Thoughts on a Simple Approach to Improve Portfolio Balance (July 2008)
With the lull before football season — and especially with baseball the only game in town — we thought we would throw some ideas on money management and bet size out there for our members. Many sports like football and basketball use a point spread. This “evens” the game out so that the bets are often close to even odds. Most bettors bet at -110 odds or -105 at “low-vig” sportsbooks. Sometimes, the actual odds are adjusted dynamically so that you can pay as much as -125 or even get “plus odds” of +110 or so. Nevertheless, these are close enough to “even odds” so that your bet size doesn’t need to vary.
On the other hand, in moneyline sports such as baseball and hockey, you will sometimes get underdog odds of +150 or +200 or more. Other times, you might like a favorite and lay -130 or even -150 (hopefully not more than that!). Or — perhaps you like to bet boxing, horses, or tennis — and might like a long-shot of 5-1. How much do you bet then? In this article, we’ll look at some simple ideas on money management and bet size. Please let us know your thoughts. The information on this site is for entertainment and educational purposes only. Use of this information in violation of any federal, state, or local laws is prohibited.
Money Management Ideas
In previous articles, SportsInsights has covered areas such as money management, the ups and downs of sports investing, and math / statistics. We have also covered important areas that can help improve your results. These include shopping for the best line, academic research and contrarian philosophies (Betting Against the Public) that SportsInsights highlights that exploit the sports marketplace. We have also studied one of the successful sports syndicates to get tips and ideas that can help us succeed in sports investing.
Bet Size for Point Spread Bets
If the odds for a sports bet are close to “even odds” (say from -115 to +115), a good rule of thumb is to bet around 1-2% of your bankroll on each selection. For the sake of this article, we’ll use 1%. That is, if your bankroll is $10,000, it is prudent to bet about $100 on each play. This will allow you to ride out the rough times and maintain your bet size so that you can regain your bankroll during the inevitable good times.
Note that if you don’t have enough of an edge to beat the “vig” — no money management approach will prevent your bankroll from eventual decline. SportsInsights’ sports investing methods can add value to any handicapping approach.
Bet Size when Money Line Odds Vary
As we saw above, it makes sense to bet around 1% of our bankroll on “even odds” bets. However, what should you do if some of your bets are +200 underdogs? Or what if you regularly bet on 10-1 long-shots in boxing or tennis or horseracing? Here are some good choices for bet size:
That is, risking $110 on every play you make (no matter if it is $110 to win $100 in an NFL game — OR $100 to win a relatively large $250 in MLB or $100 to win a nice $1000 in boxing) — you will feel that your portfolio tracks the performance mainly of the large dogs.
“Balanced Betting”: If you don’t want too much emphasis one way or the other — you can use a balanced approach. A balanced approach would go somewhere between “risking the same amount” and betting to “win the same amount.” When you place a bet, try and make the average of “the amount to risk” and “the amount to win” roughly equivalent to your betting size.
Table 1: Bet Size Methods
|Bet Size Methodology||Portfolio Impact and Notes|
|Risk Same Amount||Over-weights impact of large dogs. Ease-of-use.|
|Bet to Win Same Amount||Under-weights impact of dogs.|
Using a Balanced Approach to Bet Size
We saw above that if we don’t want dogs or favorites to “wag the dog” — we can use a more “balanced approach.” This is a little trickier than the more common methods we described above, but once you get the hang of it — it can become second nature. In essence, for most normal ranges of moneyline bets — we want the average of the “risk amount” and the “win amount” to be about your “betting unit size.” Here is a chart to help you compute and estimate a good, balanced bet size.
Table 2: Balanced Bet Size (average betting unit is $100 / play)
|Money Line Odds||Risk Amount||To Win||Avg of (Risk Amt, To Win)|
We do not guarantee that the trends and biases we’ve found will continue to exist. It is impossible to predict the future. Any serious academic research in the field of “market efficiencies” recognizes that inefficiencies may disappear over time. Once inefficiencies are discovered, it is only a matter of time before the market corrects itself.