Prize Bond vs 5 Year Fixed State bond

[RonnieShinbal88]

Investing a few € 000s in the like of Ryanair, Shell, BNP or any other large cap European company is a lot less risky than investing in small, unquoted companies via crowd funding or the like

I don't agree, if you lend to 100 small companies versus buying shares in e.g. 3 risky large companies, diversification reduces the risks considerably.
With crowd funding you can spread your capital over literally hundreds of small companies, if any one of them goes bust you only lose a fraction of a percent. You do have to consider the reliability of the loan issuers themselves. The share prices you listed could lose 20% over a weekend and no-one would be that surprised.

 

[joe sod]

Yea but you are looking at the repayment potential of small companies in a normal period like over the last decade or so. How would your strategy of lending to small businesses have coped with the 2008 financial crash when many went to the wall?

 

[RonnieShinbal88]

The S&P 500 almost halved at the time so you are looking at half of the companies having to go bust as soon as you hand them money to be comparable with equities in crash risk terms. You had 13 years from '00 to '13 for the S&P 500 to recover it's high in '00, granted it paid a small dividend of 0.5-2%.

But it is certainly a risky strategy and not very liquid, I got out of it bit by bit myself, just mentioned it as an alternative.
Mid term Government bonds and savings accounts are fairly unappealing for most these days with inflation so high and bond prices are exposed to further rate hikes.

 

[Freelance]

Hi All,

I want to invest around €10k and wondering which would fetch me a better return?

• Prize Fund rate currently 0.35%.
• 5 year bond = 3% Total Return.

Any advice/opinion please.

The 3% over 5 years is an historic low. And given the trend in interest rates it has a reasonable chance of increasing in the future. Note that the “sleep on the job jobsworths” that run state savings are usually the absolute last in the market to react to interest rate changes, up or down.

Returning to your very specific question and ignoring all the unasked for advice above, I would suggest that you shove it in PB for now, and whip it out and put it in the 5 year bonds “when and if” the initial 90 days has elapsed and the bond rate increases next year, or you find a better use for it.

One observation. When comparing the two products, bear in mind that while the notional PB rate is .35%, this includes the large prizes which you have close to zero chance of winning. The realistic return, based on the €50 prizes, is closer to .25%. There is a prize calculator in another thread if you want to look that up. With €10k, you will probably win €50 over 5 years, possibly €0 or €100.

 

[joe sod]

My crypto investment is 35% in loss at present

I think I would be concentrating on that to be honest. Crypto was really a feature of the ultra low interest rate environment we had for the last decade, with no sign of interest rates stopping especially after what the Fed said yesterday I cannot see this recovering in the high interest rate environment we have now entered. 35% loss is actually not that bad for such an investment

 

[Laughahalla]

Microfinancing isn't that safe - A lot of the companies that need microfinancing are not credit worthy , They would probably use a traditional lending facility if they were.

Percentage of Businesses That Fail | LendingTree

About 1 in 4 U.S. businesses fail within their first year of operation, according to the latest data from the U.S. Bureau of Labor Statistics.

www.lendingtree.com

If you have any consumer debt pay that down - Credit card will give you about 17% return. Paying off overdraft will give you about 15% return. Personal loan will give to between 6 & 12% return.
I'd probably keep 10k as a rainy day fund or somewhere I could get access to it easily enough in case of emergency/need to replace appliances/car. Think of it like insurance, You pay for this insurance. ( your 10k deflating is the price of this insurance).

You are limited in where you can put it with low risk. I'd stay away from the microfinancing or loaning out your money to people that are not credit worthy.(Like Mintos)

If you don't need the money for a long long time I'd be tempted to put it into your pension. Tax free growth and lowers your income tax on the way in.

 

[masterboy123]

I think I would be concentrating on that to be honest. Crypto was really a feature of the ultra low interest rate environment we had for the last decade, with no sign of interest rates stopping especially after what the Fed said yesterday I cannot see this recovering in the high interest rate environment we have now entered. 35% loss is actually not that bad for such an investment

I have a feeling that crypto will spike again and I don't have any regrets holding a tiny proportion of my wealth in crypto.
I recall being +55% in profit at one stage. I will continue to hodl!

 

[masterboy123]

Microfinancing isn't that safe - A lot of the companies that need microfinancing are not credit worthy , They would probably use a traditional lending facility if they were.

Percentage of Businesses That Fail | LendingTree

About 1 in 4 U.S. businesses fail within their first year of operation, according to the latest data from the U.S. Bureau of Labor Statistics.

www.lendingtree.com

If you have any consumer debt pay that down - Credit card will give you about 17% return. Paying off overdraft will give you about 15% return. Personal loan will give to between 6 & 12% return.
I'd probably keep 10k as a rainy day fund or somewhere I could get access to it easily enough in case of emergency/need to replace appliances/car. Think of it like insurance, You pay for this insurance. ( your 10k deflating is the price of this insurance).

You are limited in where you can put it with low risk. I'd stay away from the microfinancing or loaning out your money to people that are not credit worthy.(Like Mintos)

If you don't need the money for a long long time I'd be tempted to put it into your pension. Tax free growth and lowers your income tax on the way in.

Thanks for your opinion.

I have over 10x of this amount saved as my "rainy day fund". Whatever I plan on investing, I consider it as "gone".

 

[Laughahalla]

Thanks for your opinion.

I have over 10x of this amount saved as my "rainy day fund". Whatever I plan on investing, I consider it as "gone".

You should do a money makeover. Having over 100k in a rainy day fund for most is overkill.

 

[masterboy123]

You should do a money makeover. Having over 100k in a rainy day fund for most is overkill.

Could you please guide me what is "money makeover."?
Thanks

 

[Laughahalla]

Could you please guide me what is "money makeover."?
Thanks

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[masterboy123]

Please review my Money Makeover post:

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[galway_blow_in]

Word of warning to anyone considering putting money in a post office five or ten year bond, they do everything to block you from withdrawing early

 

[masterboy123]

Word of warning to anyone considering putting money in a post office five or ten year bond, they do everything to block you from withdrawing early

Did you have a bad experience with them recently?

 

[ClubMan]

Word of warning to anyone considering putting money in a post office five or ten year bond, they do everything to block you from withdrawing early

It's not An Post who operate these products, it's State Savings - a division of NTMA.

 

[galway_blow_in]

Did you have a bad experience with them recently?

Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond , realised I could get over four times as much on UK government ten year a few months back so bought the on sale UK debt and applied to withdraw the money in the post office

Still haven’t gotten it back, they write to me every few weeks saying I failed to quote my account number ( not true) , received a letter last Thursday saying they were posting the cheque if I didn’t provide electronic banking details ( I had ) within five days so I thought that’s fine , il wait for the cheque, low and behold another letter arrives yesterday with a case number saying I failed to provide my solidarity bond account number ( completely contradicting the previous correspondence)

The NTMA don’t want people withdrawing money

 

[noproblem]

Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond , realised I could get over four times as much on UK government ten year a few months back so bought the on sale UK debt and applied to withdraw the money in the post office

Still haven’t gotten it back, they write to me every few weeks saying I failed to quote my account number ( not true) , received a letter last Thursday saying they were posting the cheque if I didn’t provide electronic banking details ( I had ) within five days so I thought that’s fine , il wait for the cheque, low and behold another letter arrives yesterday with a case number saying I failed to provide my solidarity bond account number ( completely contradicting the previous correspondence)

The NTMA don’t want people withdrawing money

I take it the UK bond is dead in the water then so?

 

[ClubMan]

Absolutely dreadful experience, I put 60 k in spring of 2021 in the ten year bond , realised I could get over four times as much on UK government ten year a few months back so bought the on sale UK debt and applied to withdraw the money in the post office

Still haven’t gotten it back, they write to me every few weeks saying I failed to quote my account number ( not true) , received a letter last Thursday saying they were posting the cheque if I didn’t provide electronic banking details ( I had ) within five days so I thought that’s fine , il wait for the cheque, low and behold another letter arrives yesterday with a case number saying I failed to provide my solidarity bond account number ( completely contradicting the previous correspondence)

The NTMA don’t want people withdrawing money

Ireland State Savings - Help & Support | State Savings

Browse and search our help articles, download an application for or a brochure

www.statesavings.ie

 

[galway_blow_in]

It's not An Post who operate these products, it's State Savings - a division of NTMA.

Look , I wrote a cheque in the local post office and they took all the documentation off me , the product ( solidarity bond ) is advertised through the post office

 

[galway_blow_in]

I take it the UK bond is dead in the water then so?

How do you figure?