Return on Investment (ROI) and Sports Betting Math
ROI, which stands for Return on Investment, is an important mathematical equation in any investment or business opportunity. Calculating your Return on Investment is important when you make any significant financial deal. For a non-sports example, buying a house is a great time to calculate the return on your investment. Buying a house provides you and your family with a place to live, but it is also a financial investment that stands to make or lose money over time given how you handle your home. Taking care of your house, making improvements to its construction, landscaping, and value, is important because one day you may want to sell that house at a profit. Selling your house for more than the price you paid is the return on your investment, or ROI. If you paid $150,000 for your home and manage to sell it for $200,000, your ROI is $50,000.
Sports gamblers should also consider the ROI involved in gambling on sporting events. You can handicap games until you’re blue in the face, but without understanding the return you can expect for your investment, you probably won’t be successful.
Sports Betting, Stock Markets, and ROI
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.
Why, then, do plenty of stock investors make a profit over the long haul, while most sports bettors fail to turn a profit? Because sports handicappers fail to look at their investments in sporting events with the same focus that stock purchasers look at the financial markets. A stock market investor buys a specific amount of stock in a company at a specific price, hoping to achieve a specific financial gain. Sports bettors, not all but most, tend to place their bets based on things like emotion and gut feelings rather than research, discipline, and the long view of their financial investment. Betting on too many games and failure to manage a bankroll are the two biggest reasons why sports gamblers fail.
Understanding a sports bet’s ROI requires a short amount of time looking at a few simple numbers and calculations. If you’re a casual sports bettor, you can understand your wagers better by looking at what it takes to turn a profit over the long haul, rather than trying to win each and every individual bet you place.
How to Calculate Sports Betting ROI
Sit in on a single lecture attended by college math students and you’ll learn that calculating the return on any investment is as easy as working out the profit of the wager divided by the total amount wagered. Here’s an example for those people who are a bit shy about math – let’s say Jim is a sports bettor who regularly places 100 $100 bets in a session. If Jim is lucky, 50 of his bets are winners and the other 50 are losers. When you calculate the juice required by most bookmakers, normally 11/10, Jim the sports bettor is actually down by $500 after his 100 bets come in, even though he picked 50% of his games the right way. Jim’s ROI in this example is on the wrong side of financial wisdom: about -4.5%, meaning he lost $500 on a total investment of $11,000, including juice.
Taking the bookmaker’s juice into account, a sports bettor can only profit when he bets on sports by winning at least 53% of the time. This is the smallest percentage of wins a gambler needs to create a profitable ROI in sports gambling; specifically, this percentage creates a +1.2% return on investment. That’s not a huge amount of income, but it is certainly better than losing $500 like our friend Jim in the above example. A more profitable ROI would be picking winners at a rate of 55% on straight bets, which would create an ROI of +5%, while an (unlikely) 60% success rate would give a sports bettor a +14.5% return for his investment.
Understanding the impact of the ROI of your sports bets means including a projection of your return across an entire sports season, including a specific and strict bankroll, a standard bet size (most experts recommend a conservative wager of no more than 1% of your total bankroll), and disciplined betting behavior. When you combine those tactics with an ability to shop for the best lines in the business, you’ve got a formula for consistently winning while placing wagers on the outcome of sporting events.