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Member
Originally Posted by suse
With Bonus Bonds becoming a thing of the past, I'm looking at where we can put the $100 for birthdays and christmas for the grandkids.
Did Bonus Bonds actually give a return? I heard that most of them don't, so your money just got eaten away by inflation.
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With the thread being shares for children, can Sharesies have accounts that are fully in the child's name rather than Parent (Child account)?
My children have accounts with ASB and NABTrade but as they are the Parent (Child account) type I am still up for the tax and so don't use them.
With InvestNow the account can be fully in the child's name so I now use this to invest for them although there are only only ETFs and no direct shares.
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Member
Originally Posted by Cricketfan
Did Bonus Bonds actually give a return? I heard that most of them don't, so your money just got eaten away by inflation.
They used to, there would often be an envelope (remember those?) arriving with a $20 to $100 tax free prize. I likely still have a few but took almost all out a few years back to use for better purposes. I'd perhaps better follow up on my Premium Bonds in the UK too.
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Yeah I understand there were prizes, but typically what would the annual return have been? More than a term deposit?
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Originally Posted by Cricketfan
Yeah I understand there were prizes, but typically what would the annual return have been? More than a term deposit?
There was a chance when returns on TD's were a lot higher than how (so a lot more RWT would have been paid on the TD alternative). ANZ investing in a mix of TD's and government stock guarantees that expected returns are less than TD's in a low interest rate environment with the extremely high management fee that applied (Stuff quoted 1.28%!!). With higher TD rates of at least 4%, bonus bonds could have had an expected return equal or better than TD's but that would depend on what return ANZ got on the invested monies and therefore the prize fund compared to the TD options available (and of course whether you won prizes).
4% less 33% tax is 2.68%
4% less 1.28% management fees is 2.72%
With TD rates around 1.4% this becomes 1.4% less 33% = 0.94% from TD's. Bonus bonds are 1.4% less 1.28% = 0.12%. Add some government stock at under possibly under 1% into the funding mix and ANZ doesn't have the money to even generate a prize pool after paying its management fee.
Last edited by Scrunch; 05-09-2020 at 12:01 PM.
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Member
Originally Posted by Scrunch
(and of course whether you won prizes).
That's kinda the critical bit though - what was the probability of winning prizes each year? Was it such that if you stuck at it long enough, you should win enough to do better than TDs? Or would only a small percentage of people do better, with the majority winning bugger all?
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