“True” Bankroll and “Risk Capital”
Whenever we talk about percentages of bankroll, most casual bettors feel that they are on the “high end” of the ranges we discuss. This might SEEM true – but only because the “true bankroll” for most casual bettors is higher than what they have in their accounts. That is, many bettors might have $X in their accounts, but are willing to add another $Y if they draw down their account. Professionals normally already know their “full bankroll” and need to preserve their “capital” versus “risk of ruin.” http://www.atm303.com
Investors – and in this case, sports investors – need to understand the level of their “true bankroll” or “risk capital (allocated to sports).” Once investors take a serious look at their finances, they might better understand the “true” level or amount they allocate to sports investing. They might then realize that 1%-2% of their “true bankroll” or “risk capital” is indeed a realistic bet size.
Summary: Money Management and Playing Defense
Many of our articles focus on SportsInsights.com’s philosophies and contrarian strategies that have proven to work over time. In this article, we focused on money management – an area where most bettors do not pay enough attention. In essence, good “money management” is a lot like playing good defense. Money management will allow you to “stay in the game” during tough times so that good handicapping strategies (your offense) can put you ahead.
We do not guarantee that the trends and biases we’ve found will continue to exist. It is impossible to predict the future. Any serious academic research in the field of “market efficiencies” recognizes that inefficiencies may disappear over time. Once inefficiencies are discovered, it is only a matter of time before the market corrects itself. We do not guarantee our data is error-free. However, we’ve tried our best to make sure every score and percentage is correct.
Guest Article by Researchers at BettingCharts.com
One of our goals – at SportsInsights.com and BettingCharts – is to make investing in sports a more legitimate asset class. SportsInsights.com is a sports information service and presents key statistics in the sports marketplace. Together, SportsInsights.com and BettingCharts.com perform hours of research and apply the same analytical tools as investment professionals.
We believe that there are ways to profit in sports investing. However, most investors – and in particular, sports investors – do not fully understand the risks involved with their investments. Most sports bettors figure that if they beat the magical 52.4% winning percentage (lower, depending on the vig), their accounts will grow continually. As financial professionals say: this is true in the “long run.” However, there will be some scary peaks and valleys.
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In the world of finance, investment professionals use a wide variety of risk measures – ranging from statistical terms such as standard deviation to risk/return ratios such as a Sharpe Ratio. One of the more commonly used risk measures is standard deviation. While standard deviation might mean something to certain investors, it means almost nothing to others.