Are Premium Bonds Gambling?

[bridgey321]

I had this discussion with someone about whether or not putting your money into a premium bond is gambling or not. For those who aren't familiar with them:

http://en.wikipedia.org/wiki/Premium_Bond

I argued that it is essentially the same as putting your money in an ISA then taking out the interest earnt and buying lottery tickets or gambling with it. I said that you are risking losing potential money that you could earn by putting your money in a standard savings account.

He argued that since you are not losing your money and if you put £1000 in a premium bond and don't win anything then you still have your £1000 therefore haven't lost anything so therefore it isn't gambling.

What you think?

[Litellio]

I've got quite a lot of premium bonds and I quite enjoy getting a "prize" now and then in exchange for a regular interest payment. Also, even if you don't win, then you don't 'lose' anything and you're also helping the government get themselves out of this ridiculously large hole they appear to have dug themselves.

"No" vote for me, because you can't lose!

[JustPlayPoker]

I'd say they are gambling because you're gambling with your profits. It would be the same as getting the money you earn from the dividends of your stocks and taking it to the craps table. Sure your principle isn't touched, but your money is still losing value due to inflation.

The only way you make money is if your "bets" pay off.

[Gerrard48LFC]

hmm it is sort of gambling because its taking your interest which is your money and giving you a chance to win a bigger prize. so yes it is gambling, but you are supposed to have a good rate of return on these things, and savings accounts these days dont amount to much.

[deaks102]

Surely not gambling!

I've got some money in them. Never win though

[JustPlayPoker]

Surely not gambling!

I've got some money in them. Never win though

That was the best reply ever!

[Twigman]

I've got some.
It's gambling and it's -EV because the ROI is poor. There is a calculator here: http://www.moneysavingexpert.com/sav...ds-calculator/

[Pates]

Surely if the ROI is at all positive then it's going to +EV. The only downside is the opportunity cost if just shoving the money in a bank and earning interest.

[James]

net present value of the bonds is negative hence its -EV !

[Pates]

net present value of the bonds is negative hence its -EV !

That depends entirely on the discount rate. You should know this.