ROI - Return on Investment
This article addresses the return on money you invest in sports betting and what can expect at various winning percentages. Ever wonder how to calculate your return? 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. I call this the Return on Bankroll (ROB). We can look at historical average returns for common stocks as a reasonable benchmark. Warren Buffet says stock market investors should expect a 6%-7% return every year.
Now what about sports betting? Return on Bankroll is calculated simply by taking the net winnings (or losses) and dividing by the amount set aside to invest for the period (i.e. your starting bankroll). So, if were to turn a $10,000 bankroll into $10,700 by betting on sports over the course of a year, then we would match the historic stock market return of 7%. In this case, our Return would be 7%.
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%-54% range. With a 10% vigorish (i.e. risking $11 to win $10) as profit for the sportsbook, you need to hit 52.38% to break exactly even – a Return of 0%. Let's assume 3,500 bets over the course of a year. Here’s the Return on Bankroll at various win rates assuming a 10% vigorish, risking 1.5% of our bankroll per bet:
|51.4%||-100%||Lose entire bankroll|
|52.5%||12%||70% better than stock market|
|53%||62%||900% better than stocks|
|53.5%||112%||1600% better than stocks|
|54%||162%||2300% better than stocks|
The numbers above may really surprise you. You might first be thinking that hitting over 54% is likely. It is not. But don't despair. The other major learning from what you see above is that hitting a very modest win percentage can make a ton of money and put the stock market to shame!
Hitting 51.4% will result in loss of your entire bankroll (an ROI of -100%). Hitting 52.5% results in a return of 12% Remember that the stock market has historically provided an average return of 6-7% per year. As you can see, hitting just 53.0% over the course of 3,500 bets returns 62% - about 9 times as much as the stock market! Let me repeat this:
Hitting just 53.0% on 3500 sports bets in a year results in a 62% profit - 9 times as large as the stock market!
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 Return Dramatically: Line Shopping
How can you give yourself a better shot at winning closer to 54% 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 off 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 Your Return
Now, as one of my subscribers (A. Gordon) astutely pointed out, most analyses of Return 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 Return calculation. Here’s an example:
Let’s assume you play $150 games (1.5% average bet on $10,000 bankroll) and invest $600 for a season subscription to a sports service. Let’s also assume you play about 250 games over the course of a season. Your investment per game has now increased $2.40 per game ($600/250 games). So you are now investing $152.40 to win $136 on each game (instead of $150 to win $136. Instead of needing to hit 52.38% to break even, you must now hit 52.78%. 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 0.4%, 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