£100, 100 bets. Profit = ……………

If you have been read other posts in the blog you will know that I am trying to get a better return on £100 by placing bets on sports, that I would by putting it in a savings account.

As you will know, each bet I place is for just £1 so as not to put too much risk on my original £100 capital, so early on I stated that to make it a fair test, I would place at least 100 bets so that the whole £100 had been invested.  It would have been easy to place a few bets and once I had beaten the return on a savings account stop and claim my experiment to be a success, but it wouldn’t have been fair.

Well this week I reached the magic 100 bets, placed and settled. So how have I done.

After 100 bets, my betting bank balance stands at £106.21.

At the time I started the experiment, the best savings rate I could have got was 3.61% AER, that was about 3 months ago. So in a year my £100 would turn in to £103.61, while in the three months since I started, it would be worth about £100.90.

So in three months I have a £6.21 profit compared to £0.90 from leaving the money in the bank, or to put it another way, almost 7 times the return compared to the best savings bank account.  Not a bad start.

Best odds

A few weeks ago I said I would be tracking the odds at other bookmakers using www.oddschecker.com to see if I could get better returns on any of my bets.  The odds show are at the time I place my bets.  Here are the results.

Bet	My Odds	Best Odds	Worst Odds
Tennis - Verdasco beat Lapentti	1.14	1.18 (Betfair)	1.11 (Bet365)
Tennis – Azarenka beat Navarro	1.33	1.33 (Sporting Bet, Bet Fred, 888, BlueSQ, Coral, William Hill, Betfair)	1.29 (Stan James, Boyle Sport)
Tennis – Dementieva beat Groenefeld	1.12	1.14 (Betfair)	(1.07 Bet Fred)
Tennis – Safina beat Errani	1.14	1.24 (Betfair)	1.09 (Betdaq)
Ice Hockey – Czech Rep. beat Norway	1.04	1.05 (Expekt, Ladbrokes, Betfair)	1.02 (Boyle Sports, Paddy Power)
Ice Hockey – USA beat Austria	1.05	1.09 (Betfair)	1.03 (Sporting Bet)
Ice Hockey – Finland beat Denmark	1.04	1.07 (Betfair)	1.02 (Paddy Power)
Ice Hockey – Sweden beat Latvia	1.10	1.12 (Ladbrokes, Betfair)	1.05 (Boyle Sport)
Tennis – Murray beat Monaco	1.17	1.25 (Extrabet)	1.12 (Betdaq)
Tennis – Del Potri beat Troicki	1.17	1.22 (Betfair)	Stan James (1.14)

So as you can see, there is quite a difference in the odds. About 20 bookmakers are compared and not every bookmaker will be taking bets on every event.  Most will offer very similar odds but there can be a fairly big difference between the best and worst odds offered.

Take the first bet as an example.  17 bookmakers had a market for the Verdasco V Lapentti tennis match when I checked. 8 were offering the same odds as I got, 1.14, another four were only 0.01 either side of this.  So while there is a difference of 7% return between the best and worst odds, nearly 50% were offering the same, and the majority were within 1% of this.

So if you use just one big name bookmaker, it probably doesn’t matter too much which one as their odds are all very similar.  That said, if you can make the extra 1-2% here and there, your overall return over a year can be significantly increased.  While at current interest rates I’m sure you would jump at a chance to get an extra 1-2% return, it perhaps depends on whether you feel the extra time needed to check the odds is worth the extra gain.

Moving on, the most obvious trend is that one particular bookmaker (and I use the term loosely for reasons that shall become apparent in this instance) consistently offers the best odds for events, Betfair.  Over the next few posts I’ll explain a bit more about Betfair, how it works and some of its pro’s and cons.

Getting a better return

So four weeks in and my original £100 investment now stands at £101.64.  Not bad for a month given I am only looking for a £3.62 gain or more to beat the rates on offer in the best cash ISA’s when I started the experiment. If I keep that up for a year it will be the equivalent to a 21% AER tax free! But could I have done better?  The obvious answer is yes, I could have placed more winning bets, but that would put more capital at risk and remember its quality not quantity that matters.  But there is another way I could potentially have increased returns without risking more capital.

At the start of the experiment I said I had deposited my £100 with a single bookmaker.  Not all bookmakers will give the same odds for the same event, so I may not necessarily be getting the best return available each time I win. 

Let me start by saying my reason for using just a single bookmaker is for comparative reasons for the experiment.  If I had put the money in a savings account I would have left it in that account for a year.  While it is best to regularly check you are still getting a good rate in a savings account, I tend to check mine annually rather than weekly or monthly.

A better option would be to choose multiple bookmakers and deposit some of your investment with each.  This way when you see a bet you like the look of, you can check for the best rate to maximise your returns.  If you are staking 1% of your investment per bet, I would recommend using no more than 5 different bookmakers.  While spreading your money gives the best returns, spreading it about too much could mean you all your money with a particular bookmaker is staked, stopping you placing any more bets with them should the opportunity arise, until one of your outstanding bets is settled.

If you want to check odds there is a great comparison site OddsChecker.com, which will give you the odds available from all the leading online bookmakers.  What you will also notice is that some events are not carried by all bookmakers, so if there is a particular sport you want to bet on, it can be worth having a look here to see which bookmakers tend to run books on it.

Over the next couple of weeks, I will check my bets to see if I could have increase my returns if I had placed the bets with different bookmakers.

Stick to what you know

You may have noticed that the events I have been betting on have so far been limited to certain types of event and certain sports. (You can view my bets here.)  There is a reason for this, simply that these are sports I follow and enjoy.

There are two reasons for the importance of this part of my strategy for handling my investment.  The first, if they are sports/events I know and understand there is more chance of me making a well informed decision about which bets to place.  Looking at one of my football bets, Holland to beat Macedonia, I follow football and knew that this should be an easy win for the Dutch.  If you don’t follow football, despite the low odds suggesting a win for Holland is by far the most likely outcome, you will have a much higher degree of uncertainty about the result.

The second reason is if you follow a particular sport anyway, you are not really investing any additional time in order to place the bets.  Using the same football game as an example, I was looking at who was playing that night anyway.  The only extra thing I had to do was pick out any potential bets and then place them, something which took minutes.  Effectively I have found the bet by doing something I would be doing anyway, so the only investment of my time is actually placing the bet.  On the other hand if you weren’t following football you would be spending time looking for the bet (if you are trawling in general through all options it could take some time to find the ones you want), then researching if it was a good one to take or not.  Remember, we are looking to beat the bank, (it take a few minutes to open a bank account and deposit money) a return of 10% would be great but is that extra 6%-7% return worth spending hours finding the right bets?

A final word of warning, just because you are knowledgeable about and follow a particular sport, doesn’t mean you should bet on it.  The bet must fit in with the rest of the strategy too.

A few more bets

I’m a week in to my little experiment now and its been a busier week than I thought it would be so I’ll share with you the bets I have made so far.

Bet	Odds	Result
Specials(Dancing on ice) - Donal to not get perfect 30	1.05	Win
UFC 97 - Anderson Silva Win	1.18	Open
Politics - General Election Jan 2010 or later	1.20	Open
F1 - Lewis Hamilton to beat Jenson Button	1.57	Open
Tennis - Roger Federer beat Kevin Kim	1.02	Win
Tennis - Novak Djokovic beat Frank Dancevic	1.07	Win
Tennis - Andy Roddick beat Diego Junqueira	1.02	Win
Tennis - Elena Dementieva beat Anastasia Pivovarova	1.04	Win
Tennis - Ana Ivanovic beat Mariya Koryttseva	1.07	Win
Tennis - Dinara Safina beat Mathilde Johansson	1.04	Win
Football - Italy beat Montenegro	1.57	Open
Football - Germany beat Liechtenstein	1.02	Open
Football - Denmark beat Malta	1.14	Open

In a week I have made a profit of £0.31.  If I can keep this up I will have a total of £116.16 after a year, that’s equivalent to 16.16% AER if it was in a savings account!.  So while 31p may sound insignificant, as the saying goes, ‘take care of the pennies and the pounds look after themselves’.  But as I said at the start of this post, I have been a little bit busier than I expected to be in this first week, (I’ll explain why in my next post) so I don’t expect  to keep up this rate of return for the full year.  If nothing else, I am sure there will be a few losses at least over the year.

Next time I’ll expand on my strategy a little more and explain why I think I have already made a couple of mistakes by deviating from it.

Explaining the odds – Part 2

I hadn’t planned on splitting this in to two parts when I started it, but decided it would have been a little lengthy to put everything in to a single post.  Last time I explained how the odds are used to calculate your potential return and that for the purpose of this experiment and blog I will be using decimal odds, so let me explain why I made this choice in a little more detail.

There are two key things to remember about this experiment when considering odds, the stake and the goal.  The whole purpose of what I am doing is to try and beat the interest rates offered by banks.  Decimal odds make it very easy to compare potential returns to interest rates particularly as I am using £1 stake for all the bets. Lets take a closer look.

If I place a bet at odds of 1.20 I am getting a 20% return on my investment.  If I place a a bet at odds of 1.05 I get a return of 5% on my investment.  As you can see its very easy to see the ‘interest rate’ from the odds.  Compare this to fractional odds of 1/5 (1.20) and 1/20 (1.05) where the percentage return is less obvious.  When the odds are at evens (2.00) or higher it is perhaps not as instantly obvious what the equivalent percentage rate is but it is simple to work out using decimal to percentage conversions (i.e. 1.00=100%, 0.50=50%, 2.00=200%.)  We just need to subtract 1 from the odds and convert to a %.

Example
Odds of 3.50 = 250% return (3.50-1=2.50)
Odds of 1.25 = 25% return (1.25-1=0.25)

Finally, I would just like to explain a few phrases regarding odds that I may use later in the blog just in case any readers aren’t already familiar with them.

Short odds – These are low odds where the potential return is relatively small.  Odds moving from a higher value to a lower value are said to be ‘shortening’.

Long odds – These are high odds where the potential return is relatively large.  Odds moving from a lower value to a higher value are said to be ‘drifting’.

If you didn’t have an understanding of betting odds before, hopefully things will be a little clearer now and allow you to follow what I am doing as I go along.

The experiment begins

So things are underway.  I have deposited my £100 with a well known online bookmaker and am ready to get things started. (Actually I already have started, but more of that later.)

In order to set a bench mark so I know if I have beaten the banks in a years time I have looked at what savings options are open to me today through if I was to invest the money in a bank or a FTSE tracker.

Best Instant Access Savings Account
Citibank – 3.26% AER (includes 12month bonus)

Best Instant Access Savings Account (No Bonus)
Yorkshire Building Society – 2.75% AER

Best Cash ISA
Barclays – 3.61% AER (includes 1% bonus for first 12 months)

Best Cash ISA (No Bonus)
NatWest* – 3.51% AER

1 Year Fixed Rate
Nationwide – 3.14% AER

So ignoring any tax implications the best return I could get from a savings account is currently 3.61% AER from Barclays.  As I already have an ISA I couldn’t invest the £100 in this, but I enjoy a challenge so will use this as the rate to beat meaning that if the rate doesn’t change for the next year my £100 would be worth a massive £103.61. Wow! So if I can make just £3.62 from gambling I will have beaten the banks, how hard can it be.

To add another element to the challenge, I have also noted the price of the FTSE-100. 

FTSE-100 – 3842.85  (At close of play Friday 20/03/09)

If I put my £100 in a FTSE-100 tracker I would either gain or lose based on the movement of the FTSE, so if in a year the FTSE is at 4227 my £100 would have turned in to £110.  It may not work exactly like this in practice as tracker funds have management fees and I have also assumed the fund would perfectly track the index, but for the purpose of the experiment its close enough.

When I next update I will give details of some of the bets I have made or will be making.  You will also be able to track what I am doing with more regular update on Twitter.

* – requires opening of a separate account with NatWest

Sources:-
Savings account rates – moneysupermarket.com
FTSE-100 – BBC News

Why Gamble? – The background story

Perhaps before explaining my strategies for beating the banks by gambling £100 I should explain why I would want to try and do so in the first place.

For those of you reading this around the time it has been posted, I would expect you are all too aware of what has been termed by the media as the ‘credit crunch’.  But for those who have either been on another planet for the last year or so, or are reading this in the future with little or no understanding of the current economic climate, I will try to explain some of the background to what I am doing.

The whole ‘credit crunch’ thing is quite complicated, but I will attempt to explain it (as I understand it) in layman's terms and why it has lead to this experiment.  Perhaps the easiest place to start is the beginning of the 21st century.  Banks had lent to what have been termed as ‘sub-prime’ borrowers, essentially people who couldn’t afford to repay their loans and should never have been lent as much as they were lent in the first place.  Between 2004 & 2006 interest rates in the USA increased from 1% to over 5%.  This lead to people who could barely afford their mortgage payments at the low rates, defaulting on their mortgage at the higher rates, and with the property market drying up and property prices falling banks were losing money.

Fast forward to 2007, banks nervous of which banks have lost money to the sub-prime markets put up the rate at which they will lend to each other as well as making less money available.  Some banks had over relied on borrowing money from the markets in this way rather than using customers deposits to fund their lending so when the funds in these markets dry up, the serious trouble starts.  It is this that lead to the run on Northern Rock in the UK and its eventual nationalisation.  Around this time, Bank of England interest rates were 5.75%.

Northern Rock was far from alone with its problems, other banks failed or came close to collapse.  Perhaps the biggest was Lehman Brothers, while in the UK HBOS was merged with Lloyds TSB, and Bradford and Bingley was part nationalised, part sold to The Santander Group.  Governments and central banks around the world pumped money in to the financial system in the hope of stimulating lending while the Bank of England interest rate tumbled to 0.5% in March 2009.  Stock markets also suffered, with the FTSE-100 as I write this around 3800 compared to 5500-6000 about a year ago. 
If you want a bit more information on how this all unfolded, the BBC has a great article here.

So how does this all tie in with me gambling with £100 to beat the banks.  With interest rates at 0.5%, savings accounts offer very little return at the moment with the best buys being around 3% AER, and while the stock market should recover in the long term, it is just that, a long term investment and given its current volatility who knows where it will be in 12 months time.  So I have looked at other ways  of getting my money to work for me came up with the idea of gambling as a means to achieve this.

On my next blog I will give more detail of the strategy I intend to follow over the next year to try and get a better return on my £100 than I would through more traditional investment options.

Sources: -
Bank of England Interest Rates – moneyworld.com
FTSE-100 data – BBC News