Punters can learn plenty from the world of investing. Both endeavours require extensive research, an ongoing search for value and an understanding of psychology, discipline and money management. So I read with interest the 16 rules of legendary investor John Templeton and have adapted a handful to make them relevant for punters:
Profit comes from both your edge and your betting volume Profit on Turnover and Return on Investment are undoubtedly important but both are percentages. Whether your chosen timeframe is a day, month, or year, the most critical measure by which to judge your success is simply how many more dollars you have at the end of any given period. This means that a higher volume, lower profitability approach may add more dollars to your betting bank compared to a method that is very selective but has a higher percentage profit. So don’t overlook the ‘T’ component when considering Profit On Turnover because the most rational objective for serious punters is simply bankroll growth. Don’t ditch your plan at the first sign of drawdown If you drop or significantly modify a proven approach after just a short losing run you are destined to lose. It is essential that you understand that the reason that you have an assigned betting bank is so that you can ride out the inevitable losing run. I say inevitable because that’s exactly what is. Every punter/approach/system will go through a significant drawdown of their bank, so it’s essential that you can live ‘off peak’. Prepare yourself to spend most of your punting life at a level that is less than the highest point that your bank has ever reached. Once you’ve accepted that as a mindset you’ll be far better equipped to cope with losing periods. The words of Wall Street legend Lucien Hooper should be considered from the perspective of a punter: “What always impresses me,” he wrote, “is how much better the relaxed, long-term owners of stock do with their portfolios than the traders do with their switching of inventory. The relaxed investor is usually better informed and more understanding of essential values; he is more patient and less emotional”. Understand that there are many winning ways There isn’t just one single pathway to punting success. Some professionals have just a handful of bets per week and others have several hundred. Find out what suits your own punting style and stick to it. Be prepared to go against the public Hype horses come and go on a weekly basis and you need to be prepared to back the bubble to burst when the opportunity presents. That is easier said than done because it is very easy to get swept away by a boom horse, but if you are serious about winning then your job is to find value. By definition, the value in racing is away from popular opinion so you’ll need the ability to go against what other punters are doing. Forget the market mover – that horse has already bolted. Human nature makes it feel extremely difficult to go against the crowd. When so many so called ‘experts’ are touting a particular horse it takes quite a lot of strength to directly oppose the market. But you can reassure yourself that when so many people are all backing the same horse, the value (if there was any initially) has already gone. If you are backing all the same horses as Joe Public you are highly unlikely to beat the market percentage to get in front. Think of the market as the means to buy (bet on) undervalued horses. In simple terms you must understand that you have two choices: you can either be a contrarian or a loser. Or in the words of the great pioneer of stock analysis Benjamin Graham: “Buy when most people…including experts…are pessimistic, and sell when they are actively optimistic.” Very easy to say, but difficult to do unless you are 100% committed. Do your homework or hire wise experts to help ‘Investigate before you invest’ applies to the punting game as well. Remember that there are some very smart operators who you are effectively competing with every time you place a wager. I’ve never met a professional punter who operates on auto-pilot and just watches the cash keep coming in. All work exceptionally hard and never feel like they have perfected their approach. They recognise that improvement is always possible and that it’s a changing game that we’re playing in. What worked last year won’t necessarily be as successful this year. So make sure you have done enough work (or engaged the services of someone to do the hard yards for you) to enable you to bet with an edge. Don’t guess or rely on good luck. Part two of the investing lessons for punters will appear next week.