Betting On Horse Racing : Sensible Money Management (part 5)
Everyone knows that gambling is a business of risk. Professional gamblers will successfully manage their risks and make a profit, whilst 98% of punters who consistently lose money, also consistently fail to manage risk effectively.
This is the concluding part to this series of articles, where I have explored the key reasons most punters lose money, in a vain attempt to make money through betting.
We have seen the importance of always getting a value price when you bet. If you fail to strike bets which offer a satisfactory return on your investment, then ultimately you will lose money.
We have learned why you should have a sensible approach to staking. Never put too much of your betting bank at risk in one bet, in an attempt to get rich quick.
I pressed home the dangers of chasing your losses. Experienced gamblers appreciate that you will more often than not lose more bets than you win. Losing is part of gambling – accept this fact and you will not be tempted to compound your losses by trying to re-coup them by deviating from your staking plan.
In the most recent article, we looked at discipline, and why it is critical to treat your betting like a proper business if you want to achieve business-like results.
In this final section, I want to conclude by further exploring the topic of risk management, and developing a profitable portfolio of betting strategies.
Ask any number of professional gamblers and the vast majority will tell you they do not rely solely on one betting strategy alone. They spread their risk by employing several methods, and constantly reviewing the performance of each method. In effect, this is much like an investor managing a portfolio of stocks, shares, and investments. This echoes back to a previous article where I likened betting for profit to running a business.
The disadvantage of relying on just one betting method or system or tipster, is that if the strategy is not currently returning a profit, then you have no income. It’s the classic “eggs in a basket” scenario!
If you look at the Stock Market, the value of individual shares goes up and down on a daily basis. Whereas, over time, the value of the market as a whole has historically risen.
So it makes sense to have a number of betting strategies running concurrently. If during one particular month Tipster A is losing money, then probably System B is returning a profit. Your aim should be to manage your portfolio such that you generate a net income every month.
Developing a portfolio raises a number of questions:
1) Which strategies should I employ?
2) How many betting systems/tipsters should I have in my portfolio?
3) When should I relegate a system from my portfolio?
Developing your betting portfolio
To answer the first question – the obvious response is to follow profitable systems. But this is much easier said than done. Where do you find profitable methods, systems, and tipsters?
It will take you time to develop a good portfolio, but a good place to start is with your own methods. If you can read form, and you understand the concept of value, then you can develop your own methods of making good selections.
Whilst you are developing your own methods, you can employ the skills of one or more tipsters, and/or buy some ready-made systems. Before rushing out to buy a copy of the Racing Post and looking in the classified advertisements for tipsters, I recommend you search on Google under ‘tipster review’ or ‘horse racing tipster review’ or ‘betting tipster review’. Adverts will always say their tipster or system is the best, and makes amazing profits. But this is your money you are investing, and you owe it to yourself to do some home-work.
Look for a forum or discussion board where tipsters and systems are reviewed objectively by customers or people who have actually used the service.
How big should your portfolio be?
This is a question only you can answer really. The more strategies you have, the more your risk is spread across a number of income streams. You could also potentially earn more money. However, the more methods you employ the harder your portfolio will be to manage, and the more of your time will be taken up.
You will need to strike a balance where you are comfortable with the time-input and the return from the portfolio.
A sensible portfolio may have five or six strategies, with another two under review at any one time.
Managing your portfolio
In a previous chapter I suggested ‘paper-trading’ a method for at least two months to test its profitability. This means you should follow a method or tipster or system for two months to see if theoretically you would have made a profit. Once you are happy with the performance of a particular method, you can proceed to award it a place in your portfolio, and start trading with actual cash.
If the strategy doesn’t make the grade, then ‘file’ it for future reference.
You will have heard the old saying “If it ain’t broke don’t try to fix it” so you should not be too hasty to discard a particular betting method if it returns a losing month.
However, there is also the teaching “Don’t throw good money after bad”. If a system has earned a place in your portfolio by performing well for two months, then it makes sense to allow it two poor months before even considering it should be relegated. That said, if you are not happy with a system and it is losing money, then get rid of it!
Develop a portfolio of betting strategies to spread your risk and maintain a regular net income. Use a combination of your own personal methods, purchased systems, and subscription tipsters. Constantly review your profitability to highlight any under-performing strategies.