Kategoria: My Way

Tiny edges and free money makes a million

When I was young, I kind of drifted to professional sports betting. I dreamt of being a pro already as a teenager, but early in my career, I had no budget, goals, profit margin estimates, risk parameters, etc. I admit I was lucky not to have gone bust, even if I probably made mainly profitable +EV bets - so much did I overbet compared to the edges and risks. On the other hand, I might have made more money with less risk if I did better strategic planning.

For an inexperienced investor, it is hard to understand how important it is to earn interest on interest. Without increasing the stakes, when the capital has increased, one can earn a decent living but not to get economically independent. But when one increases the bet size, one should be extremely careful not to overbet. If one bets more than the optimal Kelly stakes, one goes bust or at least slows the capital growth (if one doesn't make too often overbets).

In my current My Way blog series, I am a wise 60-year-old instead of an overconfident and unorganized 25 years old. When I now try to multiply my tiny start capital and small deposits to one million in ten years, as I did between 1988 - 2008, I have calculated how things will progress with different estimations of my edge, staking, and capital circulation speed.

Even for an experienced investor like me, it always comes as a surprise how small differences in the edges make huge differences in capital growth.

Have a look at the picture below:

Let's assume that a bettor can make even money bets (Odds = 2x, evens or +100, as you wish) with a 51,5% probability of hitting. That makes each bet 3% profitable, i.e., to return 1.03 units for each 1 unit bet. The optimal Kelly-bet would be with this edge 0.75% of the capital. After 1000 bets, the expected bankroll is €12200.

I took the 3% profit margin estimate per bet for the example because I believe I can keep that profit margin in a big sample of bets. It is not profitable to bet too selectively, say on +15% expected profit bets twice a month, because in that case, the capital circulation would get too slow.

Already 3% profit margin per bet with 1000 monthly bets would accumulate even a tiny risk capital to financial freedom. Already with that pace and a conservative Kelly per four staking plan would make the 10000 units capital grow to 12200 after 1000 bets. But what if we could find only 0,5% higher odds on each bet? To find 2.01x instead of 2.00x seems not to be a problem for the Sport market robots finding their other customers and me the highest odds in the world. Actually, during my first half a year as a Sportmarket customer, the difference between Sportmarket word top odds and the second highest has exceeded 0,5% in most cases I have decided to bet.

You can see from the picture that with the odds 2.01 instead of 2.00 on those very same bets hitting with 51,5% frequency, the same 1000 bets would accumulate the starting capital of €10.000 to €13100.

A difference of 0,5% in the odds, 2.01x instead of 2.00x make a difference of €1100 after 1000 bets. It pays to compare the odds and bet on the biggest one. (Or let Sportmarket to find you the biggest odds).

Even finding 2.02x instead of 2.00x is not an impossible task. In 1000 of that kind of bets, the capital would grow to €14200. A €2000 difference.


What is "My Way"?

I designated an account in Sportmarket ear-marked only for this project. I deposited there €800 + €800 in February and then €800 every month. I started to bet in the same very defensive, risk-averse way as I did when I was young. I write regular blogs on our web page www.esbc.fi, where I follow, how this experiment/mission/challenge progresses. I call this mission MyWay.

Follow MyWay! It is not only my twists and turns in this mission, not only nostalgia from my first way towards my first million. You'll learn a lot about betting strategies, my way of thinking and working, risk management, war stories" and nostalgia. Occasionally you'll learn how to win +EV equity in upcoming sporting events for free.

Welcome to join me in MyWay!

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