# Prize Bonds are looking attractive alternatives to deposits

Discussion in 'Deposits' started by Raging Bull, 16 Oct 2013.

1. ### SoylentGreenFrequent Poster

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358
I have €210k of Prize Bonds. I win €50 about every 3rd week. Last week it was €100. I have never won anything bigger than this over the 3 years I have had them.
I get a dividend four times a year from a pharmaceutical company of about 6%. I really should move my prize bond funds in to these shares as they have been paying this dividend for years. However the share price took a knock earlier this year when it was suggested that going forward this dividend may be at risk. They have begun to recover now and back above what I paid for them.
I don't like keeping all my eggs in the one basket. Like Palerider says I live in hope that I might win one of the bigger prizes and it's a bit of fun as well.
However when I see that dividend come through my letter box four times a year that will cover the price of a week away in the sun I wonder am I being foolish in hoping that a big win is just around the corner.

2. ### dub_nerdFrequent Poster

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Uh, yes you are. With your 6% dividend you would gain the equivalent of a €50k win every four years. You hold less than a hundredth of one percent of issued Prize Bonds. You'll win a €50k prize every three hundred years on average. You'll win a million every seven thousand years. If you built the passage graves at Newgrange with your last win, you're due another one any millennium now*.

(* N.B. That was for rhetorical effect and way too optimistic. You still have a couple of thousand years to go).

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3. ### NOAHFrequent Poster

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783
What has happened to prize bond payouts ie prizes, I have quite a few and was regularly getting €50.00 per week but since July 2018 only one prize!! The website changed around then as well, have the number of prizes decreased dramatically?

4. ### dub_nerdFrequent Poster

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Don't think it was specifically in July. Prize Bonds returns have been dropping for some time. Typical returns are a quarter of what they were four years ago.

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5. ### xoxoxoFrequent Poster

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97
Have just short of €100k in prize kids and in the past 12 months i have won a grand total of €50 and that was back in December 2017. So nothing at all in 2018. I think it's time I ,poked for a better rthan turn on my money

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6. ### dub_nerdFrequent Poster

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Last edited: 9 Sep 2018
That does sound odd. Even at the current shoddy returns your most likely number of wins on €100k in a 12 month period is 6. You have a better than 90% chance of winning between 3 and 11 times. The chances of only a single win in 12 months are less than one in a hundred. Either you've been extraordinarily unlucky or there's something wrong. Here are the odds for different numbers of wins:

Last edited: 9 Sep 2018
7. ### CerveloFrequent Poster

Posts:
425
One thing I feel that people forget about the Prize Bonds is the number of bonds chasing the prizes
Last weeks draw had over 536 million bonds looking to win one of the 4437 prizes
And every week there is on average an extra million bonds added to the draw but only around an extra 40 prizes are added every month

Your lack of winnings is what the rest of us bond holders are experiencing, the past 12 months is the first time in 6 years that my winnings haven't beaten the prize fund rate

8. ### OdeaFrequent Poster

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363
I could purchase an apartment in Spain with the amount of money I have "invested" in Prize Bonds. It's very tempting to do this. At least the family could enjoy it. Not enjoying the returns on my Prize Bonds at the moment.

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9. ### xoxoxoFrequent Poster

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97
I know! I had approx 75k worth and only brought up to the just under 100k Last January but really would expect a higher return. Must just be very unlucky as I can't figure anything else amiss - have bonds, are registered etc. Here's hoping I'll have a big win soon

10. ### SHEEPFARMERRegistered User

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11
I had 140,000 in Prize bonds. Bought last January it was ok for the first 4 months I won 200 euro 4*50. Since May 2018 I have won nothing. They seem to favour the Dublin bought bonds more but I'm a farmer.. lol So I am pulling out and going with a 5 year savings cert at least I will get 5000 grand... Not sure if the prize bonds is a good option has something changed this year? I read here a few others are having similar returns as me? maybe I will buy some in the GPO this time or borrow a Dublin address...

11. ### dub_nerdFrequent Poster

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Your most likely number of wins in a year is nine. At four in four months you were ahead of the game. At four in over nine months you are behind. But nothing especially unusual about it. Dublin addresses are favoured because a quarter of the population lives there -- and the highest earning quarter -- so there are a disproportionate amount of Dublin-owned prize bonds. Every prize bond has an equal chance. The algorithm that picks the winners has no idea what your address is.

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12. ### SHEEPFARMERRegistered User

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11
9x wins at 50 euro 450 euros and a chance to win higher.... maybe 100,000 in saving cert =1000 euros a year and then 20000 in prize bonds.......in with a chance of a bigger win..... up the Dubs

13. ### susanoNew Member

Posts:
3
Mind me asking how you're arriving at those percentages? Just so I can input a different investment total.

14. ### dub_nerdFrequent Poster

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Last edited: 21 Oct 2018
Don't mind at all, in fact use this this Google sheet (but see end note below). Anyone can edit it, preferably without breaking it. It may take a few moments to load, but there are two tabs at the bottom for Chart and Tables. On the Chart sheet you can type in the amount of your investment in the box provided and the chart will show the probabilities for each number of €50 wins.

The 'smarts' are on the Tables sheet. Hopefully it is mostly self-explanatory, and it has links to the input parameters from the Prize Bonds web site. Basically it makes the simplifying assumption that your wins will all be €50 prizes which is reasonable given that the number of individual prizes higher than €50 is only 0.5% of the total. It is straightforward to then calculate that the expected return on your investment is presently 0.33% tax free. The calculations are all set out in the spreadsheet. However, since you must win a discrete number of €50 prizes the returns will be lumpy for small investments although they will average out given enough time.

The odds of receiving any particular discrete number of prizes in a year are a little harder to calculate. I used to use a bunch of complicated combinatorics which involved numbers bigger than the spreadsheet could handle without hacky workarounds. Then another user on here, Duke of Marmalade, helpfully pointed out that the wins should follow a Poisson distribution. When it did indeed produce identical results I was sold. So we combine your investment, I, with the expected average return of 0.33% to give the average number of €50 wins:

$\lambda=\frac{I\times0.33\%}{50}$

The probability for any given number of €50 wins, k, is then given by the Poisson distribution:

$P(k)=e^{-\lambda}\frac{\lambda^k}{k!}$