Premium Bonds....... Good investment or not???????

[Wacky Racer]

Sorry if this has been covered before....

If the maximum £30,000 were invested in UK Premium bonds, would this be a wise investment??

According to the website below, statistically you MAY win around ten times or so, but even this equates to a paltry 2% pa return.....Although of course you investment is 100% safe......(On the other hand you could hit the jackpot)

So, good idea or not??

And if not, any better suggestions, and no, I don't want a secondhand TVR Tuscan,....


www.channel4.com/4money/banking/guides/premium_bond_guide_220903_page1.html

[bruciebabie]

Won 4 x £50 on mine this month. I've had 4 before but then I've had nothing more often. The biggest single win thus far is just a £100 cheque.
I have sold my bonds for VCT funds then re-bought out of dividends at the beginning of the tax year a couple of times. It suprised me that the same holding amount performed differently when re-bought. One lot delivered virtually zero in a year which is statistically impossible. I like the fact that I don't have to pay 40% on my earnings.
There are persistent rumours that the government use the big wins on ERNIE to pay people off, IRA informers for instance.

[Dr Strangelove]

bruciebabie said:

There are persistent rumours that the government use the big wins on ERNIE to pay people off, IRA informers for instance.

are you suggesting that ERNIE is fixed?

[pmanson]

I've been buying Premium bonds since last June. (£200 per month instead of paying rent while i'm on my placement year.)

I haven't won a thing! (I've got £1400 saved so far though.)

[norfik dump]

bought £100 worth for both my kids in 2003, one lot payed out £50 the other £100. not a bad investment in a year

[mrmaggit]

It's bit like the lottery, except you don't lose your stake. What with the relatively poor interest rates at the moment, hasn't it got to be worth a go? Well I've just stuck a grand on there so I'll let you know

[ATG]

Premium bonds are a pretty crap investment. You might get lucky, but you are more likely not to get lucky. The average return is significantly less than you can earn on deposit at a bank or building society.

[titiany]

My dad bought the max amount of premium bonds and gets around 50 or 100 smegeroonies a month. His theory is that you are more likely to win during the first few months (not quite sure why!) and so sells them up every now and then, and buys a new load.

He seems to swear by it, but I'm not so sure. There are cleverer ways to invest rather than leaving it to chance x

[gtr-gaz]

Well, I'm all for them.

As mentioned, interest rates are crap at the moment so what have you got to lose?

We have £20,000 between my wife and I and have had them for 18 months. I'm self employed so it's a good way of setting aside tax money.
In that time we have had countless £50's, 1 x £1,000 and believe it or not, 1 x £25,000!
So we are well up on our investment already

Interesting to note that most of our winnings happened in the first half, not sure why.

I think i'ts best to buy a big block of them in one go, I'm sure it increases your chances.

[ATG]

Real interest rates are not that low at all. Savers may feel good when they can earn 10% on a deposit account, but you only get those opportunities when inflation is high too. You need to look at the difference between inflation and nominal interest rates to guage your real rate of return. If you don't do this, you are ignoring the fact that your initial capital's value is constantly being erroded by inflation.

Consumer price inflation is currently running at roughly 1.5% (GDP deflator is about 2.5%, take you pick). Short term interest rates are around 4.9%. On that basis real rates are somewhere between 2.4% and 3.4%. That is actually pretty good.

If your expected nominal return is only 2% from Premium Bonds (according to previous posts on the thread) then your expected real return must be somewhere between -0.5% and 0.5%. Which isn't so good.

[pmanson]

I have £1400 saved in £200 blocks.

(Saving £200 per month)

Do you think its worth cashing them in, then buying £1400 back in one lump?

[wedge girl]

Not won anything since 1987, used to win £50 at least twice a year before that, even wrote to them and checked they had the correct address and everything.