Calculating Return on Investment in Sports Betting
in this article...
- How much can you win betting sports?
- What's a realistic return on investment betting sports?
- The effect of purchasing picks on your ROI
This article addresses the Return on Investment (ROI) a player can expect at various winning percentages. Ever wonder how to calculate your return on investment? What can you realistically expect at various winning percentages? Read on...
This article assumes the “investment” we are speaking of is the money you set aside to risk in sports betting (i.e. you bankroll). For example, you might start the year with a bankroll of $10,000. This is money you have set aside to invest during the year (or the season) on sports bets.
The “return” is the net winnings or losses based on that investment. We can look at historical average returns for common stocks as a reasonable benchmark. Over the past 75 years stocks have returned around 10% per year.
Now what about sports betting? ROI is calculated simply by taking the net winnings (or losses) and dividing by the amount set aside to invest for the period. So, if were to turn a $10,000 bankroll into $11,000 by betting on sports over the course of a year, then we would match the historic stock market return of 10%. In this case, our ROI would be 10%.
Our ending net winnings or losses will be based on all of the bets placed over the course the season (or year). A realistic expected win rate over the course of an entire year is probably in the 50%-55% range. With a 10% vigorish (i.e. risking $11 to win $10), you need to hit 52.38% to break exactly even – an ROI of 0%. Let's assume 3,500 bets over the course of a year. Here’s the ROI at various win rates assuming a 10% vigorish, risking 1.5% of our bankroll per bet:
|Win %||ROI %||Note|
|52.5%||12%||Beats stock market|
|53%||62%||6x return of stocks|
The numbers above may really suriprise you. Hitting 51.4% will result in loss of your entire bankroll (an ROI of -100%). Hitting 52.5% results in an ROI of 12% Remember that the stock market has historically provided an average return of 10% per year. As you can see, hitting just 53.0% over the course of 3,500 bets returns 62% - over 6 times as much! This is the power of sports betting. You can achieve much higher returns that many other investments, including the stock market. Now before you rush off and invest your entire 401k in sports betting, there is a tradeoff. While the potential returns are higher, the variance (and thus risk) are also higher. Please read this article for more on variance in sports betting.
Improve your ROI dramatically: Line Shopping
How can you give yourself a better shot at winning closer to 55% vs. closer to 51%? One way is to shop for lines across multiple sportsbooks. By finding an extra half-point of value once in a while, you can easily add 1-3% to your winning percentage over the course of a season. That may not sound like a lot but as you can see above, that can easily be the difference between winning and losing. Also, you can improve on the numbers above by shopping ofr better odds. The figures above assume a 10% vig. Through line shopping, you can essentially cut that in half to 5%. By doing that, you take the required break-even figure down from 52.38% to 52.21%! Read more about line shopping.
The Effect of Purchasing Picks on ROI
Now, as one of my subscribers (A. Gordon) astutely pointed out, most analyses of ROI don’t ever calculate in the cost of a service. The above analysis assumes you invest $110 to win $100. What if you pay for a service as a way to increase your winning percentage? You need to add the cost of the service into the “investment” portion of the ROI calculation. Here’s an example:
Let’s assume you play $100 games and invest $750 for a season subscription to a sports service. Let’s also assume you play about 200 games over the course of a season. Your investment per game has now increased $3.75 per game ($750/200 games). So you are now investing $113.75 to win $100 on each game. Instead of needing to hit 52.38% to break even, you must now hit 53.25%. So, you must be convinced that the service will increase your win rate by enough to cover the cost.
These calculations vary depending on the amount bet, number of games, and amount of the service. But as you can see, in the example above, if you believe a sports service can increase your winning percentage by about 1%, it makes financial sense to invest in the service. Here's more on the range of winning/losing possibilities with my service.
I hope this helps shed some light on what you can expect to net at various winning percentages with and without a sports service.More Sports Betting Articles