Betting Math - ROI
When you buy a house, there are several reasons for doing so. Besides the fact you need a place to live (and watch football games on television), a house is also an investment. You take care of that house because, one day, you hope to sell it for more than you bought it for. You want a return on your investment.
But do you think of the return on your investment when you wager on sporting events? Most sports handicappers don't, and they should.
Sports handicapping can be compared to playing the stock market. An investor (the bettor) risks capital by purchasing a certain amount of stock (or laying down a bet) in a company (or on a team). And if that outfit performs well, either in the business world or on the field, the investor profits.
But while many stockholders make profits over the long run, very few sports handicappers do. And one of the main reasons is that few bettors look at sports handicapping like stock buyers look at the market. Whereas market players purchase specific amounts of a stock at a specific price, with specific gains in mind, most sports bettors wager fairly indiscriminately, betting on too many games and failing to manage their money with much discipline.
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A run through a few simple numbers may help the average sports handicapper to better understand just what they're up against as they try to turn a profit over the long haul.
The return on an investment is calculated simply as the profit divided by the total amount risked. Let's say a sports handicapper makes 100 $100 bets. Then let's say 50 of those bets turn out to be winners, and (of course) the other 50 are losers. Taking into account that the vigorish (or grease or juice, or whatever you call it) on most pick'em sports wagers is 11/10, that means the bettor is going to be down $500 after those 100 bets come in. The return on investment in this case is going to be on the wrong side of good; -4.5 % (rounded off), or $500 lost after a total risk of $11,000.
To profit by betting on sports (just by playing the same amount all the time on straight-up propositions), the handicapper, fighting the vig, must win at least 53% of his wagers. This percentage of wins creates a +1.2% return on investment. Not great, but better than losing.
Following the same pretext, picking winners at a 55% rate creates a +5% ROI, and a 60% success creates a +14.5% ROI.
Now, the trick is to project these figures on to a "complete season," with a stated bankroll, a standard bet, and strict discipline. That's how many successful sports handicappers do it over the long run.