If you’re looking for a low-risk, interest paid investment as part of your financial portfolio, then this could be an interesting avenue to explore. We overview Bonus Bonds in NZ — background, how it works, draws, prizes, investment portfolio.

Bonus Bonds were first introduced by the Government in 1970 as a way of encouraging New Zealanders to save more. Originally administered by the Post Office, they are now managed by ANZ Investment Services, and are available at both ANZ and PostShop outlets.

You can invest in Bonus Bonds with as little as $20, which will buy you 20 bonds valued at $1 each. Each Bonus Bond has a unique identifying number (such as 14804 895816) and will be entered automatically into monthly draws for prizes. There are no fees charged, and your Bonds have no expiry date.

Although bonds do not pay any interest, each month your bonds go into a draw and you could win prizes from $20 up to $1,000,000. So if you buy 20 bonds, you have twenty chances of winning each month. There is no limit to how many bonds you can buy.

Nearly one third of all New Zealanders own bonus bonds, and the Bonus Bond Trust has paid out $1.5 billion in over 44 million tax paid cash prizes.

The amount paid out in prizes each month varies according to how well the Trust fund is performing. As an example, in August 2008 the prizes were $1,000,000; $100,000; $50,000; and 380 prizes of $500 each.

This is an excellent alternative to Lotto because you do not lose the money that you invest. If you want to free up your savings, you can redeem your bonds at any time, and get back the $1 per bond that you put in.

Bonus bonds are great as gifts, and especially good for children as part of a savings portfolio for the future. You can feel confident that your money is safe as the fund is managed very conservatively, and has an “AAAA” rating from Standard and Poors.

Over time, on average, the fund usually has a lower rate of interest than investing in the bank, but it is still worth making it a small part of your investment portfolio – your capital is safe, you get the monthly excitement of prize draws, and you might strike it lucky and pick up a windfall.

You can learn more about NZ Bonus Bonds by visiting www.bonusbonds.co.nz , or popping into your local ANZ Bank or PostShop branch.

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