How Viable Are Premium Bonds

by : Andy Lim

Do you think you should win at a least a prize if you have invested 30,000 pounds in premium bonds? There is no guarantee that you will win a prize even in your lifetime. But the report said that there are 168 millionaires from the winning the grand prize since 1994. So, you may stand a chance to win.

Anyone can buy premium bonds. The only requirement is the person must be at least 16 years old. You can invest as little as 100 pounds or as high as 30,000 pounds.

Although the bonds don't give you any interest, but the money which is pooled together from all the investors provides a sufficient fund for the cash prizes. You can calculate the interest by taking the total cash money and divide it by the total investment. It will come to about 4% for every pound invested.

How do the National Savings and Investment agency determine who is the winner of the cash prizes? Every month, they will draw random numbers using a number generator which is known as ERNIE. It will prevent any kind of pattern. This will ensure that no one can cheat the machine. Every bond will have a unique number. However, you need to remember one unique code. This unique code is issued to you as a bondholder when you buy your first premium bonds. With this unique code, it can trace to all your bonds that you have bought.

The good thing about this investment is that the government guarantee it. You can say that it is a very safe investment because you won't lose your money. Unlike any other bonds, you can withdraw your money at any time.

The negating factor is that you don't earn any interest from these bonds. But you have an opportunity to become a millionaire. In addition, you can use the same bonds for every draw. If you compare to lottery, then you understand that why so many British people invest in these notes. In the lottery, you have to buy all the time but for premium bonds, you can buy one time and you are entitled for a lifetime opportunity to win 1,000,000 dollars of cash provided that you don't redeem them for cash.

Another factor that many people don't consider is the inflation rate. Although you don't lose your investment, but the inflation will depreciate the value of your investment. What you have invested 10 years ago is not going be the same worth should you decide to redeem the bonds today. You would not be able to buy many things today if you could buy them 10 years ago with the same amount of money.

Premium bonds are safe investments. Today, the National Savings and Investment firm offer an easier way to buy the bonds. You only need to call them by phone. Apart from this, you can buy them from post offices, ATMS or directly from the agency. You only need to remember one thing. It is risk-free and offers no interest. Nevertheless, it is not inflation-proof. The value of your investment will depreciate over the time.