Strawberries without cream just doesn't taste right for me and in the same way I'd like to share with you a brief explanation of why if you're comparing ROI (Return on Investment) to your systems or tipsters selections that you should also be including ROC – Return on Capital - a less commonly used concept but potentially more important for anyone taking their betting exploits seriously.
ROI is a commonly used benchmark used to compare actual betting returns based on your stakes and provides a simple measurement figure that demonstrates the profitability from the selections calculated. However the ability to understand and calculate Return on Capital (ROC) is perhaps as crucial in order to leverage the most value from your betting bank, assuming of course that you are following Rule 1 of successful betting and actually using a betting bank?
For anyone new to racing and maybe not as “betting worldly wise” as myself or many others (I learned the hard way through bitter experience) the wisdom of following tried and tested rules eliminates many of the mistakes that I and many others before me have experienced. Here is a list of the mistakes that I personally aim to avoid and perhaps at a later date I'll explore the reasoning and rationale behind all of them.
- Failure to Use Betting banks
- Failure to keep Accurate Records
- Failure to Stake Correctly
- Chasing Losses
- Lack of Value Appreciation
- Greed for Instant Wealth
- Lack of Discipline
- Uncontrolled Emotion
- The Grass is Greener
Numbers have always fascinated me and it's true to say that the my education wasn't entirely wasted but racing and betting have been the main beneficiaries of my “A level Maths with statistics” and the mathematical links between Strike rate, Correct Staking, ROI & ROC are all crucial to sound betting bank management and it pays to understand the importance of all four, but for today I'll focus on Return on Capital.
So armed with your betting bank - let's assume a starting bank of £2000 and having done your homework you decide that you will only invest in any selection process that generates a minimum historic proven 10% ROI. This means that for every £10 staked you would expect to have a return of £11 generating £1 profit.
However the ROI measurement on its own is only one part of the equation and used on its own can potentially be detrimental to making the most profitable decision as we'll see.
These days nearly every reputable tipster or service will provide their full results and should also provide accurate ROI figures allowing you to compare their historic results and even if you're using your own systems/selections, you should also be keeping accurate records so that you have the historical data enabling you to calculate the ROI of these. So assuming that you have all this information you now have a decision to make and so you shortlist 3 possible selection options, one of which will be chosen and used with your betting bank. For this illustration I'm going to assume that all three have the similar historic Strike Rate (SR) as different Strike Rates would in fact affect the staking, but that's another topic. So let's consider:
Option A – ROI 30%
Option B – ROI 20%
Option C – ROI 10%
An easy choice on the face of it, Option A is seemingly three times as profitable than Option C, but remember that we want to generate as much profit as possible from our starting £2000 betting bank and on closer examination of all three options we identify the following:
Option A – selections average 3 – 4 per week let's say 200 per year.
Option B – selections average 1- 2 a day let's say 500 per year.
Option C – selections average 3-4 a day let's say 1200 per year.
Now assuming that all three options have a similar strike rate (The Strike Rate will determine our most appropriate staking) we can now easily calculate how much our initial £2000 bank should grow in a full year by using the historic ROI figures of each option with the number of bets to calculate the Return On Capital after one year.
Option A - 200 bets £2000 staked @ 30% ROI = £600 profit.
Option B – 500 bets £5000 staked @ 20% ROI = £1000 profit.
Option C – 1200 bets £12,000 staked @ 10% ROI = £1200 profit.
So surprisingly the lowest ROI option, C, actually generates the highest amount of profit from your bank after a year. Indeed, it was twice as much as option A that had the highest ROI. So whilst you may not be winning as much profit on each bet with option C the fact that you have a much higher number of bets provides for a greater annual profit.
It's very similar to the “pile them high sell them cheap” concept in that you can afford to win less because you are betting on more selections so over a period of time you actually win more.
This calculation is referred to as the Return on Capital (ROC) and in the above example would be shown in percentage terms like the ROI figures i.e.
Option A – ROC 130%: Starting bank £2000 + £600 profit = £2600 after 1 year
Option B - ROC 150%: Starting bank £2000 + £1000 profit = £3000 after 1 year
Option C – ROC 160% : Starting bank £2000 +£1200 profit = £3200 after 1 year
The ROC calculation is used to calculate the size of your betting bank after a period of time, so whilst the ROI figure is important, the ROC calculation is perhaps as crucial in identifying how much your betting bank may grow after a period of time and therefore enables you to leverage the maximum earning potential from your betting bank.
For anyone taking their betting seriously and using a betting bank you really should be considering and calculating both Return on Investment and Return on Capital for your selections.
- Roger (aka maverick99)