Sports Betting as an Alternative Investment

Sports Betting as an Alternative Investment
 by: Daniel B. King

Many will dismiss outright the ability to make good returns on your investment through the medium of sports betting. It is not really surprising as betting is hard work, solitary, and you have to grind out thousands of bets to get your returns.

Of course to many members of society - betting also carries a great big "loser" tag. This is not without justification since the vast majority of sports bettors do lose. I would, however, estimate that the percentage of "losers" would be equally high in the world of stock trading and investment markets if you considered those individuals who entered that environment without the necessary experience. Most people trust their savings and investment income to experts and no doubt if the betting public trusted their income to the 1% or 2% of betting experts who made a profit - the loser label might become less sticky.

So what kind of returns can you expect?

Anywhere between 18% and 22% on betting turnover (that money actually put through the sportsbooks) annually. Of course this could vary greatly - years of 30% and 13% would also be possible. The laws of probability defy accurate annual estimates.

You will notice that I have not stated losing years - this is because they are rare - I have experienced one in my life time, my first. I am always aware of the possibility but I am confident I will never experience one again - partly because of the numerous hedging methods now available on the sports betting exchanges. I wonder how many young people on Wall Street today can confidently say they will only have one losing year? There may be a handful, those engaging in arbitrage and those experienced in 'selling' as well as 'buying' the market - but there won't be many.

So do the sportsbooks close accounts if you are a winning player? Well curiously the answer is 'yes'. I say curiously because if the book is doing its job properly, it is taking the action from both sides of the line (odds on the event) and simply taking the commission in the middle. The sportsbook makes its money whatever the result - they are merely commission-takers. Winning bettors do not win money from a sportsbook, they win money from other losing players. I guess some books simply do not like winners - but many manage the action well and allow big bets. Big bets means big turnover, big turnover means big profits.

The Sports. Very briefly the US pros generally turn to Basketball as a major source of income simply because of the sheer number of games -

you need to bet high numbers of games to get the returns. Remember a good bettor will still lose around 4.4 to 4.6 bets out of 10. Football (NFL) is big too though game numbers are few. Hockey does not have many takers but the lines are often the best value - the prices can be very generous. Baseball runs somewhere in between. In the UK and Europe it is mainly Soccer and Horse Racing. There is no tax on betting in the UK which is a big advantage and no pari-mutuel system on horse racing. The price you get in the morning is the price you stay with - unlike US horse betting which is subject to starting price odds and heavy taxes.

The key to success in any trading or betting environment is value. If you are not getting a value price, then you will find it hard to make a profit.

You need to indentify the "product" eg a stock or a team - it doesn't matter. If your expectation of that product doing well is higher than the price on display - in relative terms. You "buy" it. Still, if you are not profitable in your betting after say 350 bets or thereabouts - it may be time to say "ok this is not for me" or "ok let me re-think my betting strategy." You simpy cannot tell if you are a good or bad bettor after 10, 20 or 50 bets - with those low numbers you are still falling victim to standard deviation and probability.

Generally I have found that sports betting produces bettor average returns year on year. It is tougher psychologically as you generally act in a lone capacity. No corporate social or support structure, no lunches, no team environment. But then no bosses, politics...you know the score.

Betting is also virtually recession proof, lets face it only a huge war might disrupt the national sports schedule. Sports markets are not influenced by the economy. You worship different gods and your path is one that runs through the wilderness and is not well trodden. You will love it or hate it..

About The Author Daniel B. King has been a professional sports bettor and trader for eight years, helps advise a number of sportsbooks and is acively involved in the sports betting industry. www.sbsportsbook.com www.vipsportsgroup.com www.betongameday.com

This article was posted on Nov 30 2005