£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.

Being the bookmaker

Ok, so the title is a little inaccurate, but for most people laying the bet is similar to acting as the bookmaker, though as we are not actually making a book we aren’t technically being a bookmaker.

Anyway, last time I said that just laying the no hopers wasn’t perhaps the best quick and easy option to making money it may seem at first.  To try and explain this I shall make up a fictitious book with 6 selections.

Team	Odds
New York Rangers	1.10
Toronto Maple Leafs	1.25
Sheffield Steelers	15
Guildford Flames	50
Fife Flyers	100
Nottingham Panthers	250

Anyone familiar with ice hockey will recognise the teams above and know that either New York or Toronto would easily win this league, but which of those two it will be is a little less certain, so we decided to lay the other four teams knowing they have no chance (if you don’t know anything about ice hockey trust me on this).

On the betting exchange some people are taking a wild punt and they are wanting to back Sheffield, Guildford, Fife and Nottingham. This is important, on betting exchanges bets must be matched, so if you want to lay a bet for a certain amount at certain odds, there must be someone (or people) wanting to back the bet at the same amount and odds.  If you tried laying Nottingham at 2.5, it wouldn’t get matched while people can get odds of 250.  Think about it, would you back a team at 2.5 if you could get 100 times that!

So we lay £1 on Sheffield, Guildford, Fife and Nottingham. So if Sheffield win we lose £15, Guildford £50, Fife, £100 and Nottingham £250.  As only one team can win we don’t need to cover all these liabilities combined, just the biggest one.  So for this we need to have £250 in our betting bank and the most we can win is £4.  That £250 is then tied up until the league is over.

So you can see the problem, to lay things like this requires a much larger betting bank that I am using for this experiment.  However, if you are using a much larger bank, it is worth thinking about this as an additional option to help increase your returns.  With this example it is about the same as backing at odds of 1.02, pretty common for what I have been doing in this experiment.  So if you have a bit more to play with, you can make steady if unspectacular long term returns with very little risk.

Hopefully this gives you a bit of an insight in to betting exchanges. I plan on coming back to them at a later stage, as they present some very good opportunities for making money, which don’t form part of this experiment, but could be used in another experiment at a later date.

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.

If in doubt, leave it out

As I write this I am following the ice hockey world championships.  Tonight Sweden are playing Latvia.  Sweden should win, but the Latvians are no pushover, so it won’t be the big score run up that has happened in a number of the games at these championships.

I placed a bet on this game, for Sweden to win, but when I did had a very small doubt about this game.  The doubt was small, but never the less, I still had some element of doubt over the result of this game as the Latvians had lost by only a couple of goals against the USA a couple of days ago.

Right now as I write this, Latvia are winning 2-1, with just one period to play. Certainly far from over, but highlights a great point.  If you are in doubt over a bet and think maybe the bookies have it wrong, leave it and move on to the next one.  While you have to accept you will lose some bets, you need to limit these where possible.

Now for the 3rd period, come on Sweden!

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.

Betting in Play

Last time I mentioned that you should stick to what you know when placing bets.  One of the reasons main reasons for this was so as to minimise the time you have to spend making the strategy work.

Last night saw some football matches I was following.  For the sake a a few seconds I was able to place two bets, admittedly at very low odds, on games I wouldn’t have bet on before play started and achieve more growth on my investment.  Worth looking at for easy gains.

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.

Quantity or quality?

Last time I finished by saying it is the quality of bets, not the quantity of bets that matters, and as an overall strategy I stand by this.  However, to try and keep this experiment as scientific as possible I feel the need to set a minimum quantity of bets.

The purpose is to try and get a better return on £100 by betting than I would get by putting it in a savings account.  If I put £100 in a savings account I would have invested the whole £100.  To try and give a fair comparison I need to make sure I invest the whole £100 in the experiment.  As such I will be making a minimum of 100 bets with a stake of £1 over the year to insure I have invested the whole £100. I say minimum as any bets over this amount will be the same as compounding interest in a savings account.

Early gains and a few mistakes

So as you will see from my last entry, I have already started to make money and at a much better rate than a savings account can offer, but despite his I feel I have already made some mistakes by ignoring a basic principle on which my strategy is built.

So far I have said the basic strategy involves small bets on sure things, but over the last couple of days I am already regretting one bet I have made.  In case you hadn’t already guessed its the Lewis Hamilton to beat Jenson Button over the course of the F1 season.

Now you may be thinking I am regretting this given Hamilton’s less than stellar start to the season which at this point consists of being a couple of seconds of the pace in practice, starting from the back of the grid in the Australian Grand Prix and then having his 3rd place taken away.  If so you’d be wrong, I expect McLaren to improve and as such Hamilton’s performance to improve so still feel he has a good chance of beating Button over the season and that the bet gave a reasonable return.  The reason I regret it is I took it because I thought it offered a reasonable return and it is what is sometimes referred to as a ‘fun’ bet.  Some professional gamblers might say that all my bets are ‘fun’ bets, but I’d like to think there is a bit more to what I am doing than that.

The reason for saying this is I got a little carried away at the start of the experiment and placed more bets than I needed, including some I perhaps wouldn’t have made if I had sat back and thought about it for a moment.  Going forward, it is important to remember, its not the quantity of bets I make, its the quality.  So add ‘NO FUN BETS’ to ‘small stakes on sure things’ to the strategy.

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.

Explaining the odds

Previously I talked about the bets I had placed.  Today, I will explain the odds which determine the return from each bet.

For the purpose of this experiment I will be using decimal odds, rather than the fractional odds most people are perhaps more familiar with.

Fractional Odds
For anyone who has seen horse racing on TV or been in a betting shop this is how you will most likely be familiar with odds being displayed.  Lets look at a few of examples.

2/1 – This means that for each £1 you bet, the bookmaker will give you £2 if you win plus your £1 stake. So a win here would give you £3 total return.

5/4 – For each £4 you bet, the bookmaker will give you £5 plus your stake.  A £1 bet @ 5/4 would give a total return of £2.25.

1/5 – For each £5 you bet, the book maker will give you £1 plus your stake. A £1 bet @ 1/5 would give a total return of £1.20.

Evens is the same a odds of 1/1

So what ever your odds you can calculate your total return in the following way:

Total Return = (Stake x Odds)+Stake
N.B. Odds it top number divided by bottom number, e.g. 2/1 = 2 divided by 1

Decimal Odds
This is the way odds are more commonly displayed with online bookmakers so is the method I will be using for this experiment.  It is probably easier to understand too.

Quite simply, you calculate your return by multiplying the odds by the stake.  This gives you the total return including the stake.  In decimal odds, 2 is the same as evens.  Here are the few examples.

4.2 – For a £1 bet at these odds your total return would be £4.20.

1.05 - (This was the odds for the settled bet in the last post). A £1 bet would return £1.05.

Finally, it is also worth remembering that your stake is at risk for every bet you make.  So if you stake £1 in a bet, you risking losing that £1.

Strategy Basics - ‘Small bets on sure things’

So far I have told you that I am going to gamble with £100 to try and get a better return on my money than I would putting it in the bank and why I am trying to get a better return. In this blog entry I will explain the basics on the strategy I am going to use to do this.  I may talk about what I am doing as an investment, this is purely for the purpose of the experiment and it should be remembered what I am doing is gambling and it should not normally be considered a form of investing.

First, what I am doing is gambling so the risk element is high as I could lose all my money.  Two things to note, first I am only using £100 for the experiment as it is an amount of money I am prepared to lose.  This is true of many investment vehicles, for example shares, people always say don’t invest more than you are prepared to lose.  It is also an amount I have just got from selling stuff on eBay, so is extra money I didn’t count on having available to me. The second point is that I will be spreading my risk to minimise the possibility of losing all my money.

So how does the strategy work?  First I will only be placing small bets, starting at £1 so as never to risk more than 1% of my initial deposit on any single event.  This way if I lose, I have plenty of opportunity to win my money back.  Second I will only be betting on ‘sure things’.  I realise that nothing is ever certain, but bookmakers aren’t stupid.  If something has long odds there is a reason for it, it is unlikely to happen.  Likewise, the shorter the odds the more certain the event to happen.  Remember I am not looking for quick fix, this is a long term strategy.

Basically that is it, ‘small bets on sure things’.  I’ll go in to things in more detail as I progress, but that is the basic principle behind my strategy.