State savings maturing

Discussion in 'Deposits' started by Logo, Jan 8, 2018.

1. LogoFrequent Poster

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Last edited: Jan 8, 2018
A friend had sale agreed on a property last November. Long story short - it fell through. He has state savings for part payment which are due to mature the end Feb-May this year. He plans to leave them as is while looking for another house. I know it's impossible to get a decent return on deposit investment lately but maybe prize bonds is a better option for €250K as the time frame is impossible to gauge. Any thoughts welcome. Thanks

Last edited: Jan 8, 2018
2. dub_nerdFrequent Poster

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The return expected on Prize Bonds will be about 0.27% -- that's about one €50 prize per month on €250k. Grossed up, it's the equivalent of 0.43% from a deposit account before DIRT. So it's probably better than you'll get from a deposit account. On the downside, you have to keep prize bonds for an initial period of three months, and there is some paperwork involved (true for a new bank account too). The shorter the period the Prize Bonds are held the greater the chance of "lumpiness" in the return, i.e. the prizes might clump together so that you miss out if the time horizon is only a month or two.

Personally, when it gets down to quibbling between €50/month or €20/month return on €250k, I'd take the path of least resistance, whatever happens to be handier. Non-risk returns are derisory whatever way you look at them.

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3. LogoFrequent Poster

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Last edited: Jan 12, 2018
Thinking about expected returns in Prize Bonds seems to take the joy element out of the lottery. I realise that when talking big investments we try to analytically assess the most probable outcome. Thanks to dub_nerd for great posts in helping to explain statistical probable outcomes - Poisson distributions, bell-shapes, lumpiness etc. The only thing missing from the theory is the definite random possibility of winning the jackpot. I know someone who did win €250K from a quick pick lottery number but I've yet to meet anyone who has won a million from Prize Bonds.

Last edited: Jan 12, 2018
4. dub_nerdFrequent Poster

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There's something innate in us humans about being attracted to the small possibility of a big payoff. Lottery operators trade on this. I consider it a service to humanity to damp down the exuberance.

... which is why I like to remind people that if they buy €100k in Prize Bonds they will win the million euro prize on average once every 8,000 years! And at just 1% annual inflation your €100k will be worth less than one billion billion billionth of a cent in today's money after that length of time. So it's not like even your great-great-great-whatever kids will be thanking you for it!

5. xoxoxoFrequent Poster

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You're shattering my dreams dub_nerd. What are my chances in the lottery?

6. dub_nerdFrequent Poster

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Sorry, I've never even looked at the lottery. That's a total mugs game. (Unlike Prize Bonds you won't get a billionth of a cent back even one second later). I was involved in a bid to provide software for the National Lottery over thirty years ago, and that's the last time I gave it a moment's thought.

7. xoxoxoFrequent Poster

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Seemingly my odds aee better to win the top prize open the lottery than the prize bonds. I need to have a dream! I agree, it's certainly a fools game - unless you win of course!

8. dub_nerdFrequent Poster

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The first rule of fool's games is that anything that can only be retroactively declared to be "not a fool's game" is a fool's game.

9. noproblemFrequent Poster

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An awful lot of fools in Ireland and they're an expanding group.