Monday, April 7, 2008

Premium Bonds Are Better Than Lottery

One of the uprising stars in the investment portfolio is premium bonds. Although many have place their money in these bonds, there are some quarters begin to doubt if they are a worthwhile investment. The first premium bond was brought into existence in 1956. The British government used this instrument to persuade the citizens to save money. Unlike any other security or treasury bond, it does not give any interest. Instead it offers cash prizes which are worth more than a million pounds. It provides opportunities to the lower income group to win one million pounds using a lottery. About 20 million people in UK hold at least one premium bond. This represents one third of the population. They can buy these bonds from the post office or the National Savings and Investment agencies.

When the interest rates drop, these bonds seem to be a secure avenue for investing. At the same time, investors will the excitement to win one million pounds in cash every twice a month. The top prizes are about 15% of the total prize money allocated. Another 15% is allocated for the mid range prizes while the remaining 70% goes into small prizes with the smallest that carries the value of 50 pounds.

A 50 pound prize is equivalent to a 500 percent return as each bond is one pound. Your chances of winning is 1 in 21,000 but as the bonds become more popular, the odds may turn against you.

You can start with 100 pounds but the cap is set at 30,000 pounds. The government guarantees your investment but not the odds of winning cash prizes. This guarantee allows you to sleep peacefully every night without worrying about losing your hard-earned saving.

The minimum age for an investor in premium bonds is 16. Many parents buy these monetary instruments for their children's education funds. If your children start investing early, they will appreciate the value of money. In addition, the possibilities of winning sufficient money in helping them to start life are great.

Using the same bond, you can continue to play the game as long as you like. It makes sense if you have more bonds, then your odds of winning get better. Since the prize money is tax-free, you can reinvest the money into the bonds again until you hit the limit of 30,000 pounds. However, during the last decade, the chance of winning has drop. This is due to the fact that the market has a lot of bonds which lower the probability of getting your number selected.

Nevertheless, you still have an upper hand compared to the American Lottery because you can use the same premium bonds over and over again. You can check online for the premium bond draw results. Should your numbers match the ones on the listing, then you contact them and claim your money. Till today more than 500,000 unclaimed prizes are sitting in the National Savings and Investment agency.