherwise, but the truth is that for the overwhelming majority of people they are not (unless that person likes the thrill of the lottery at the expense of getting a reasonable return on their money). Premium bonds have a niche that doesn't fit with the majority's financial situation.
    • ValiantSon
    • By ValiantSon 24th Feb 18, 11:09 PM
    • 1,844 Posts
    • 1,704 Thanks
    ValiantSon
    If you are happy with the risk why worry,at the end of the day there the only gamble i know of where if you lose you get your stake back so no harm no foul
    Originally posted by firestone
    My biggest problem with premium bonds is the way that they are regularly recommended to people on these forums as a good idea when a question is asked about where to save money. They are not a savings product and there is a lot of ill-informed comment about the mythical 1.4% interest rate. If someone wants to put their money in premium bonds because they are not bothered about earning any interest on the money, and love the thrill of a gamble, then I'm perfectly happy for them to go ahead. What I object to is them proselytising about them as a good option for savings.
    • Thrugelmir
    • By Thrugelmir 24th Feb 18, 11:20 PM
    • 58,454 Posts
    • 51,828 Thanks
    Thrugelmir
    My biggest problem with premium bonds is the way that they are regularly recommended to people on these forums as a good idea when a question is asked about where to save money.
    Originally posted by ValiantSon
    Normally just to park large lump sums of money for relatively short periods of time. As savings rates have been dire in recent years. I've rarely seen the suggestion as a form of saving. As was posted earlier. I tend to find those who buy PB's on a regularly basis are whose who are financially informed. PB's being one string of a much broader portfolio.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • firestone
    • By firestone 24th Feb 18, 11:25 PM
    • 226 Posts
    • 100 Thanks
    firestone
    My biggest problem with premium bonds is the way that they are regularly recommended to people on these forums as a good idea when a question is asked about where to save money. They are not a savings product and there is a lot of ill-informed comment about the mythical 1.4% interest rate. If someone wants to put their money in premium bonds because they are not bothered about earning any interest on the money, and love the thrill of a gamble, then I'm perfectly happy for them to go ahead. What I object to is them proselytising about them as a good option for savings.
    Originally posted by ValiantSon
    Would totally agree but think some of the idea of them being called a savings product has come about through the low interest rates and them being popular with retired people who maybe have a larger cash sum then most and use them knowing they are also safe but have enough in other accounts.There are many on here (myself included) who would recommend S&S over PB but that is based on previous performance but to some they would be a bigger gamble then the bonds but its each to there own.Could always stick a Tenner on Leicester again next year
    • ValiantSon
    • By ValiantSon 25th Feb 18, 12:00 AM
    • 1,844 Posts
    • 1,704 Thanks
    ValiantSon
    Normally just to park large lump sums of money for relatively short periods of time. As savings rates have been dire in recent years. I've rarely seen the suggestion as a form of saving. As was posted earlier. I tend to find those who buy PB's on a regularly basis are whose who are financially informed. PB's being one string of a much broader portfolio.
    Originally posted by Thrugelmir
    But as I've already said, this is simply anecdotal, and I posted my own completely anecdotal evidence about financially aware people who play the lottery.

    If you don't see the regular suggestion of premium bonds for savings then we must be reading different threads!
    • IanManc
    • By IanManc 25th Feb 18, 1:01 AM
    • 535 Posts
    • 870 Thanks
    IanManc
    If you are happy with the risk why worry,at the end of the day there the only gamble i know of where if you lose you get your stake back so no harm no foul
    Originally posted by firestone
    You get back the capital you put in, but really your "stake" - i.e. the money you are gambling - is the interest that the capital generates. You never gamble the capital, but you don't get the interest you're gambling with back if you lose. If you win you get back some of your stake, but the gamble is that your winnings might exceed your stake ...... or they might not.
    Last edited by IanManc; 25-02-2018 at 1:38 AM.
    • eskbanker
    • By eskbanker 25th Feb 18, 1:09 PM
    • 7,096 Posts
    • 7,522 Thanks
    eskbanker
    My biggest problem with premium bonds is the way that they are regularly recommended to people on these forums as a good idea when a question is asked about where to save money. They are not a savings product and there is a lot of ill-informed comment about the mythical 1.4% interest rate. If someone wants to put their money in premium bonds because they are not bothered about earning any interest on the money, and love the thrill of a gamble, then I'm perfectly happy for them to go ahead. What I object to is them proselytising about them as a good option for savings.
    Originally posted by ValiantSon
    I still think you're too dogmatic about them, perhaps unsurprisingly when you openly admit that "Premium bonds are one of my pet hates" which is hardly going to be the starting point for an objective assessment of their merits!

    I don't see anyone proselytising about them but do see them as a perfectly valid choice for savers, even if not necessarily the best - as discussed elsewhere recently, there is no dispute that the return isn't guaranteed but the fact that the capital is clearly makes them closer to more conventional savings products than to lotteries.

    There is no formal definition of 'savings product' that I'm aware of that requires returns to be guaranteed and there are other accounts described as savings accounts where the return isn't guaranteed, such as the Sharia-compliant products. The current accounts that you (not unreasonably) recommend to optimise returns also aren't savings products if you want to get too literal about this....

    So I don't see much value in getting bogged down in the semantics of whether or not they fit within specific pigeonhole definitions of options for people's money, as it's not exactly difficult to make a case that they're completely unique and so wouldn't be the answer to any question!
    • ValiantSon
    • By ValiantSon 25th Feb 18, 1:40 PM
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    ValiantSon
    I still think you're too dogmatic about them, perhaps unsurprisingly when you openly admit that "Premium bonds are one of my pet hates" which is hardly going to be the starting point for an objective assessment of their merits!
    Originally posted by eskbanker
    They are one of my pet hates because they are such a poor option for the overwhelming majority. Having objectively assessed them I have come to the conclusion that they are generally a rubbish option and they have become a pet hate. This entirely logical. You are attempting to suggest that my view is tainted by them being a pet hate, but this is flawed because they have become a pet hate due to my evaluation of them. (This is how critical opinions are formed).

    I know you don't agree with me and we've been through this all before, so I see little point in you having another go.

    I don't see anyone proselytising about them but do see them as a perfectly valid choice for savers, even if not necessarily the best - as discussed elsewhere recently, there is no dispute that the return isn't guaranteed but the fact that the capital is clearly makes them closer to more conventional savings products than to lotteries.
    Originally posted by eskbanker
    Okay, you don't see the proselytising and I do. Each of us has a unique perception of the world.

    They aren't a savings product, they are a lottery. There is no guaranteed return; savings products offer a guaranteed return, even if it is miniscule. Premium bonds are a lottery: if your number is picked you win a prize. That is the definition of a lottery. It is irrelevant that the capital is not at risk, the return is based on a lottery.

    There is no formal definition of 'savings product' that I'm aware of that requires returns to be guaranteed and there are other accounts described as savings accounts where the return isn't guaranteed, such as the Sharia-compliant products. The current accounts that you (not unreasonably) recommend to optimise returns also aren't savings products if you want to get too literal about this....
    Originally posted by eskbanker
    I never said that current accounts were savings products.

    Any savings product offered by a UK bank or building society (with the exclusion of Sharia-compliant banks) have a guaranteed return. I don't think that it is unreasonable to use that as a definition. Sharia-compliant banks are distinctly different due to religious laws: they offer a profit, rather than interest. The difference is very small and, to the best of my knowledge, they have not failed to deliver the projected profit to customers, so it is, to all intents and purposes, analogous to interest.

    So I don't see much value in getting bogged down in the semantics of whether or not they fit within specific pigeonhole definitions of options for people's money, as it's not exactly difficult to make a case that they're completely unique and so wouldn't be the answer to any question!
    Originally posted by eskbanker
    You have just tried to raise a semantic issue regarding what a savings product is, but I'll let that slide for now.

    The return on premium bonds operate on a lottery. It is not, therefore, wrong of me to refer to them as such.

    Nothing I have said is wrong, and my view is based on an objective evaluation of the product on offer, and compared to other available products. Furthermore, as I have repeatedly said (both to you, and in general), premium bonds are a potentially useful product to some people. It is not the case, however, that they are best for the majority.

    This really is becoming tiresome. Could you just accept that I have not said anything that is factually inaccurate, and I am perfectly entitled to object to them being recommended, without clarification, as a suitable savings product for anyone looking for a reasonable return? And then can we move on? Please?
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