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.
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.
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.
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.