FYI article from MoneySmart: Are Prize Bonds For Prize Idiots?
http://t.co/E3eIOA1RGe
That article is nonsense and, judging by the title and various rhetorical flourishes such as prize bonds having "no place in a ‘serious’ portfolio", is pure snobbery. It barely provides any quantitative analysis at all, and where it does, it's wrong.
Certainly, prize bonds are not for the very small investor. That is part of the nature of the beast. Getting consistent returns absolutely depends on investing enough to even out the probabilistic bumps. But if you understand this, and have enough to invest, the odds are in your favour compared to current deposit rates.
The article says "your 3% gross prize bond interest rate is notional – you could quite possibly win/earn nothing". Well, ok, but your equities could "quite possibly" lose money, or your bank could "quite possibly" go bust. Such statements are meaningless unless you can quantify the risk. You'd expect someone recommending investments in risk assets would understand that. With prize bonds, the risk can be thoroughly and rigorously analysed, unlike equities where "black swan" events occur with unknown frequency.
So, instead of nebulous statements, we can confidently say that if you have one prize bond the chances are 99.85% that you will nothing in a given year. But if you have a €100k investment the chances that you will win nothing are less than one in ten billion. Yes, you could "quite possibly win nothing" but the odds are utterly negligible. The odds of different levels of return are shown in the various histograms on this thread.
The strange statement attributed to the Prize Bond company in the article that "you have a 4/1 chance of winning something in any one year" is meaningless without mentioning a level of investment, and even then says nothing about the likely level of returns.
The only thing I'd agree with in the article is that prize bonds "do not offer a straightforward rate of interest". Anyone who does not understand how larger investments lead to more consistent levels of return should steer clear of them.