Handicapping sporting events is very similar to investing in the stock market. In this example, a sports bettor is like a stock investor who risks his own capital by buying a set amount of stock in a company. It’s easy to imagine that investor as a gambler who risks his bankroll by wagering on a team rather than a financial product. For both the stock market investor and the sports gamblers, good performance on the part of the stock (or team) leads to profits for the investor. This leads to the concept of ROI, return on investment is a performance measure used to evaluate the efficiency of an investment. To calculate ROI, or in this case, the profit earned from your sports betting system, the return of an investment is divided by the cost of the investment.
ROI is perhaps the best way to analyze the success of a betting system, for this example we will assume a risk of $100 on each bet. We will start by taking your net profit and dividing it by the total risk. For example, if you created a system that had 500 games played and you won 25 units off of it, your sports betting ROI would be calculated thusly: (25 units X $100) / (500 games X $100) = .05. This number is typically viewed as a percentage, so this system would have a return on investment of 5%. Essentially we have taken the gains from our bets and then divided that by the total cost of investment or the amount of money we have put at risk.
In baseball, there are often systems with losing records because we take too many underdogs with plus money. This means that we cannot use winning percentage as a metric of success, but we can determine our return on investment by dividing our units earned by the number of games we have wagered on.
We can look at historical average returns for common stocks as a reasonable benchmark. Warren Buffet says stock market investors should expect a 6%-7% return every year.
Now what about sports betting? Return on Investment is calculated simply by taking the net winnings (or losses) and dividing by the amount set aside to invest for the period (i.e. your starting bankroll). So, if were to turn a $10,000 bankroll into $10,700 by betting on sports over the course of a year, then we would match the historic stock market return of 7%. In this case, our Return would be 7%.
Our ending net winnings or losses will be based on all of the bets placed over the course the season. A realistic expected win rate over the course of an entire year is probably in the 50%-54% range. With a 10% vigorish as profit for the sportsbook, you need to hit 52.38% to break exactly even – a Return of 0%. Let’s assume 3,500 bets over the course of a year.
We could conclude that a consistent formula to win in sports betting includes a combination of tactics like including a specific and strict bankroll, a standard bet size and disciplined betting behavior with an ability to shop for the best lines in the business.
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