Have you heard of the 4% life plan?
It’s got nothing to do with horse racing, but in this article I’m going to show you how you can use it to make a living from your betting.
The concept of the 4% life plan is that if your investments make a minimum of a 4% yearly return, all you need is to have twenty five times your annual expenditures invested and you’ll be able to live off your investments for ever.
It works like this…
If your monthly expenditure is £1,500, then you are spending £18,000 per year to live.
Multiply that by twenty five and you get £450,000.
Four percent of £450,000 is £18,000. Which means as long as your investments make an average of 4% a year you can live off your investments without ever having to work again.
Yes, £450,000 is a lot of money, but if you’re from London, or anywhere near, then you’ll probably know people who have mortgages of that amount and a lot more.
In summary, it’s a lot of money, but it’s not an unachievable amount.
If you start investing regularly, then you will also be able to add the returns you’re making back into the investment pot to help you reach it even faster.
Don’t believe me?
Take the average UK salary of £28,870, which leaves you with £2405.83 after tax every month. Remove your living costs of £1,500 which leaves you £905 each month to invest. Nearly ten thousand pounds a year, which will grow at £400 per year (assuming the 4% yearly return). Actually it will be more because you’ll be investing money every month so it will grow a bit faster.
And… that’s assuming a single income household.
If you’ve got two average incomes in the house, then you have the £905 from the first salary and the full £2405 from the second, for a total of £3,310 to invest each month or £39,720 each year. At that rate it would only take you eleven years to be able to live off your investments.
Of course everybody’s circumstances are different, but the idea is to live within your means so that the majority of your income can be invested.
Anyhoo, if you want to read more about this from a personal finance point of view, then there are lots of places online. One of my favourites is the Mr Money Mustache blog. It’s American, so has an American slant on it, but it’s well written, personal and entertaining.
But what we’re interested in is…
Implementing It In Horse Racing
The first, most important, consideration is the returns.
It assumes a 4% return per year.
When have you ever heard of a horse racing bettor who’d be happy with a 4% return on their investment?
I’d venture to say never.
Yet if bettors were happy with this level of return, then almost anybody would be able to be profitable.
That’s some serious food for thought.
Most bettors want 20% return ON EVERY BET!
If you proved to a financial investor that you could get a 20% return every year, they’d bite your hand off and you’d have more money being sent your way than you knew what to do with.
Yet, us horse racing types are trying to make this amount on every single bet.
Assuming four bets a day, and I’m going to try to do better math than I did in my last post about what to expect from your horse racing betting profits, then we’re placing 1460 bets per year.
Aiming for just 4% per year is an average return of just 0.27% per bet.
Heck, I reckon anybody could do that without too much work. I could list a whole bunch of betting strategies that could achieve that with nearly zero effort. This 3-step horse racing betting strategy is an example.
Okay, I admit, you’ll need to be an RA Pro Member to be able to use it exactly as it is, but it’s possible to do everything manually if you want to. It would just take you a lot longer.
If you’re not yet a member of the RA Pro Community, you’d better go grab your trial here.
Admittedly, we want more than a 4% return per year as well, but let’s start with this as our base level, and build from there.
Implementing It As A Staking Plan
If we want to make an average of 0.27% return on investment per bet, then surely we’re never going to be able to make a serious profit?
I know lots of people hate odds-on betting, but this would represent average odds of 1.03, and most people would consider odds that low meant:
- The horse was basically guaranteed to win
- You could never make a profit
But we already know that 99% of bettors get it wrong, because they lose. And they get it wrong here as well.
I’ll come back to this later.
It makes around 6% ROI, based on £100 stakes and an average risk (we trade out so we’re never risking our entire stake) of 40% of the stake.
Because the risk is so low, a bankroll of 12 units is all that’s needed, and we’re starting with £905, just one months savings based on 4% Life Plan.
We’re not going to invest more than a single month’s savings, which means that we’re in a position to be more than comfortable to lose it, as we know we can save this amount every month.
How much do you think you’ll have at the end of the year, assuming a 100% re-investment of profits?
Whatever you guessed, I’m sure you were too low. The real number is £10,344.79.
Yup, you’ve turned your £905 into £10,344.79, assuming just a 2% ROI per bet and full re-investment of profits.
Heck, even if you wanted to play super safe and have a bankroll of 25 units, you’d still have turned your £905 into £2,915.71 in the first year. By the end of year two it would be £9,393.74.
Yes you read that right.
Even at the most conservative level, with a tiny ROI, you could have turned one month’s savings of £905 (at average UK salary and expenditure) into nearly ten thousand pounds in less than two years.
Your stakes would be £376, and there’d still be plenty of liquidity to play with. Within three years you’d be able to cover all your monthly expenditure from these bets.
As you’re probably beginning to gather, mindset is everything.
I firmly believe that anybody can become successful betting on horse racing.
Where the majority of bettors struggle is with their mindset.
Even successful horse racing bettors will often approach the game with the mindset of a bettor instead of an investor.
Change your mindset to that of an investor.
Change your approach to that of an investor.
Change your expectations to that of an investor.
And you will have given yourself the biggest edge possible.
It’s these three mindset changes that can turn from a losing bettor to a profitable bettor literally overnight.
These changes will mean that you realise you only need one, very low risk, strategy to make a lot of money.
The Big Question…
And it really is a big question.
Are you able to change your mindset from that of a horse racing bettor to an investor?
Do you think you can make that adjustment?
And if you can… would you like me to show you a high strike rate, odds-on strategy, that may only generate a return just above break-even, but will be better than 4% a year, that you can use with this approach?
Let me know by leaving a comment below.