Prize Bonds are looking attractive alternatives to deposits

[MugsGame]

Update- This post is a response to some ill informed conspiracy theory posts which have no place on Askaboutmoney - Brendan


Fexco do a lot more than draw prize bonds; all companies in similar sectors are growing, so it's no surprise they're hiring.

We and indeed the PB auditors don't need to look at the code.

The winning prize bonds numbers are published for each draw. Do an FOI request to get the PBs entered in each draw, and then run some statistical tests to check the distribution is as expected.

This might not rule out very infrequent prize allocation errors, but should rule out significant problems or anything nefarious. Even PBs wrongly omitted from draws should be detectable with some assumptions (PBs are allocated in sequence so related PBs should enter the pool together, and PBs should not leave and re-enter the pool frequently).

 

[masterboy123]

Thanks for the Google sheet. I have 10,000 to invest and wondering if you have another Google sheet which shows probability of winning million euros?

What a weird assertion by the Irish times. It's meaningless unless you know the annual odds of winning €50 on an investment of €10k. As it happens, you've a better than 50% chance of winning no prize at all. The overall average return is about 0.33% ... which doesn't justify the administrative hassle in my view, compared to having access to your money in a bank.

By the way, my Google Sheets Prize Bonds modeler is still available here, as always:

https://drive.google.com/open?id=16v6Br0IuG46HjNF7wcePcmxKcDStTb5mCTSfscE-j4o

 

[dub_nerd]

I have 10,000 to invest and wondering if you have another Google sheet which shows probability of winning million euros?

You don't need a spreadsheet for that, you can do it in your head. You are investing 10,000. The total invested in Prize Bonds (as of Oct '18) is 3,100,000,000. Therefore you have one chance in 310,000 in each draw. Since there are two draws each year for €1m, you will win one on average every one hundred and fifty-five thousand years.

In other words, you are a very tiny rounding error away from zero chance of winning. It is well known that the human psyche is so constructed that it wildly overestimates the chances of success in scenarios where there is relatively little downside (e.g. foregoing a better interest rate on your money). That's why so many reason that "someone has to win the prize so it might just as well be me" (which is incorrect). It makes a lot more sense to consider whether it is worth your while investing for the €33 euro average annual return on your €10k.

 

[podgerodge]

@dub_nerd I take your point on a 0.27% tax free return being not worthwhile (is this still up to date?) , but I'm scrambling to see a guaranteed return much greater? With, say, €150k to 'invest', is there really much difference between PB expectations and putting them in a Bank - perhaps 0.1%? Perhaps that is worth the 'dream' factor?!

 

[dub_nerd]

No, there is very little difference which is why I'm inclined to think it's not worth the hassle. Objectively, the "dream factor" is worth essentially zero, but if it makes a psychological difference then more power to you. My own opinion is that it's worth training yourself out of such sentiments as they might be more dangerous in another situation if, say, you were prone to a gambling addiction.

There is one other factor which might favour Prize Bonds, and that is spreading institutional risk. Our banks are still far from in good shape -- look at their share price performance over the last year or two. Non-performing loans continue to be a problem in spite of many being sold off. This week we should have the latest Central Bank mortgage arrears report which I expect to show that progress is still glacial.

 

[podgerodge]

No, there is very little difference which is why I'm inclined to think it's not worth the hassle. Objectively, the "dream factor" is worth essentially zero, but if it makes a psychological difference then more power to you. My own opinion is that it's worth training yourself out of such sentiments as they might be more dangerous in another situation if, say, you were prone to a gambling addiction.

There is one other factor which might favour Prize Bonds, and that is spreading institutional risk. Our banks are still far from in good shape -- look at their share price performance over the last year or two. Non-performing loans continue to be a problem in spite of many being sold off. This week we should have the latest Central Bank mortgage arrears report which I expect to show that progress is still glacial.

Thanks dub_nerd. Ironically, I am leaning towards the opposite - that the hassle of bothering with another bank for practically no difference in return makes the "dream factor" at least a bit of fun given that we are talking peanuts in the scheme of things. But I would do it with a very certain mentality that it was for fun with no expectations!

 

[Duke of Marmalade]

Thanks dub_nerd. Ironically, I am leaning towards the opposite - that the hassle of bothering with another bank for practically no difference in return makes the "dream factor" at least a bit of fun given that we are talking peanuts in the scheme of things. But I would do it with a very certain mentality that it was for fun with no expectations!

podge I have maxed out in Prize Bonds. Admittedly I was in before the last cut and the hassle factor for me would have been getting out. Every Friday at 12.30 I have a bit of fun looking at the draw results online. Actually the dream factor satisfies my Lotto itch. mathematically the dream factor is worth about 0.20%. But if you have a Lotto itch and this satisfies it you can value that at around 0.5% as Lotto "investments" are subject to about 70% tax and expenses.

 

[SlugBreath]

I have always enjoyed receiving my cheque in the post when I have a Prize Bond win.
I see that the rules have changed. You can no longer have your win posted to you by way of cheque. You can only have it lodged in to our bank account or re-invested.
Today, in place of my €50 cheque I got eight new Prize Bonds in it's place. Just not the same. I don't need more Prize Bonds.

I know many people prefer to have their wins lodged direct in to their bank account. Any thoughts?

 

[SparkRite]

Well I don't have that concern, over €45K in since last June and zilch, zero, nada....

 

[Philip S]

What a weird assertion by the Irish times. It's meaningless unless you know the annual odds of winning €50 on an investment of €10k. As it happens, you've a better than 50% chance of winning no prize at all. The overall average return is about 0.33% ... which doesn't justify the administrative hassle in my view, compared to having access to your money in a bank.

By the way, my Google Sheets Prize Bonds modeler is still available here, as always:

https://drive.google.com/open?id=16v6Br0IuG46HjNF7wcePcmxKcDStTb5mCTSfscE-j4o

Thank you for the modeling sheet. It appears you need to invest €15,175 to be in a case where change a wining 1 prize is greater then no prize. wondering what timespan would you be looking over. There is a large difference in winning 1 prize every 5 years against if i live to be 100 (now 33) i will win one prize over that time

 

[jpd]

in a year

 

[Mike]

Hi all,

Can I just clarify, if I have an account with An Post does this reduce the amount I can have in Prizebonds and still be covered by the State guarantee?

Also, is it wise to be considering Prizebond at present with the way economy etc is going?

Thanks

 

[Saavy99]

Hi all,

Can I just clarify, if I have an account with An Post does this reduce the amount I can have in Prizebonds and still be covered by the State guarantee?

Also, is it wise to be considering Prizebond at present with the way economy etc is going?

Thanks

Your money is as safe in prize bonds as it would be in a bank or credit union. Not sure about the state guarantee with An Post, I think it's 100,000 per person in total.

 

[RedOnion]

Your money is as safe in prize bonds as it would be in a bank or credit union. Not sure about the state guarantee with An Post, I think it's 100,000 per person in total.

Just to clarify:

State savings, including prize bonds, are Irish Sovereign debt. They're guaranteed by the state, and have nothing to do with the deposit guarantee scheme, or An Post.

The guaranteed amount of state savings is unlimited, but there are limits on the amounts of each product/issue that an individual can purchase.

 

[Saavy99]

Red Onion, thanks for clarifying.

 

[Lockup]

guarantee is per person per institution up to 100k

 

[RedOnion]

guarantee is per person per institution up to 100k

The thread is about prize bonds. There is no limit.

 

[RobFer]

Seems there is an increase in prize bond purchasing during the crisis, however, I would have thought that this is the worst time to buy prize bonds.

 

[Saavy99]

Seems there is an increase in prize bond purchasing during the crisis, however, I would have thought that this is the worst time to buy prize bonds.

Why do you say that?

 

[RobFer]

Why do you say that?

I would imagine they are a good place to dump money when equities are expensive but now the stock markets is declining so it's surely the wrong time to be buying prize bonds or any low risk assets.