Prize Bond vs 5 Year Fixed State bond

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masterboy123

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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.
 
masterboy123 said:
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.
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Of the two, the latter is obviously the better guaranteed return because you could (and very likely will) win nothing on Prize Bonds.
But over 5 years there's a strong argument for investing directly or indirectly in equities for the possibility of an even better return.
 
With inflation running at 10% a year you are losing alot of money with both the prize bonds and the 5year bond. Even if you opened a sterling savings account you could be getting 3% a year now with rising interest rates. I particularly would not be locking my money away in a very low interest rate bond now for 5 years for just 3% !!
Even though stocks don't do so well during high inflation they do a much better job of tracking inflation than historically low yield bonds.
 
3% total return equates to 0.59% annually, so definitely higher than Prize Bonds expected return

If you redeem the 5 year bond early, you will not get the full interest earned to date as early redemption reduces the interest earned - by quite a lot actually. So you are effectively locking your money away for 5 years
 
Don't think I would be adding exchange rate risk by investing in £s right now
 
jpd said:
Don't think I would be adding exchange rate risk by investing in £s right now
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Ok but it's more to highlight what poor investments these bonds are now with high inflation. Even waiting a year when deposit interest rates and bonds are likely to be much higher interest rates. The ultra low interest rate are still a legacy issue that have not fully washed out of the financial system yet
 
joe sod said:
With inflation running at 10% a year you are losing alot of money with both the prize bonds and the 5year bond. Even if you opened a sterling savings account you could be getting 3% a year now with rising interest rates. I particularly would not be locking my money away in a very low interest rate bond now for 5 years for just 3% !!
Even though stocks don't do so well during high inflation they do a much better job of tracking inflation than historically low yield bonds.
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Thanks for your advice.
I am with AIB and they don't have any saving account with 3% interest rate.

How do you get access to the Sterling Savings account?
And any such product available in Ireland?
 
Prizebonds are raffle tickets with the guarantee you will get your money back but nothing else. Nice to have a few as a gift but not an investment product for sticking thousands into.
 
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The reason sterling offers such a high interest rate, is because the markets expect sterling to depreciate against the USD and the EUR and require a high rate to compensate the expected exchange rate loss

Whether the expected exchange rate loss will come to pass is unknowable in advance, but ...
 
I've used some of the crowdfunding sites, linkedfinance, mintos etc.

With LF you can get 7% p.a. lending to an A+ rated company for 3 years, 11% for a B rated company for 5 years etc.
They do the ratings themselves, no idea how reliable they are.
I set up autobids and kept each individual loan amount small, to limit exposure to any single company, e.g. with 10k lend 100 euro to 100 companies, one company defaulting will cost you max 1% of yield (probably much less as they seem quite good at recovering amounts and the defaults don't happen immediately).
The down side with the highly diversified portfolio approach is that it takes months to get all your money invested, so you fade in and out rather than having 100% invested for 5 years. You could look at 200 a pop to 50 companies and probably still well beat the bond yields you are listing even with a few defaults.

There may be other or better options out there, the Mintos one has been running for years but the loan originators themselves on there can be dodgy/risky and it's more of a marketplace for loans, so if you are not an expert, there are others in there who are, so you are probably often buying stuff they don't want. The advantage is you can sell your loans at any time in that market and get out (assuming someone wants to buy them). I decided around Covid that it was too risky for me but I see it is still up and running and there is a longer history available for the originators now. It was easy to liquidate when I got out after Covid started and I got a decent return overall. I'd do a lot of research before getting into those loan markets again, it wouldn't be worth the effort unless you are investing a lot.
 
RonnieShinbal88 said:
I've used some of the crowdfunding sites, linkedfinance, mintos etc.

With LF you can get 7% p.a. lending to an A+ rated company for 3 years, 11% for a B rated company for 5 years etc.
They do the ratings themselves, no idea how reliable they are.
I set up autobids and kept each individual loan amount small, to limit exposure to any single company, e.g. with 10k lend 100 euro to 100 companies, one company defaulting will cost you max 1% of yield (probably much less as they seem quite good at recovering amounts and the defaults don't happen immediately).
The down side with the highly diversified portfolio approach is that it takes months to get all your money invested, so you fade in and out rather than having 100% invested for 5 years. You could look at 200 a pop to 50 companies and probably still well beat the bond yields you are listing even with a few defaults.

There may be other or better options out there, the Mintos one has been running for years but the loan originators themselves on there can be dodgy/risky and it's more of a marketplace for loans, so if you are not an expert, there are others in there who are, so you are probably often buying stuff they don't want. The advantage is you can sell your loans at any time in that market and get out (assuming someone wants to buy them). I decided around Covid that it was too risky for me but I see it is still up and running and there is a longer history available for the originators now. It was easy to liquidate when I got out after Covid started and I got a decent return overall. I'd do a lot of research before getting into those loan markets again, it wouldn't be worth the effort unless you are investing a lot.
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Obviously lending to small companies (like pubs, restaurants, tanning salons etc.) is riskier if we hit a bad recession so that's something to consider, once you lend the money out it's gone and you have to wait for it to come back in monthly loan repayments!
 
Thanks all.
I am gonna hold off from any investment now.

I do have a relatively large portfolio of different stocks using a "Pie" on Trader 212.

My crypto investment is 35% in loss at present.
 
masterboy123 said:
Perhaps this assumption may not be true
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Well, in the absence of more info about their overall financial situation and only the original question to go on, it's a reasonable assumption.
And if the original poster cannot answer the question posed then they are obviously not very financially astute.
 
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No need for people to demean others for their supposedly lack of financial investment expertise. I've invested in funds, post office savings, deposit accounts and a few stocks I bought through a bank. But, my overall knowledge is zilch apart from my hunches.
 
RonnieShinbal88 said:
You recommended investing in equities!
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I didn't recommend it.
It's impossible to recommend anything given the small snippet of info in the original post.
A money makeover post would be needed.

Equities are a lot less risky than microfinancing especially over the medium/long term.
And arguably less risky than deposits where the money is guaranteed to lose value due to inflation.
 
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