Punting as an investment

You’ll probably get some funny looks if you talk to people about punting as an investment.

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You’ll probably get some funny looks if you talk to people about punting as an investment.

Most responses will range from laughter to concern.

Many non-punters have a pre-conceived idea of betting and the risk associated with it. While any single bet it certainly a risky proposition to some extent, as we well know there are things you can do to lower the risk over time.

The first being the use and management of a proper bankroll, which allows you to stay comfortable during
downswings and only risk a small proportion on each individual wager.

All Champion Bets packages use a 100-unit bank, and we’ll use the simple example of a $10,000 bank ($100 units) to look at betting through the lens of investment.

Say you had $10,000 to invest… what would your options be?

Bank it

The easiest option is of course to simply sit your money in the bank. A term deposit (where you’ve locked your money in for a set period of time) offer the best interest rates.

A generous rate at the moment would be around 2.75%. Your return (compounded monthly) would be:

1 year: $10,278.49
2 years: $10,564.74
3 years: $10,858.96

Shares

A good managed fund might be able to get you 7% per annum without cranking up the risk profile too high without cranking up the risk profile too high. Based on that, at the end of each year your balance would be:

1 year: $10,700.00
2 years: $11,449.00
3 years: $12,250.43

That’s obviously for the sake of illustration, assuming smooth returns each year.

Now there’s plenty of other investment options – property is one that springs to mind – though if you only have $10,000 to play with, you’re going to find it difficult to get involved there. You can invest in a property fund, which pools the funds of a huge amount of institutional and individual investors, though you’ll generally find the returns aren’t that different to good managed share funds.

Betting

Now we’ll look at investing the same amount on the punt, using our NSW Ratings package as an example. While we’re not quite at three years yet, we can use the 2.5 years since April 2015. This is how you’d have fared:

1 year: $30,226.05
2 years: $35,570.10
Today: $43,535.40

The NSW Ratings package has ticked over 335 units profit in that time. At $100 a unit, that’s $33,535 profit.

Viewed as an investment, the returns are staggering and simply cannot be matched by anything else.

So how on earth can that happen, and what’s the catch?

Investment turnover

The returns from an approach such as this are the result of many, many small transactions. In that three years, there’s been more than 6,000 individual bets, with a total turnover of $358,131. So the original $10,000 has been turned over more than 35 times.

The profit of $35,535 on that means a Profit on Turnover (PoT) figure of 9.4%.

Tell somebody you’re making 9.4% profit on your investment, and while it’s impressive, you won’t get those stupid, non-believing looks we spoke about earlier.

The incredible profits that have been made are a result of the number of opportunities in racing. You can simply turn over your investment so many times.

Risk

Gambling involves risk, but again: this can be managed with a 100-unit bank and responsible staking. Over all these thousands of bets, the single biggest wager has been 1.8 units (or $180).

Of course there’s losing runs. But if you use a proven approach (from somebody who’s been doing it for a living for many years), the long-term results will come.

Long-term view

While non-punters might have their pre-conceived judgments, so do punters: the thing most of us struggle with is sticking to the long-term view. Here’s a view of the bankroll over the period:

While it’s been a very successful period overall, that doesn’t mean it’s always smooth sailing.

The growth isn’t linear. Very, very few investments are, and betting definitely isn’t!

There’s plenty of downturns over that time, and also prolonged flat spots. These are periods of weeks, or months.

Probably the single biggest challenge with betting to make money is mastering the mental challenge of losing streaks and variance. So many people just cannot deal with it. They get extremely nervous when there’s a losing run – or even just a flat spot where they’re neither making nor losing money.

snowy graph

Workload

One thing you do have to keep in mind is that this isn’t a passive investment. You don’t just invest your cash and
forget about it… you have to do the work!

Having said that, provided you’re setup with the right tools – namely bookmaker accounts and odds comparison – it’s well within the abilities of anybody to make it happen. The bets are prepared for you. You just have to get them on!

Snowy says

I love this article because it lays out exactly why i love betting, and why betting on horse racing is the best betting medium of all. The ability to ‘churn’ your money over and over across so many races each week, month and year means that good gambling and bankroll management can make betting on horse racing an ‘investment’ like no other. It’s not for everyone though. The greater rewards come with greater risks, but more importantly greater mental challenges. Downtimes and flat streaks can be more prolonged than ‘safer’ investments, so the ability to see the long term horizon is of utmost importance.