Advice

Designing Your Betting System Portfolio – Part 2

(Last Updated On: August 3, 2010)

Today we are continuing to part 2 of the series that I began last month called Designing Your Betting System Portfolio. We are going to be looking at what SR and ROI would be needed in order to make a balanced portfolio. Originally I was going to use a portfolio of 5 systems but following your suggestions have decided to drop this to 2.

I think that although laying is harder to make a profit from it is good to have a laying strategy as part of your portfolio because it increases the strike rate overall and decreases the stress of losing runs and bank volatility.

With three systems I would put forward that one possible way of starting is systems that meet the following criteria:

1)      The first system should concentrate on higher priced horses as this is where it is easier to make the value.

2)      The second system should be a backing strategy with a strike rate of over 20% so we are not missing the shorter end of the market.

3)      The third system is our laying system and we are aiming to get as high a strike rate as possible and definitely over 80%.

We have begun to get a shape to the sort of systems that we are going to need to start our portfolio. By putting this down in writing we have given ourselves a target to work towards which will immediately make the job easier.

What ROI do we want?

You will remember that in the last article I mentioned that I would be looking for a minimum of 2.5% ROI and it was mentioned that this may be slightly low. I agree that when you are starting this is too low to be looking for but rather than look for the same ROI across all systems we should spread it out slightly.

System 1 is where it is likely to be easier to find a profit and so we should be looking for a minimum of 10% ROI. As we are betting outsiders this higher ROI means that we are also getting a good return for the risk of betting at higher odds. I would suggest capping your odds at 29 though because much past this the strike rate becomes too low.

System 2 we should be happy to settle for a lower ROI as we are trying to catch the lower priced horses that we shouldn’t be betting against. Even if we have a selection from System 1 in the same race we may not want to be betting against these strong lower priced runners. A 5% ROI would be a good target.

System 3 is a laying system and so by definition the ROI is going to be lower than backing. The main purpose of this system is to increase the portfolio’s strike rate and so decrease the losing swings. I would actually be happy to settle for a break-even (after 5% commission) on these selections but would suggest a target of 5% ROI and possibly settling for 3%.

How many bets?

What is not usually discussed is the quantity of bets. It is all very well having a system that produces 10% ROI but if it only gives you 5 selections per month then, personally, it wouldn’t be for me. In order to make a £2000 profit per month this means that I need to bet £20,000 per month and spread over 5 bets this is £4000 per bet. When you start taking bankroll considerations (eg. 100 units) into this it turns into a huge bankroll.

I would rather take 7% ROI and have 50 bets per month. This would mean to get our £2000 profit per month we would be placing bets at around £570 but the bankroll requirements are likely to be similar (100 units) as the higher ROI.

Don’t worry about the large figures that I am using, these are just examples to get the idea across that ROI needs to be considered alongside the quantity of bets.

After all that how many bets are we going to use? I would suggest a minimum of 1 bet per day for System 1, 5 bets per day for System 2 and 10 bets per day for System 3.

The reasoning behind this is that as the ROI target drops we want more bets to make our profit.


Now we are going to have to take some imaginary figures in order to have a look at the kind of profit we would make. These figures are purely for this example, you do not need to stick to them.

System 1

We have 1 bet per day so around 350 bets per year. If our average odds are 15.00 then this represents a 6.66% strike rate. Our selections will need to get a higher strike rate than this to win. To have a 10% ROI we will need to get around 27 selections correct in the year which is a strike rate of around 11.42%.

This would make about 35-40 units of profit per year.

System 2

There are 5 bets per day in this system with average odds, for example, of 5.00. We would be looking at around 1750 bets per year with the odds representing a strike rate of 20% which we need to better to make a profit. In order to get our 5% ROI we would need a strike rate of just 22%.

This system would make a about 100 units of profit per year.

System 3

This is the laying system with 10 bets per day or 3500 per year. If we cap our odds on this system at 7.00 and assume that all our selections that lose have odds of 7.00 we know that the selections will win the race (and lose for us) just under 15% of the time giving us a strike rate of 85% which we need to beat to make a profit.

We can only afford to lose 378 of these bets if we want to make our 3% ROI.  This gives us a strike rate of around 89% and a profit of 697 units.


These figures are higher than expected because we are using the same odds for every runner and this wouldn’t happen but it is just an example to show how the portfolio would work in terms of profit. More importantly we could expect losing streaks of:

  • System 1 – 26 losing bets in a row
  • System 2 – 19 losing bets in a row
  • System 3 – 4 losing bets in a row

As you can see the beauty of a portfolio is that the systems support each other’s volatility to minimise the reduction in the bank.

I would like to develop this series into a Race Advisor betting portfolio. If you would like to have your strategy considered for development then please put it into the forum. This month’s poll will be updated whenever a system is added and you can vote for the ones that you would like to develop with us there. We shall take the top voted strategy each month and develop it further.

Michael Wilding

Michael started the Race Advisor in 2009 to help bettors become long-term profitable. After writing hundreds of articles I started to build software that contained my personal ratings. The Race Advisor has more factors for UK horse racing than any other site, and we pride ourselves on creating tools and strategies that are unique, and allow you to make a long-term profit without the need for tipsters. You can also check out my personal blog or my personal Instagram account.

9 Comments

  1. How do you calculate the ROI?

    Is the ROI calculated on money employed or the change in your bank balance.
    Maybe you could use my results from yesterday.

    I have a £200 bank – At £2 stakes I made 16 bets on the place market.

    16 selections 12 successful the sum of the 16 Befair prices = 27

    Pete

  2. Good question Pete there seems to be a number of ways to calculate ROI. For me a ROI of 0% is break-even. The calculation I use is the amount of profit made divided by the amount of money risked.

    If you make 16 back bets at £2 then you have risked £32. If you made a profit of £10 then 10/32 = 0.31 or 31% ROI

    If you make 16 layed bets of £2 and the sum of the Betfair prices-1 (we have to minus the stake money from the odds to calculate the risk) is 27 then you have risked £27. If you won 12 of your bets you have made £24 (without removing commission) so 24/27 = 0.89 or 89% ROI

    A calculation that may be better is expected rate of return per unit bet, e.g. for every 1 unit bet we expect to return 1.10 units.

  3. Excellent article as a mainly lay I can support your figures of 89% strike rate requirement this seems to be the cut off between losing/breaking even and making a substanial profit. In my experience at 89% you are well and truly in profit.

    I would suggest that the laying system needs to be sub divided into two parts one for laying of short priced horses or favourites where your liability is lower and the second for higher priced runners and your liability is much higher. The staking is all important and liabilities must be controlled. therefore I would lay a favourite with a larger stake to increase my bankroll without taking on a high liability and reduce stakes for a higher priced runner to protect my bank.

    Jim

  4. Thanks for your comments Jim, a good point about splitting the lay system up I shall look into that in the next article.

  5. When evaluting systems I have an issue with the ROI figure most often quoted in that without putting a timescale to them they are totally useless. For example during the same year a single bet of £100 winning £20 gives exactly the same ROI as one hundred single one pound bets placed over the year and resulting in total winnings of £20.

    Therefore when looking at system performance I want to know the Profit on Turnover POT and the ROI based on the bank required over a fixed period of time (preferably one year).

    With the examplse above you would have the single bet option giving a POT of 20% and because the bank would probably be larger than the bet size (lets say a 10 point or £1000 bank) the annual ROI will be only 2%.

    But the one hundred bets would have the same POT of 20% but if the bank is again 10 points you would only need ten pounds to achieve the £20 profit. This would give an ROI of 200%.

    So we have two systems with the same POT but totally different ROI yet most people would quote them as being the same 20% ROI.

    So when system sellers/creators quote an ROI take it with a pinch of salt and remember you can’t compare quoted ROI’s.

    And thats why I calculate POT and annulised ROI based on size of bank required.

  6. MethodMan you have a very good point. My personal preference is to use a Rate of Return. This means that for every 1 unit bet I may be getting 1.20 units back. I then know that if I can bet 100 units over the year I will make 20 units profit, if I am only getting 10 units of bets on I will only make 2 units profit. The nice thing about Rate of Return is that you can then also estimate it for bets you haven’t yet made.

  7. RA looks like we agree in what we look for but the problem is we dont have standard terms we can use in discussion. The system sellers and get rich quick merchants all quote high ROI’s but use different criteria (if any) to arrive at the figure.

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