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Post by bernythedolt on Dec 17, 2022 20:09:29 GMT
Interesting, because this isn't how the guy who designed that calculator above sees it. Taking a £30,000 holding, he discards (claims to, I haven't checked) the outlying top and bottom 1% of prizes, resulting in his 'trimmed mean' of 2.7% - exactly 10% off NSI's rate. He regards that as the expected return on £30k (hover over the question mark for his explanation). I think I prefer your analysis, at least for a discrete year or less. Having said that, the number of mid-tier prizes has increased from 1/3rd of a percent to 1% of the total number of prizes. So we should be seeing far more £500 and even £1000 wins creeping in now... Over the longer term, I think knocking off 20% will turn out to be too punitive. The true figure is likely to be somewhere between the two of course, and it will be interesting to check back after a few months. Your right, both methods of estimation are far from perfect. In reality the average return is likely to be a bit higher than simply assuming you never win any middle or higher tier prizes. I agree that knocking off 20% of the prize rate is likely to be an under estimate. Something just over 2.6% is probably about right. I can't see any justification for picking 1% as the number of outliers to ignore. However, it just so happens that using 1% means that all middle and higher tier prizes are rejected in both the pre and post January prize funds. Here's another (imperfect, but possibly slightly better) way of estimating the likely average return from the new prizefund: 52.50% ( 2,621,112 / 4,992,880 * 100 ) of the prizes will be £25. 23.25% ( 1,160,883 / 4,992,880 * 100 ) of the prizes will be £50. 23.25% ( 1,160,883 / 4,992,880 * 100 ) of the prizes will be £100. 1% (100% - 52.50% - 23.25% - 23.25% ) of the prizes will be higher than £100. Someone with the max invested (£50,000) with average luck would expect to win 25 prizes per year ( 50,000 / 24,000 * 12 ). 13.125 (25 * 52.50%) of those prizes will most likely be £25. I.e. £328.125 (13.125 * £25). 5.8125 (25 * 23.25%) of those prizes will most likely be £50. I.e. £290.625 (5.8125 * £50). 5.8125 (25 * 23.25%) of those prizes will most likely be £100. I.e. £581.25 (5.8125 * £100). 0.25 (25 * 1%) of those prizes will most likely be > £100. So, each year, with average luck, someone with the max invested would expect to win £1,200 (£328.125 + £290.625 + £581.25) = 2.4% plus one higher value prize every 4 years. If we assume that the higher value prize is the most likely £500, then that adds an average £125 per year, which raises the total to £1,325 per year, or 2.65%. Nice analysis, the expected value is of course the sum of (value times probability of that value occurring) and you've laid that out succinctly above. If I could give a double uptick I would.  So a smidgeon over 2.65% is a realistic expectation then, agreed. So we're knocking off neither 10% nor 20% from the NSI rate now, but 11.7%. As you say, slightly imperfect with the assumption at the end. Of the ~50,000 prizes above £100, ~36,000 are £500, leaving ~14,000 >£500. So approximately 2 in 7 times the higher prize will be either somewhat, or significantly, higher than £500 (as indeed we have seen recently in this thread!)
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Post by bernythedolt on Dec 17, 2022 22:55:27 GMT
Your right, both methods of estimation are far from perfect. In reality the average return is likely to be a bit higher than simply assuming you never win any middle or higher tier prizes. I agree that knocking off 20% of the prize rate is likely to be an under estimate. Something just over 2.6% is probably about right. I can't see any justification for picking 1% as the number of outliers to ignore. However, it just so happens that using 1% means that all middle and higher tier prizes are rejected in both the pre and post January prize funds. Here's another (imperfect, but possibly slightly better) way of estimating the likely average return from the new prizefund: 52.50% ( 2,621,112 / 4,992,880 * 100 ) of the prizes will be £25. 23.25% ( 1,160,883 / 4,992,880 * 100 ) of the prizes will be £50. 23.25% ( 1,160,883 / 4,992,880 * 100 ) of the prizes will be £100. 1% (100% - 52.50% - 23.25% - 23.25% ) of the prizes will be higher than £100. Someone with the max invested (£50,000) with average luck would expect to win 25 prizes per year ( 50,000 / 24,000 * 12 ). 13.125 (25 * 52.50%) of those prizes will most likely be £25. I.e. £328.125 (13.125 * £25). 5.8125 (25 * 23.25%) of those prizes will most likely be £50. I.e. £290.625 (5.8125 * £50). 5.8125 (25 * 23.25%) of those prizes will most likely be £100. I.e. £581.25 (5.8125 * £100). 0.25 (25 * 1%) of those prizes will most likely be > £100. So, each year, with average luck, someone with the max invested would expect to win £1,200 (£328.125 + £290.625 + £581.25) = 2.4% plus one higher value prize every 4 years. If we assume that the higher value prize is the most likely £500, then that adds an average £125 per year, which raises the total to £1,325 per year, or 2.65%. Nice analysis, the expected value is of course the sum of (value times probability of that value occurring) and you've laid that out succinctly above. If I could give a double uptick I would. So a smidgeon over 2.65% is a realistic expectation then, agreed. So we're knocking off neither 10% nor 20% from the NSI rate now, but 11.7%. As you say, slightly imperfect with the assumption at the end. Of the ~50,000 prizes above £100, ~36,000 are £500, leaving ~14,000 >£500. So approximately 2 in 7 times the higher prize will be either somewhat, or significantly, higher than £500 (as indeed we have seen recently in this thread!) Extending the analysis a little, I've drawn up the following table, purely for interest, showing the expected contribution each month from each prize tier, for a £50k holding. [Prob = no. of prizes / total number; E(X), the expectation component = the product of prize value times probability of that prize. You've outlined why a £50k holding should currently return an average 25 wins per annum. I've highlighted your finding of a cumulative £1,200 / 2.4% at the £100 level]. We can take our own view on which probabilities are sufficiently unlikely that we can safely ignore them. My own cut-off is the £1000 prize level, above which the probabilities become implausible. The final column then shows a return of 2.7%, which is remarkably close to your "2.65% assuming 4-yearly £500" derivation. | Value | Number of prizes | Prob of prize | E(X) for 1 win | For 25 wins | Cumulative win | % return |
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| £1,000,000 | 2 | 4.0057E-07 | £0.40 | £10.01 | £1,500.00 | 3.00 | | £100,000 | 56 | 1.1216E-05 | £1.12 | £28.04 | £1,489.99 | 2.98 | | £50,000 | 112 | 2.24319E-05 | £1.12 | £28.04 | £1,461.95 | 2.92 | | £25,000 | 223 | 4.46636E-05 | £1.12 | £27.91 | £1,433.91 | 2.87 | | £10,000 | 559 | 0.000111959 | £1.12 | £27.99 | £1,405.99 | 2.81 | | £5,000 | 1,118 | 0.000223919 | £1.12 | £27.99 | £1,378.00 | 2.76 | | £1,000 | 11,983 | 0.002400018 | £2.40 | £60.00 | £1,350.01 | 2.70 | | £500 | 35,949 | 0.007200053 | £3.60 | £90.00 | £1,290.01 | 2.58 | | £100 | 1,160,883 | 0.232507691 | £23.25 | £581.27 | £1,200.01 | 2.40 | | £50 | 1,160,883 | 0.232507691 | £11.63 | £290.63 | £618.74 | 1.24 | | £25 | 2,621,112 | 0.524969957 | £13.12 | £328.11 | £328.11 | 0.66 | | 4,992,880 | 1 | £60.00 | £1,500.00 |
Ergo, I think I'll continue to deduct the rule-of-thumb 10% from NSI's rate for the time being...
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Post by Ace on Dec 17, 2022 23:31:30 GMT
Nice analysis, the expected value is of course the sum of (value times probability of that value occurring) and you've laid that out succinctly above. If I could give a double uptick I would. So a smidgeon over 2.65% is a realistic expectation then, agreed. So we're knocking off neither 10% nor 20% from the NSI rate now, but 11.7%. As you say, slightly imperfect with the assumption at the end. Of the ~50,000 prizes above £100, ~36,000 are £500, leaving ~14,000 >£500. So approximately 2 in 7 times the higher prize will be either somewhat, or significantly, higher than £500 (as indeed we have seen recently in this thread!) Extending the analysis a little, I've drawn up the following table, purely for interest, showing the expected contribution each month from each prize tier, for a £50k holding. [Prob = no. of prizes / total number; E(X), the expectation component = the product of prize value times probability of that prize. You've outlined why a £50k holding should currently return an average 25 wins per annum. I've highlighted your finding of a cumulative £1,200 / 2.4% at the £100 level]. We can take our own view on which probabilities are sufficiently unlikely that we can safely ignore them. My own cut-off is the £1000 prize level, above which the probabilities become implausible. The final column then shows a return of 2.7%, which is remarkably close to your "2.65% assuming 4-yearly £500" derivation. | Value | Number of prizes | Prob of prize | E(X) for 1 win | For 25 wins | Cumulative win | % return |
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| £1,000,000 | 2 | 4.0057E-07 | £0.40 | £10.01 | £1,500.00 | 3.00 | | £100,000 | 56 | 1.1216E-05 | £1.12 | £28.04 | £1,489.99 | 2.98 | | £50,000 | 112 | 2.24319E-05 | £1.12 | £28.04 | £1,461.95 | 2.92 | | £25,000 | 223 | 4.46636E-05 | £1.12 | £27.91 | £1,433.91 | 2.87 | | £10,000 | 559 | 0.000111959 | £1.12 | £27.99 | £1,405.99 | 2.81 | | £5,000 | 1,118 | 0.000223919 | £1.12 | £27.99 | £1,378.00 | 2.76 | | £1,000 | 11,983 | 0.002400018 | £2.40 | £60.00 | £1,350.01 | 2.70 | | £500 | 35,949 | 0.007200053 | £3.60 | £90.00 | £1,290.01 | 2.58 | | £100 | 1,160,883 | 0.232507691 | £23.25 | £581.27 | £1,200.01 | 2.40 | | £50 | 1,160,883 | 0.232507691 | £11.63 | £290.63 | £618.74 | 1.24 | | £25 | 2,621,112 | 0.524969957 | £13.12 | £328.11 | £328.11 | 0.66 | | 4,992,880 | 1 | £60.00 | £1,500.00 |
Ergo, I think I'll continue to deduct the rule-of-thumb 10% from NSI's rate for the time being... Agreed. I've edited my original post suggesting a 20% deduction to say that the theory has been discredited.
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Post by Ace on Dec 17, 2022 23:43:14 GMT
You've picked a good cutoff point in my opinion bernythedolt. On average, someone with the maximum holding would win a prize over £1,000 once every 96.5 years. |
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Post by bernythedolt on Dec 17, 2022 23:46:02 GMT
Extending the analysis a little, I've drawn up the following table, purely for interest, showing the expected contribution each month from each prize tier, for a £50k holding. [Prob = no. of prizes / total number; E(X), the expectation component = the product of prize value times probability of that prize. You've outlined why a £50k holding should currently return an average 25 wins per annum. I've highlighted your finding of a cumulative £1,200 / 2.4% at the £100 level]. We can take our own view on which probabilities are sufficiently unlikely that we can safely ignore them. My own cut-off is the £1000 prize level, above which the probabilities become implausible. The final column then shows a return of 2.7%, which is remarkably close to your "2.65% assuming 4-yearly £500" derivation. | Value | Number of prizes | Prob of prize | E(X) for 1 win | For 25 wins | Cumulative win | % return |
|---|
| £1,000,000 | 2 | 4.0057E-07 | £0.40 | £10.01 | £1,500.00 | 3.00 | | £100,000 | 56 | 1.1216E-05 | £1.12 | £28.04 | £1,489.99 | 2.98 | | £50,000 | 112 | 2.24319E-05 | £1.12 | £28.04 | £1,461.95 | 2.92 | | £25,000 | 223 | 4.46636E-05 | £1.12 | £27.91 | £1,433.91 | 2.87 | | £10,000 | 559 | 0.000111959 | £1.12 | £27.99 | £1,405.99 | 2.81 | | £5,000 | 1,118 | 0.000223919 | £1.12 | £27.99 | £1,378.00 | 2.76 | | £1,000 | 11,983 | 0.002400018 | £2.40 | £60.00 | £1,350.01 | 2.70 | | £500 | 35,949 | 0.007200053 | £3.60 | £90.00 | £1,290.01 | 2.58 | | £100 | 1,160,883 | 0.232507691 | £23.25 | £581.27 | £1,200.01 | 2.40 | | £50 | 1,160,883 | 0.232507691 | £11.63 | £290.63 | £618.74 | 1.24 | | £25 | 2,621,112 | 0.524969957 | £13.12 | £328.11 | £328.11 | 0.66 | | 4,992,880 | 1 | £60.00 | £1,500.00 |
Ergo, I think I'll continue to deduct the rule-of-thumb 10% from NSI's rate for the time being... Agreed. I've edited my original post suggesting a 20% deduction to say that the theory has been discredited. You could yet be right, there's SUCH a massive cliff edge probability shift between the £100 and £500 prize payments, that 2.4% seems the almost guaranteed base level for most of us with a full holding, while some of us will get closer to the 2.7% predicted by the numbers. So hard to be predictive now, but it should be somewhere in that 2.4 - 2.7 region...!
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Post by bernythedolt on Dec 17, 2022 23:48:35 GMT
You've picked a good cutoff point in my opinion bernythedolt . On average, someone with the maximum holding would win a prize over £1,000 once every 96.5 years. I hope travolta is reading, and squirming with guilt at taking more than her share... 
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Post by overthehill on Dec 18, 2022 10:30:20 GMT
If only the failed and fraudulent P2P platforms had had such in-depth analysis in the forum!
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Post by Ace on Dec 18, 2022 12:00:36 GMT
If only the failed and fraudulent P2P platforms had had such in-depth analysis in the forum! I do my best! E.g. I've just raised an official complaint with Kuflink regarding the misleading and factually incorrect rates that they advertise for their 3 and 5 year products. See p2pindependentforum.com/post/464515/thread for details. Not that I believe Kuflink to be either failed or fraudulent. They are one of my trusted platforms, but they shouldn't be allowed to overstate possible returns to gain a competitive advantage. I'd like to see the FCA insist that all platforms use the same standardised rate definition, e.g. XIRR, like they do with APR and AER for other products. I'll dream on.
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Post by overthehill on Dec 18, 2022 12:10:26 GMT
If only the failed and fraudulent P2P platforms had had such in-depth analysis in the forum! I do my best! E.g. I've just raised an official complaint with Kuflink regarding the misleading and factually incorrect rates that they advertise for their 3 and 5 year products. See p2pindependentforum.com/post/464515/thread for details. Not that I believe Kuflink to be either failed or fraudulent. They are one of my trusted platforms, but they shouldn't be allowed to overstate possible returns to gain a competed advantage. I'd like to see the FCA insist that all platforms use the same standardised rate definition, e.g. XIRR, like they do with APR and AER for other products. I'll dream on.
You're doing a grand job and/but I wouldn't be surprised if you have been reducing your P2P exposure either overall or at the very least in platforms where you are overweighted. I certainly have been. I have a smoke alarm implant for when people or companies start to blow it up my a?se.
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Post by Ace on Dec 18, 2022 12:24:55 GMT
I do my best! E.g. I've just raised an official complaint with Kuflink regarding the misleading and factually incorrect rates that they advertise for their 3 and 5 year products. See p2pindependentforum.com/post/464515/thread for details. Not that I believe Kuflink to be either failed or fraudulent. They are one of my trusted platforms, but they shouldn't be allowed to overstate possible returns to gain a competed advantage. I'd like to see the FCA insist that all platforms use the same standardised rate definition, e.g. XIRR, like they do with APR and AER for other products. I'll dream on.
You're doing a grand job and/but I wouldn't be surprised if you have been reducing your P2P exposure either overall or at the very least in platforms where you are overweighted. I certainly have been. I have a smoke alarm implant for when people or companies start to blow it up my a?se.
I'm still increasing my P2P exposure, though mostly through natural growth rather than adding new funds. I'm constantly adjusting the platform mix, and I'm trying to lower my maximum exposure per platform (I was caught out by, and am suffering from, the ABLrate wind-down). I still see P2P as a good counterbalance to shares rather than using the traditional bond counterbalance. I still have a roughly 50/50 split. This year will be the first where the P2P portfolio has roundly beaten the share portfolio. Details to come in my end-of-year report.
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Post by bernythedolt on Dec 18, 2022 13:04:16 GMT
You're doing a grand job and/but I wouldn't be surprised if you have been reducing your P2P exposure either overall or at the very least in platforms where you are overweighted. I certainly have been. I have a smoke alarm implant for when people or companies start to blow it up my a?se.
I'm still increasing my P2P exposure, though mostly through natural growth rather than adding new funds. I'm constantly adjusting the platform mix, and I'm trying to lower my maximum exposure per platform (I was caught out by, and am suffering from, the ABLrate wind-down). I still see P2P as a good counterbalance to shares rather than using the traditional bond counterbalance. I still have a roughly 50/50 split. This year will be the first where the P2P portfolio has roundly beaten the share portfolio. Details to come in my end-of-year report. I think money left under my mattress probably beat my share portfolio this year.
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Post by overthehill on Dec 18, 2022 15:03:44 GMT
I'm still increasing my P2P exposure, though mostly through natural growth rather than adding new funds. I'm constantly adjusting the platform mix, and I'm trying to lower my maximum exposure per platform (I was caught out by, and am suffering from, the ABLrate wind-down). I still see P2P as a good counterbalance to shares rather than using the traditional bond counterbalance. I still have a roughly 50/50 split. This year will be the first where the P2P portfolio has roundly beaten the share portfolio. Details to come in my end-of-year report. I think money left under my mattress probably beat my share portfolio this year.
Expand your window. My shares portfolio is up 24% aug 2019-> aug 2022, up 7% aug 2020-> aug 2022, down 14% aug 2021-> aug 2022.
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Post by Ace on Dec 18, 2022 16:20:37 GMT
I think money left under my mattress probably beat my share portfolio this year.
Expand your window. My shares portfolio is up 24% aug 2019-> aug 2022, up 7% aug 2020-> aug 2022, down 14% aug 2021-> aug 2022.
My P2P portfolio would win on 1, 2 and 3 year timescales based on today.
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travolta
Member of DD Central
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Post by travolta on Dec 19, 2022 16:44:16 GMT
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keitha
Member of DD Central
2024, hopefully the year I get out of P2P
Posts: 4,598
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Post by keitha on Dec 20, 2022 11:17:48 GMT
Surely given current prices, just turning the heating down for a week would pay a big chunk of that. The 5 cold days we just had cost me nearly £50 in heating. £10 a day, last years highest was £2.75, the year before £2.20. Will create a separate thread for this ...
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