Return on investment is a performance measure used to evaluate the efficiency of an investment. To calculate ROI, the return of an investment (or in this case, the profit earned from your sports betting system) is divided by the cost of the investment with the result typically being expressed on this website as a percentage.
ROI is perhaps the best way to analyze the success of a betting system and, for this example, we will assume a risk of $100 on each bet. We will start by taking your net profit and dividing it by the total risk. For example, if you created a system that had 500 games played and you won 25 units off of it, your ROI would be calculated thusly: (25 units X $100) / (500 games X $100) = .05. This number is typically viewed as a percentage, so this system would have a return on investment of 5%. Essentially we have taken the gains from our bets and then divided that by the total cost of investment — or the amount of money we have put at risk.
One of the reasons this number is so important is that is helps us determine if a system is truly profitable. In baseball, there are often systems with losing records because we take to many underdogs with plus money. This means that we can not use winning percentage as a metric of success, but we can determine our return on investment by dividing our units earned by the number of games we have wagered on.
If you have any questions about return on investment or any other betting lingo, please leave your comments in the section below or contact us on twitter @sportsinsights.