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Post by GSV3MIaC on Aug 17, 2019 15:30:36 GMT
Tax free too, which makes them more attractive for some ..
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Post by carrdelling on Aug 17, 2019 18:57:32 GMT
Tax free too, which makes them more attractive for some .. This ^ I agree with Stonk when he says that the real returns of PB are currently between 1.0%-1.2% due to the skew towards big prizes; but the fact that the interest is tax free means that this is almost equivalent to an easy access cash account giving 1.8%-2.0% for anyone earning 50000+ annually (and with more than 500£ on interest per year already). And, to the best of my knowledge, the best rates for cash accounts (with no risk) are still at about 1.5%.
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Stonk
Stonking
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Post by Stonk on Aug 17, 2019 21:11:22 GMT
Premium Bonds are not a particularly rational investment, but they are more rational than a lot of things people do with their cash. On average, punters receive 1.40%, but this is massively skewed by the big prizes of which there are very very few, so virtually everyone gets a lower return. Either you will be spectacularly lucky, or you will receive about 1.0% to 1.2%. I like the idea of simulating a PB holding using a good instant access account (1.50%) and an occasional lottery ticket.
My parents have for years remained convinced that their PBs are doing (a) better than average, and (b) better than a savings account, but the reality is they are not good at maths.
90% of the prize fund goes to "small" prizes, nearly all £25, so as long as you have a reasonable number of units then you can expect to receive 90% of 1.4% over time, i.e. 1.26%. Strictly speaking the return will be a smidge less because of the timing of the draws, depending on the day of the month when you deposit and withdraw. Not the best cash account, but not the worst either. Source: www.nsandi.com/prize-checker (and lookup Prize Draw Details).
The number you put in a statement like "you will receive X% unless you are lucky" will depend on what you mean by "lucky". Looking at the prize distribution, I just thought you'd be lucky to get anything above £25!
My maths went like this:
For July 2019, there were 3,332,530 prizes in total out, of which 3,272,465 were £25 prizes. Therefore any prize has a 98.2% probability of being £25. Unless you have a big holding, the chances are you will only win £25 prizes.
The total prize fund was £95,254,775; the total of £25 prizes was £81,811,625. That's 85.9% of the money paid out in £25 prizes. 85.9% of the overall interst rate (1.40%) is 1.20%. Then subtract a bit because new bonds don't enter the draw immediately.
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Aug 17, 2019 22:14:25 GMT
Don't forget that PB prizes are tax free, so the 1.2% that 99+% of holders with a reasonable holding will get over a reasonable period of time equates to 1.5% or 2% or 2.18% or 4% depending on your tax rate and so beats any other government or FSCS backed investment held outside an ISA.
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ceejay
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Post by ceejay on Aug 18, 2019 8:18:38 GMT
90% of the prize fund goes to "small" prizes, nearly all £25, so as long as you have a reasonable number of units then you can expect to receive 90% of 1.4% over time, i.e. 1.26%. Strictly speaking the return will be a smidge less because of the timing of the draws, depending on the day of the month when you deposit and withdraw. Not the best cash account, but not the worst either. Source: www.nsandi.com/prize-checker (and lookup Prize Draw Details).
The number you put in a statement like "you will receive X% unless you are lucky" will depend on what you mean by "lucky". Looking at the prize distribution, I just thought you'd be lucky to get anything above £25!
My maths went like this:
For July 2019, there were 3,332,530 prizes in total out, of which 3,272,465 were £25 prizes. Therefore any prize has a 98.2% probability of being £25. Unless you have a big holding, the chances are you will only win £25 prizes.
The total prize fund was £95,254,775; the total of £25 prizes was £81,811,625. That's 85.9% of the money paid out in £25 prizes. 85.9% of the overall interst rate (1.40%) is 1.20%. Then subtract a bit because new bonds don't enter the draw immediately.
You might only win in units of £25, but don't forget that several of your bonds can win in one month. I stand by my 1.26% minus a small amount for the beginning and ending of your holding period (which becomes negligible if you hold for several years). Of course that's an average - the winnings are inherently lumpy. Plus whatever value you choose to assign to the small chance of winning a medium or large prize.
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jo
Member of DD Central
dead
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Post by jo on Aug 18, 2019 15:35:23 GMT
My XIRR on PBs since 2004 is 1.32%.
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Post by df on Aug 18, 2019 20:27:56 GMT
I have gross interest of £47.5k, fees of £4.8k, defaults of £25.6k and recoveries of £0.8k giving me net interest of £18k and a 4.4% annualised return, what do other people have? In the last few days I have lost £1k of net interest as defaults have gone up again. I just calculated that in the period since the last tax statement 6 April until today I have gross interest of 12.7k, commision of 1.3k, defaults of 13k and recoveries of 0.7k giving me NEGATIVE net interest of £1k, about -0.4% return on capital invested. The annualised return figure can be rather misleading as it will take into account all the years since you opened the account regardless of the balance. So mine shows 4.4% because I had the account open 5 years and the early years were OK (when I had £5k invested getting 6%!). But the fact that this year I so far have a negative return does not get shown anywhere somehow. If this -0.4% figure was shown I may well have made different decisions earlier.... And actually it is worse because those recoveries relate to debt that went bad in previous periods. You can try this yourself, just download all the historical tax statements, add them together, then look at the updated summary and deduct..... I'm content with this. I'm less interested in short term results. It didn't take me any effort to notice my monthly balance steadily diminishing, it was very obvious because I didn't deposit or withdraw for a year since the 18/09/17 remodelling. After a few consecutive months of this decline I've decided to make a swift exit. I've hardly anything left in FC (2 forever late, 2 "risk band removed" live, the rest are defaults). Small portions of recoveries are coming in so my historical return has recently increased from 1.9% to 2.1%. Feel very lucky to end up in positive.
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Post by gravitykillz on Aug 18, 2019 21:03:48 GMT
I have gross interest of £47.5k, fees of £4.8k, defaults of £25.6k and recoveries of £0.8k giving me net interest of £18k and a 4.4% annualised return, what do other people have? In the last few days I have lost £1k of net interest as defaults have gone up again. I just calculated that in the period since the last tax statement 6 April until today I have gross interest of 12.7k, commision of 1.3k, defaults of 13k and recoveries of 0.7k giving me NEGATIVE net interest of £1k, about -0.4% return on capital invested. The annualised return figure can be rather misleading as it will take into account all the years since you opened the account regardless of the balance. So mine shows 4.4% because I had the account open 5 years and the early years were OK (when I had £5k invested getting 6%!). But the fact that this year I so far have a negative return does not get shown anywhere somehow. If this -0.4% figure was shown I may well have made different decisions earlier.... And actually it is worse because those recoveries relate to debt that went bad in previous periods. You can try this yourself, just download all the historical tax statements, add them together, then look at the updated summary and deduct..... I'm content with this. I'm less interested in short term results. It didn't take me any effort to notice my monthly balance steadily diminishing, it was very obvious because I didn't deposit or withdraw for a year since the 18/09/17 remodelling. After a few consecutive months of this decline I've decided to make a swift exit. I've hardly anything left in FC (2 forever late, 2 "risk band removed" live, the rest are defaults). Small portions of recoveries are coming in so my historical return has recently increased from 1.9% to 2.1%. Feel very lucky to end up in positive. Put your funds in Crowdproperty for a year and get 8% interest.
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Post by df on Aug 18, 2019 22:01:45 GMT
I'm content with this. I'm less interested in short term results. It didn't take me any effort to notice my monthly balance steadily diminishing, it was very obvious because I didn't deposit or withdraw for a year since the 18/09/17 remodelling. After a few consecutive months of this decline I've decided to make a swift exit. I've hardly anything left in FC (2 forever late, 2 "risk band removed" live, the rest are defaults). Small portions of recoveries are coming in so my historical return has recently increased from 1.9% to 2.1%. Feel very lucky to end up in positive. Put your funds in Crowdproperty for a year and get 8% interest. 5 years of running and 100% of projects fully paid back sounds encouraging, but I have developed a bad taste for property loans and £500 per loan doesn't fit my diversification strategy no matter how safe it may sound. I get 8%+ from LC (30 months investment), which is not bad for mainly unsecured loan book.
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Post by gravitykillz on Aug 19, 2019 5:14:17 GMT
Its £250 per loan or less with autobid.
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ashtondav
Member of DD Central
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Post by ashtondav on Aug 19, 2019 7:31:56 GMT
Ah, that old chestnut autobid - nothing goes wrong with autobid.
Does it!
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Post by Ace on Aug 19, 2019 8:22:09 GMT
There doesn't seem to be any lower limit on CPs AutoInvest. I have several investments of £1.12, where monthly interest payments are reinvested in new properties. (They don't have many loans that pay monthly, most are bullet payments at the end, but there are a few).
Their AutoInvest works well for me. If you forget to check that you're happy with upcoming properties and your funds are allocated to one that your not happy with you do get a short time to back out. You get emailed when your funds are allocated to an investment. You then have a 24 hour window to cancel that investment. I've tried this and it works fine.
I'm a fan of CP, but you can't quite achieve an XIRR of 8% due to cash drag at the start of each investment. I.e. there is a short period between funds being committed and the borrower drawing down where there is no interest earned. I think this is around 2 weeks. Also, you need to have funds on the platform prior to funding the investment, which can add a bit more time. This portion of time can be minimised by switching cash in and out of the platform, but that's too much hassle for me (and unless your managing to put that cash in some other instant access account that is also earning 8% you are fooling yourself that you're really avoiding the cash drag). There is also a longer period of cash drag at the start of AutoInvest where you're waiting for your funds to be split over at least 5 investments.
I wouldn't let any of this put you off. They do seem to run a pretty tight ship. A potential 7% on well secured loans looks a lot more attractive than a potential 8% on unsecured loans to me.
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nummo
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Post by nummo on Aug 19, 2019 10:31:10 GMT
Good write up ace, i'm also invested in CP and have been pretty happy so far. They did an excellent webinar on their due diligence processes which I would highly recommend to anyone considering this platform.
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Post by Ace on Aug 19, 2019 19:45:10 GMT
My XIRR on PBs since 2004 is 1.32%. My XIRR on PBs since 1995 is 2.13% (rates were higher back then). Total prizes of £9025. My XIRR for this calendar year so far is 1.30%. I could obviously have done better elsewhere, but it's ok for totally secure funds. I use them as an easily accessible emergency cash buffer with a bit of fun thrown in (I don't get out much, obviously 😉 ). I've only ever used them once in all that time, and that was to buy a brand new motorbike at I price I just couldn't resist 😆. It did feel like an emergency at the time!
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