What's the best investment, an ISA or premium bonds?

I'm thinking about trying to put 拢3000 away over the next 12 months in regular monthly payments but am not sure what the best option would be. ISAs seem to be touted as the norm for people wanting to save a little extra but the interest rates don't seem that great. Not being a numbers person I'm wondering whether the amount of tax I would save in an ISA would be that much compared to other investments. Any ideas?

It depends on your aims. Short term, say 3 years or less; a cash ISA . Longer term, a stock market ISA, of which there are different options available.(choices of sector, country, and risk level). Premium Bonds are a gamble (I have 拢3,750 worth, and have won, on average, only one 拢50 prize per year, since 1997.
*A good website to browse, below, run by the Daily Mail.

They are both pretty good depending on interest rates, the thing with Bonds especially the NSI bonds is that you have them entered into a draw every 2 weeks and you could win more money lol!
with Isa's you only get to go up to 拢3000 like you said.

An ISA is the better way to go if you are just starting out saving. Especially if you are a higher tax payer. they may be a good idea if you are saving for a short period or fancy a flutter and don't mind if you just end up with the same amount at the end. They're not really good for people who want to see their capital grow reguarly.

Read this article about premium bonds and whether they are worth it.

http://www.moneysavingexpert.com/cgi-bin...

ISA - definately

ISA is an investment, premium bonds acts a a deposit

ISA gets you tax advanatges. the disadvantage is that you proabbly end up paying a management fee or service charge which you wont on premium bonds

Premium boinds dont guarantee you any return, unless you win, but your money is secure.. it drops in value as inflation bites.

you can put money into an ISA and then spread your risk.. put some on bonds/cash, some in shares. ALthough personlly I thgink it would be a brave person putitng money into shares at present. htey have seemed over valued worldwide for a long time.. like the UK housing market it doens't feel right to me.

I would recommend a cash ISA - shop around for the best rates, you can save up to 拢3000 a year annually to put into it. Postal ISA's offer good rates and you can access your money pretty quickly by a letter request.

Premium Bonds - I found one that I had been given when I was a baby - I'm in my 30's now - I checked to see if there were any outstanding wins on it over the 30 year period - not a penny!

I think you would have to buy a lot of bonds to increase your odds of winning something - I'd say stay away from them and invest where you get a guaranteed return and also where you can access your cash reasonably easily!

I think ISA is better, It's more secure. And why would not the interest rate be good. The highest one I found so far was in NatWest. It's 5% and going to rise with the Bank of England Rate. So you might even get a higher rate! Go for it!

I just want to add something. I need to invest some money too and I have been researching for a week. I just found out that National Savings and Investments offer an ISA at 5.80% (variable) AER. This comes up to J174 per tax year. So I think that's the highest I have found already and I will invest in there. Also I was just with them on the phone and I found out that they pay you at the end of the tax year for the many days that you have kept your money in. Say from now to April is calculated per day. Also If you wanna close the account - they will calculated up to that day. Their minimum deposit is J1000. Thought of letting you know. Hope you find it useful.

ISA and investing in shares by far.

I have copied in my answer to another guy about portfolio investing:

have invested in shares for many years and have been very succesful easily beating the market.

I think you are looking at portfolio investment theory in to complicated a way.

I am a value investor which means that I assess the companies business positioning, the quality of its management, the history of earnings etc.

If you can find companies that have shown good earning growth in the past and are well positioned to do so in future then you can't go wrong. I look for companies that should achive earnings growth of 15 to 20 % pa. Add on dividend yield of, say 2 % , and you have a total return of 17 to 22 % - 20 % over 5 years should give you a total return of 150 %.

Pick the right companies and hold the shares long term. Use all tax shelters like ISA - I use E*Trade ISA's which have low charges.

My current portfolio is

ARM
Autonomy
HSBC
RBS
Tesco

ARM design chips for mobile phones, set top boxes, iPods etc so demand is expanding massivly with the digital age.

Autonomy has a many products based around a sophisticated search engine using neural probabiliy matching and benefits because companies need to organise the fast amount of unstructured data they have

HSBC will benefit from exposure to fast growing developing markets in China, India, South America etc

RBS has a core position in the UK and the US - strong growing healthy economies and now a major stratetgic stake in China. They have strong positions in investment banking, wealth management and other areas.

Tesco is the best retailer in the world with a very strong position in the UK, the biggest grocery website in the world, exposure to developing markets and potential to expand into non-food which is more prifitable than food.

I hope that helps.

NS&I ISA 5.8%, premium bonds ~ 3.4%. inflatsion at 3.9%