Want to Buy, Large Deposit, Low Income

[slasher]

@ps200306

Personally, the administrative hassle of cashing all those €50 cheques would not be worth it to me for a couple of hundred extra a year on €100k. I’d consider it if the margin between deposit rates and PBs reverted to those of a couple of years ago, but that’s unlikely. Ditto for most of the State Savings too.

On the other hand, working out the probabilities and lumpiness is quite a lot of fun. I have a neat spreadsheet with a macro for a logarithmic version of Sterling’s approximation for factorials, due to Excel not being able to cope with the astronomical permutations involved.

You can get the winnings paid by Direct Debit! (still send out a paper notification)

[Madness_of_Crowds]

@ps200306

@satechi

Has anyone done the math on probability of winning on prizebonds in any year?

Seeing that savings accounts no longer give any interest and looking forward banks might start charging for “privilege” of giving them money to invest and the government taxes the interest punitively, this NTMA prizebond thing and other state savings options start to look more attractive

Yes. The thing that most people don’t get is that the “lumpiness” of the return is more important than the probability. Returns on Prize Bonds have been hammered in the last couple of years so that you can now expect only a 0.58% return tax free. However, consider that the minimum prize is €50 and 0.58% of a single €6.25 prize bond is 3.625c. Divide that into the minimum prize denomination. In the current low interest rate environment you might be happy with a 0.58% return after tax but would you be happy to wait 1,379 years on average to achieve it?

In other words you have to buy lots of Prize Bonds for the odds to even out so that you have a reasonable chance of achieving the average 0.58% return each year. I reckon €100k or more is sensible, but an absolute minimum of several tens of €k is needed. Personally, the administrative hassle of cashing all those €50 cheques would not be worth it to me for a couple of hundred extra a year on €100k. I’d consider it if the margin between deposit rates and PBs reverted to those of a couple of years ago, but that’s unlikely. Ditto for most of the State Savings too.

The awful thing is that in the present environment, all things considered, that return’s not bad. Given that DIRT is 40%, you’d about double your net income and if you’re risk averse, have a reasonable sum of idle money that you might need in the short to medium term but aren’t stinking rich, there are certainly worse things to do with it.

@slasher

You can get the winnings paid by Direct Debit! (still send out a paper notification)

Direct Credit, surely?
If even Prize bonds have a negative nominal, let alone real yield, your only investments ought to be beans, guns and ammo!

@ps200306

On the other hand, working out the probabilities and lumpiness is quite a lot of fun. I have a neat spreadsheet with a macro for a logarithmic version of Sterling’s approximation for factorials, due to Excel not being able to cope with the astronomical permutations involved.

I find your scheme interesting and would like to subscribe to your newsletter.
(Honestly, I do. The phrase “Sterling’s Approximation” suddenly made me come over all misty-eyed and nostalgic for my days studying ‘A’ level maths many years ago.)

[ps200306]

@Madness of Crowds

I find your scheme interesting and would like to subscribe to your newsletter.
(Honestly, I do. The phrase “Sterling’s Approximation” suddenly made me come over all misty-eyed and nostalgic for my days studying ‘A’ level maths many years ago.)

Ok, let’s try to get it all out of the way in one hefty installment. We’ll start with some refreshers on combinatorics before relating it to Prize Bonds.

ps200306’s Newsletter #1

EDIT: I moved all of this explanation to a doc on the web, plus an associated spreadsheet.

[johnnyskeleton]

Why not spend some of the savings on yourself? Travel for a few months, go out and enjoy yourself, get sky movies. Whatever suits. I know there is an appeal to living frugally and i sometimes look at how much i spend on nights out, television, holidays etc or even on food by eating out instead of cooking a cheap veg curry and shudder at the waste of money.

But fundamentally life is for living and a bit of a holiday might give you some perspective.

[Thargor]

I dont deprive myself, I do all that anyway, its just all my hobbies are centred around cycling/exercise or gaming/films, most of which is basically free. No need to spend money on tv and films in this day and age, pissing money away on stuff like that just doesn’t appeal, most of my friends are the same.