What Is the Return on Investment When Betting on Sports?
November 16, 2021
You hear a lot about return on investment (ROI) when talking with traders or those involved with such things as stocks or bonds. However, the return on investment is just as important in the world of sports betting. If you are going to be a serious player, hoping that your bets will help to supplement your income, then you need to be able to create a positive ROI.
What is ROI?
If this is a term that is a bit confusing to you, then a little explanation may help. Return on investment measures the amount of money that you reap in comparison to that which you have invested. The simple formula for this is:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment x 100%
The higher the ROI percentage the better off you are doing.
Why is ROI Important?
Now, you may be asking yourself why this is important at all? That’s a good question.
Consider this for a minute. If you bet an average of $1000 a month and ended the month with $1500. If you removed the amount you invested from the total amount you have you would come up with $500 as your top number. Divide that by the original $1000 and you come up with an ROI of 50%. That’s pretty good.
However, if you invested $1000 and came away with $200 at the end of the month, you have a total of -$800 divided by $1000 which gives you an ROI of -80%. That is terrible.
Your ROI lets you know how well you are doing in your bets. It removes the original amount you invested and compares that with what your return is against that original investment. Positive numbers are what you are shooting for. The higher the percentage the better off you are doing. When you are in the negative, as with anything else, you are doing badly.
What is the ROI in sports?
Now that you understand ROI a little, you may be wondering what is the return of investment on games you want to wager on? This depends upon your rate of success.
You may be looking at how a person who bets 2-ways pick’em bets can win around 50% of their bets yet over a longer period of time still lose all of their investment and wonder how that is possible? It’s a good question. It starts with the fact that you have to pay some of your initial investment in fees to whatever sportsbook you are using. This is commonly referred to as the Margin, the Commission, the Vig, or the Juice.
Some charge a flat rate which could be anything from $1 ranging as high as $50 depending on the size of your bet. Others may charge a fee of anywhere from 3% to 10%. Sportsbooks margins are most often set to a % This is another reason why it is a good idea to choose more than one sportsbook to place your bets so that you can get the best rate for your investment.
That will mean that you actually need to win more than 50% of the time to actually start earning money. You might be a person who wins around 50% and is a break-even sports bettor. That may be good if you just want to spend a fun afternoon or evening betting on football, basketball, hockey, or some other sports, but it is not a way to earn money. The best and easiest way to increase your win ratio and get a better ROI on your bets is to follow betting experts. Betting experts are usually long-term winning players with a much greater ROI on their bets than just happy bettors.
So, let’s look at how the ROI works. To do so, we will choose a rather simple example.
Say you place three bets on Sunday, betting $100 on each of the contests. Now, understand that you most likely lost at least $60 simply by placing these bets because of fees. If you win on two of those games (with odds and payouts the same in each game for this example), you would win $100, but you lost $60 in fees. That leaves you with an ROI of $40/$300, which is 13.3%. Not bad, but that may not do much more than pay for your drinks at the bar.
However, it is a big improvement over what a person will likely gain by investing in stocks. The average stock increases in value of no more than 1% in a week’s period of time. If you took that same $300 and bought 30 shares of a stock at $10 each and saw a 1% change, you would earn $3. Your investment in gambling would be far superior.
Now take the same scenario, but with five bets placed. If you win three, your winnings would be $100, but you would pay $100 in fees (5 games x $20 per game), giving you an ROI of 0. See how even in winning you can walk away with nothing?
Where you start to earn real money is when you are reaching around a 53% win rate or better over an extended period. A person winning as much as 55% of their bets will earn a significant amount of money and get a far greater return on their investment than a person who invested the same amount in the stock market. That’s a pretty sizable amount of return that happens almost immediately. It’s why many get involved in gambling over other investment opportunities.
Should you choose Sports Betting over other investment?
This depends on your level of interest, knowledge, and time spent following your favorite sport.
Some people may consider sports betting to be foolish, right or wrong. You will likely find that the vast majority of financial analysts and consultants will tell you that investing in the stock market or some other similar endeavor is a lot smarter.
What is neglected by these experts is that most people are not knowledgeable about stocks or commodities. They couldn’t tell you what kind of stock to invest in because they don’t have the skills or information needed. Plus, there are literally millions of stocks out there, so choosing the right one to be successful with is a real crapshoot.
In contrast, most people are extremely knowledgeable about at least one sport. They could tell you a great deal about what is going on in the NFL, college basketball, or the NHL. They could tell you who’s hot, how injuries are affecting a team, and what success a team will have against their opponent for that night. That’s golden information for a person who wagers.
There is a greater risk. There is no doubt about that. Very rarely does a person buy stock in something and that stock goes completely belly up. That means that, no matter what, the chances are 99% that they will still have some money even if the stock tanks.
That is not true of your bet. If your team loses, you lose it all. It’s an all-or-nothing scenario. However, the return is much greater as well. Most people will invest in a stock that will increase by 10 or 20% at most. If they invest $1000, by the end of the year they may have $1200 per share in that stock. That’s good money, but not a real big return.
There are those stocks that can reap 8, 10, 20 times their initial value. However, finding those stocks is not easy.
The truth is you can be successful in sports betting. A person wagering $1000 on three different games and being right about all of them could very well likely triple their money in one night (then again, he could also lose everything).
If you are going to become more involved in sports betting, you need to be paying attention to your ROI. Make sure that the wagers you are making are giving you a positive return. If you find yourself in the negative spin, it’s time to start betting on something else or give up altogether.