Sports investing requires a long-term perspective that takes into account three key elements: (1) establishing one’s objective; (2) establishing one’s risk tolerance; and (3) diversification. I will discuss each of these three elements in greater detail below as they are critical to a successful investment strategy.
ESTABLISHING YOUR OBJECTIVE
The first thing that a sports investor must decide is his or her objective with respect to a realistic rate of return on their investment. Most serious sports investors think in terms of years when it comes to establishing their return objective.
ESTABLISHING YOUR RISK TOLERANCE
Like any other investor, a sports bettor must understand that there is no sure thing in investing. Indeed, the stock market is the word’s largest regulated casino and many investors on wall street witnessed the precipitous decline of their portfolios in 2008 and 2009. By utilizing the analysis and recommendations of successful sports handicappers like myself, one can maximize a return over a period of time. However, the amount of money that a sports investors decides to place in his or her Sports Investment Pool (SIP) should not endanger their life style.
DIVERSIFICATION
There are two aspects to diversification: (1) the relationship of your Sports Investment Pool to other investments (i.e. stocks, bonds, money market funds, savings account, etc.) and (2) determining unit levels. As for the latter element to diversification, I recommend making one unit equal to 2.5% of your starting Sports Investment Pool (SIP). This amount should not be varied during the year unless you add more funds to your SIP. Utilizing a 2*, 3*, 4* and 5* rating system, I recommend investing 1.8% of one’s SIP on a 2* selection, 2.5% of one’s SIP on a 3* selection, 3.75% of one’s SIP on a 4* selection and 5% of one’s SIP on a 5* selection.
PAYING THE MORTGAGE WITH 56% WINNERS
While many handicapping sites on the internet tout 60% to 70% winners, most serious sports investors understand that these figures are blatant distortions that are impossible to maintain on a long-term basis. However, with the assistance of an honest and reputable handicapping service, one can achieve a substantial rate of return on 56% winners. Consider the example below and decide for yourself whether you can pay the mortgage (or rent) with a modest win rate of .560:
An investor has an initial SIP of $5,000, a unit size of $125 (2.5% of the starting SIP) and anticipates making investments of one unit each on exactly 500 baseball, basketball and football games during a 12 month period. Further, to simplify the calculations, assume the investments are made, and the winning percentage remains, at a constant level over each week of the year. The investor wins 270 games, a very good win percentage of 56.2%. The net units won on the investments are 40.1. (At 11 to 10 odds on each game, 270 units were won and 240.9 units were lost [230 games times 1.1]). Thus, the investor’s annual Return on his/her SIP of $5,000 is approximately 67%! Please note that the annual Return of 67% would be identical for any dollar size SIP with the same assumptions utilized in this example. For those of you interested in the Return calculation, here is how I calculated it. Net units won of 40.1 times $125 (one unit in this example) yields winnings of $5,012. Since the initial SIP was $5,000 and the ending SIP was $10,012, the annual Return equals $5,012 divided by the average SIP balance during the year of $7,506.
I personally pay many of my bills with my sports investment earnings, and you can as well by adhering to a strict money management system like the one outlined above.