Prize Bonds are looking attractive alternatives to deposits

theresa1, if I was to hazard a number I would say €10,000. For that investment you stand to win "several" (i.e. between 2 and 3) €50 prizes per year. It might still take several years to average out to your 1.2% return.

For a €1,000 investment you are looking at an average of only one €50 prize every 3 to 5 years. That's way too little. It could take decades before things "average out".

In reality, for a decent chance of averaging out quickly, I'd say several multiples of €10,000 is advisable.
 
Here's another attempt to show the "lumpiness" issue for different size investments. It's not easy to read exact values from this chart -- it's supposed to be illustrative:



On one horizontal axis you have the size of investment €10k, €20k, €30k ... €100k. On another you have the number of €50 wins in a year. On the vertical axis you have the percentage chance of getting that number of €50 wins for the given investment. For each size of investment, represented by a different colour, the highest bar is the most likely number of wins, and is close to the expected long run average number of wins. Of course, bigger investments result in bigger numbers of wins although the percentage return eventually averages out the same for everyone.

It may seem paradoxical (or even wrong!) that the highest percentage chance of hitting the average is for the smallest investment. But look closer. For that small investment, you also have a significant chance of only getting half the average (22%), or nothing at all (10%)!

By contrast, look at the higher investments. In the following view I've swung the whole chart around so you can see the highest (€100k investment):



It's not easy to read the numbers, but the highest bar for the €100k investment represents 23 wins with a likelihood of about 8%. But you also have close to the same 8% chance each of getting 21 or 22 or 24 or 25 wins. That adds up to nearly a 40% chance of getting within 10% of your expected average return every year. By summing more bars we see an 80% chance that your return will be between 75% and 125% of the average and a better than 99% chance that it will be between 50% and 150% of the average. What are the odds of getting less than half the expected average? They are less than 0.3% ... vastly less likely than only getting half your expected average for a €10k investment.

Again, I stress that things will eventually average out. But it is likely to take much longer to do so for small investments, possibly many years.
 
A priori odds, based on €100k investment and current prize fund size, of going n weeks without a win:

1 week -- 64%
2 weeks -- 40%
3 weeks -- 26%
4 weeks -- 16%
5 weeks -- 10%
6 weeks -- 7%
7 weeks -- 4%
8 weeks -- 3%
9 weeks -- 2%
10 weeks -- 1%
11 weeks -- 0.7%
12 weeks -- 0.4%
13 weeks -- 0.3%
14 weeks -- 0.2%
15 weeks -- 0.1%
 
Do you have to put a substantial amount into prize bonds to make it pay off?
 
Yes. See the top of page 7 of this thread. Upwards of €10k, preferably several times €10k, are needed to give you a good chance of averaging a 1.2% to 1.3% tax free return.
 
I'm sharing postman_pat's luck. Put in just under €100,000 last month and no winnings four draws later. Still well within the bounds of probability though.
 
MugsGame said:
I'm sharing postman_pat's luck. Put in just under €100,000 last month and no winnings four draws later. Still well within the bounds of probability though.
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Quite unlucky though -- odds are more than 5 to 1 against that scenario. Just as a matter of interest -- how do you know which is the first draw your PBs are included in? Do they tell you in correspondence or is it from the date stamped on the bonds?
 
Quite unlucky though -- odds are more than 5 to 1 against that scenario.
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Yep

how do you know which is the first draw your PBs are included in? Do they tell you in correspondence or is it from the date stamped on the bonds?
Click to expand...

The issue date is stamped on the bonds, so I'm assuming it's included in all draws after that date.
 
Good article in The Sunday Indo yesterday about prize bonds, To win the big prizes they say is harder than getting hit by lightning,so same view as most people in here... but the article said the sales are rising and rising, so its hard to figure.
 
Re;the article in indo. I could never understand the logic in the Million euro prize every second month,,,,Why not give one person 100,000 every draw,,, 52 winners every year instead of 6...and give you more incentive to be in there,,,
I for one would be very glad of 100,000....
 

The million quid appeals more to human nature. Most people are innumerate anyway when it comes to odds. If you have any sense, the chances of winning a more frequent 100k prize are still much too small to justify investing in anyway, and if you just have $ signs in your eyes the 100k will be less effective than the million in luring you in.

I'd be much more interested if they paid no prize bigger than €50, and make it a straight 1.6% tax free return.
 
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