Premium Bond Diary - end of second year. Not good.

I saw the other month someone bought a load and won a million in the next month.

This, most definitely, was not me. I don't win anything.

In the last 3 years there have been several million winners who have won within 3 or 4 months of purchasing their bonds. Call me suspicious but I wonder if it is tied into marketing bonds? In the New Year I am considering cashing in my bonds or actually cashing them in and taking out new ones.

LOL OK you are suspicious.

It will be because they have been advertised a lot and many sold as a result of that, therefore the chances a winner will be from someone who recently bought is increased. Also, due to inflation, many more bonds are being bought now than were previously (originally you could buy a single bond IIRC, now its a min of 100 or so), therefore the ratio of old bonds decreases. For example, years ago people might have bought ten or twenty bonds at a time, now they are buying a hundred or more. So old bonds become an increasingly smaller fraction of the total pool.

But the important thing is, each *individual* bond still has the same chance of winning, but if, say 80% of bonds were bought in the last ten years, then there is an 80% chance a winner will have been bought in the last 10 years, if that wasnt the case it wouldn't be a fair lottery.

Were you to cash in and rebuy you'd be actually lowering your chances due to missing out a few months with no chance at all of winning, and the new bonds you bought would have exactly the same chance as the old ones, which is, not much of one.

Tumbleweed wrote: ...

It's not /so/ poor. Simulations I ran earlier this year show IIRC an expected return of around 2.5% p.a. on a 10000 bond holding. It's at least in the same ballpark as a bank account after tax (unlike that other major gamble-fest), and there's always that /remote/ chance of a big win.

I probably wouldn't go /quite/ as high as 10K, but figure that (asuming you can get an appropriate overdraft on cashing them in) PBs are a good near-cash home for, say, a 1k->3k '3months rent/mortgage/roof repair[0]/car failure/etc emergency fund' for folks that would rather have the chance of a big win than 50 quid p/a interest.

Doubt many IFAs would suggest that, mind - I don't get the Big Idea that an emergency fund *has* to be instant access - if it is a real emergency, then the loss of interest on non-IA savings isn't that big a deal.

rgds, Alan [0] Indeed, I guess there might be some merit in increasing your buildings (or other) insurance excess and bunging the reduction in premiums into PBs each year.

Alan Frame wrote: ...

You need to invest a lot or it really isn't worth bothering. The most likely return appears to increase with number of bonds, although not a lot after about 15k bonds (from memory). (Trivial example, for 1 bond, your most likely yearly return is nil).

Just looked back through my old results - for some reason I only seem to have kept the results for 9000 bonds. Oh well :-{