Sensible Money Management


money management horse racing
These series of articles could be the most important ones you will ever read.

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Betting On Horse Racing: Sensible Money Management (Part 1)


Of course I didn't! That would have been complete madness, and dicing with financial suicide. Putting absolutely everything you have on one horse is an example of bad money management – albeit an extreme example, but it got your attention didn't it?

Yet all too often the average punter is guilty of bad money management. On a much lesser scale admittedly, but is it any wonder that the average punter loses money betting on horse racing? I am often asked by my members “how much” they should put on each bet, “do I have a staking system?”, or “how soon can I give up my job and just bet on the horses?”

It seems plenty of people like to pay lip service to managing their betting bank-roll, but it never ceases to amaze me how so many people are still acting so recklessly with their money when it comes to betting. It strikes me that the perennial losing punter is a little like the over-weight bloke, who sets out on January 1st with every good intention of losing his beer gut. He has a few salads, maybe even pays a visit to the gym. But more often than not come February he is back to his comfortable eating habits, and the weight continues to pile on.

It's often the same with the average punter – he has developed bad habits that have, over time, contributed to a steady flow of money out of his bank account and into the coffers of his local bookmakers. To become a winning punter he must change his ways.

Let's examine some of the bad betting habits that contribute to an unhealthy bank balance:


1. Poor value bets

Let's imagine you go into Tescos and pick up a tin of baked beans from the shelf. At the check-out the spotty 17-year-old scans the tin, and says “four hundred and seventy-eight pounds sixteen pence please, sir. You hand him your debit card, key in your PIN number and stroll out of the store. Ridiculous? Of course it is – you wouldn't pay whatever price the store decided to charge. So why do so many punters take whatever price is on offer about a horse they fancy?

The answer is simple – they have no idea what a good price about the horse should be. We are all familiar with a tin of beans, we have an idea of how much it is worth, and we can make a decision what we will and will not pay. But when it comes to backing horses, probably the only limit most punters will place upon themselves is never to back odds-on.

This self-imposed rule can in itself be a fallacy – if you offered me 4/5 odds-on about a horse with a 4/9 odds-on chance of winning, I would bite your arm off!

The odds about any given horse are a reflection of the weight of money behind it, and not necessarily a reflection of the true odds of the horse winning. Let me give you an example: top trainer Sir Michael Stoute is running a valuable filly for the first time in a maiden race at York. Champion jockey Kieron Fallon is in the saddle. The Racing Post has 7 experts tipping this horse to win. There are 11 other runners in the race. This horse's price is 11/10 – is this a good bet? Do you really think that a filly running in public for the first time with no form to point to has a genuine chance of just under 50% to win the race?

This is a good example of when a horse's price is lower than it's true chance of winning. NOT good value.

The only way to make a profit from betting on horse racing in the long run, is to consistently back horses at prices too high compared to their actual chance of winning. This is known as getting ‘value' into your bets. You are paying less for something than its true worth. It's stuff you would learn on day one of your economics GCSE. Equally, you will profit long term if you consistently lay horses to lose at prices too short compared to their actual chance of winning.

The lesson to be learned is only ever bet when you have value on your side. Otherwise, just let the horse run. I will continue my examination of the other money-sapping betting habits in future articles, but that's all for today.



Betting On Horse Racing: Sensible Money Management (Part 2)


In a previous article I jokingly suggested I had put all my assets – my savings, the deeds to the farm, my kids’ Trust fund, and the proceeds from selling one of my kidneys – on a horse at Newbury. I showed this was potentially financial suicide, and an extreme example of bad money management.

I wrote that more often than not a losing punter will find himself saddled with a bunch of bad betting habits. It is these bad habits that have gotten him, and his betting bank, to where his is now – the Poor House.

To arrive at a change in fortune, and to start making consistent profits, the losing punter has to be prepared to make changes to the way in which he bets. In the previous article we talked about the cornerstone supporting my own personal betting strategy, and that is finding value in every bet you make.

You will only ever make a profit from betting if you consistently back horses at prices too high when compared to their actual chance of winning. This is exactly how bookmakers have made their money for generations – they consistently lay horses at prices too low compared to the actual chance of the horse winning. When punters continue to take these low prices day-in and day-out, it will only ever be the bookmakers who come out with a profit in the long run.

The second ‘bad habit’ I want to examine is the subject of inappropriate staking. What do I mean by staking that is not appropriate? Well, what I am driving at is placing bets that are generally too large in proportion to the size of your betting bank.

Before I expand upon this, the concept of a betting bank is a side-issue in itself. You categorically MUST have a sum of money put aside for the sole purpose of betting. It scares me rigid when I hear of people simply ‘dipping’ into their current account to place a bet using their debit card.

If you do not have a separate account for your betting activities, you cannot keep records, and you will not be able to answer that simple question, “Am I making a profit, or a loss?”

It goes without saying, that betting involves a degree of risk, and you should never bet with money you cannot afford to lose.

Getting back to inappropriate staking, the idea of lumping all your money on one horse is an extreme example of over-staking. Of course, on the one occasion this strategy may pay off. We had friends round a few nights ago to play one of those Race Night DVDs. I was comfortably in front by studying the form before each race, and placing considered bets at what I considered to be value prices. As you might imagine, I had a suitably smug expression on my face as we came to the last race, and our friends were complaining I enjoyed a ‘professional advantage’.

My wife then decided to put every penny she had left on an 8/1 chance. The race turned out to be the ‘lucky last’ for my wife, and she walked away with the whole bank!

But seriously, continue with these tactics, and it will not be long before you lose everything.

Personally, I would never consider starting any betting campaign with a bankroll of less than 100 points. In other words, I will divide my bank by 100 to arrive at my unit stake. You can see that I will only ever be putting 1% of my bank at risk when I place a bet.

This is a very generalized approach, and you might argue that a little more consideration should be given to a punter’s typical strike rate. True, if someone has a strike rate of 50% then it is statistically highly unlikely that he will suffer a run of 100 losers to go bust. So, in this case you might be justified in operating a smaller bank. Bear in mind that when flipping a coin, it is by no means unusual to see 6 or 7 ‘heads’ in succession, and losing runs in double figures do occur.

Erring on the side of caution, you could foresee two such losing runs occurring twice in close succession. In which case, I hope you can see that even when considering a system which such a high strike rate, having a bank of well over 20 points now seems very sensible.

With my own Redd Racing betting service, we enjoy what I would consider to be quite a healthy strike rate. However, we have experienced a negative swing of some 60 points during one particular month a couple years back. The account recovered to make a profit by the end of the month, but it underlined the importance of having a bankroll large enough to absorb the losing runs that EVERYBODY has to endure from time to time.

Indeed, it would probably be better advice if I suggested members of my service had a bankroll of 150 or even 200 points in reserve.

Yet I often receive emails asking me whether it is OK to deposit £100 with Betfair and start with unit stakes of £10.

Betting with stakes too high in proportion to your bank normally comes out of a desire to make money quickly. I think we are all guilty of getting overly greedy sometimes, and unwilling to think a little more long-term. People are inclined to set themselves unrealistic profit targets, given the size of their betting bankroll. Having a bank of £100 and expecting to be able to make £100 per month is not realistic. Get-rich-quick does not exist.

Akin to the Tortoise and Hare story, let me give you an example of where what might initially seem like a very moderate return, actually gives surprising results over time.

If you started with £100 in your betting bank, and increased this bank by just one-half of one per cent every day, after just 6 months your account would have a balance of £244 due to the compounding effect. You could more than double your investment in 6 months with this seemingly small daily profit return. Take that to your bank or building society and see if they can come anywhere near such a deal!

Hopefully this demonstrates how ‘slowly but surely’ wins the race.

To summarize, my advice would be to set your unit stakes at one per cent, or even one half of one per cent, of your total betting bank. By striking only value bets, and when the odds are in your favor, your betting bank will grow. As your bank grows, so you can naturally increase the size of your unit stake to make more profit – but your bets will still be in proportion to your bank.

In the next part of this Sensible Money Management, I will look at more bad habits that suck money from the accounts of losing punters.



Betting On Horse Racing: Sensible Money Management (Part 3)


This is the third installment in a series of articles on profitable betting through sensible money management. So far, I have discussed the importance of getting value when you bet, to maximize the returns you achieve when your selections win. In the most recent article you should have learned to keep your stakes in proportion to the size of your betting bank.

Today I want to examine a common mistake that often gets punters into serious trouble – chasing your losses.

I don’t think there can be many of us who have not at some time, decided to get back what we just lost by betting a little bigger on the next race. It is sometimes known as progressive staking.

Let’s take a simple scenario: you bet £10 on Red Rum, and he loses. What do you do? Perhaps you continue with your selection methods and come up with another pick in the next race – Best Mate. The price is 6/4F

But, rather than putting another £10 bet on Best Mate, you decide to ‘chase’ your loss from the last race. You add another £7 to your stake so that when Best Mate wins you will pick up an extra £10.50 to recover the bet you lost on Red Rum. Good plan? Could be, after all Best Mate is a sure fire winner, right? May be. May be not!

What happens if Best Mate loses? You are now £27 ‘in the hole’. But you still have a plan. Your next selection is a dead cert winner at Even money. You place your usual £10 stake plus an extra £27 to cover your losses so far. No need to worry. When this one comes in, you will have re-couped your losses and have a £10 profit to show as well.

Let’s take a step back here. You are staking £37 to win a £10 profit. Think about it – you are effectively getting odds of only around 1 to 4 odds-on about a horse that is Even money in the market. That is terrible value!

You may escape this time and your horse may well win. But what if, heaven forbid, your red-hot even money favorite fails to win? After just three bets, you are down to the tune of £64 when your normal stake is just a tenner!

Long losing runs do occur, more frequently than you might think, and even with short-priced selections.

If you spent a day in a casino at the roulette tables, and analysed how many times you witnessed a run of 7 or 8 consecutive ‘red’ numbers, I would not be at all surprised if you saw this happen four or five times – in a single day. Here we have pretty much a 50/50 bet, even money, that the roulette ball will land in either a red or a black slot. Yet I was amazed to learn that the longest run of the same color (reported) was THIRTY-NINE consecutive reds!!

Imagine if you were betting on black, and saying to yourself each time “no worries, it’s got to be black next time…. Surely?”

But let’s go back to the more common occurrence of a losing run of 7 even money bets. We will be betting on the red.

We place a £1 bet on the first spin. It’s black. We chase our loss by ‘doubling up’ and next bet £2. If we were to carry on in this manner, after 6 spins we would be betting £64 to win our original £1

I sincerely hope my point is getting across. By chasing your losses you can very quickly see your stakes climbing to preposterous levels, to win your original, relatively small stake. The risk is way out of proportion compared to the potential reward.

One last example to really ram the point home. The Racing Post runs a tipster competition. All the leading racing journalists are involved, representing the nation’s newspapers and horse racing publications. These are experts at tipping horses. Take a look at the results table any day, and see for yourself the longest losing run. Remember, these are the experts.

I looked today, and Racing Post PostData has suffered this season a losing run of twenty-seven. Twenty-seven consecutive losers from an expert tipster! And believe me, he is not on his own, just the worst offender this season so far.

There is an old saying – “Don’t throw good money after bad”. If your selections don’t make a profit from simple level stakes betting, don’t try and make them profitable by throwing more money at them. You may survive with a profit for a while, but this approach is a disaster waiting to happen. Sooner or later you WILL blow your entire bank chasing a disproportionately small profit.

If your selections don’t make a profit from simple level stakes betting, change your system.



Betting On Horse Racing: Sensible Money Management (Part 4)


In Part One of this series of articles on sensible money management, I said that much of the reason people will lose money through betting is because of bad habits. How do you overcome bad habits? Discipline, of course!

If you were running your own business, you would treat it as a business and not a hobby. You would get to your desk on time each morning. As well as doing the things you enjoy about your business, you would attend to all the mundane tasks necessary for things to run smoothly. You would file your tax returns on time. You would have a business plan and you would set budgets for attainable growth. You would aim to make a profit by earning more in revenue than you spend in costs. You would not continue to sell a product at a loss. Etc., etc.

To run a business takes a lot of self-discipline, and so it is with making a long-term profit from betting. It is not as easy as some people would have you believe. If this were true, then tens of thousands more people would be placing bets from their laptop by a pool in Spain, and there would be no more bookmakers in your local High Street!

If you are prepared to discipline yourself, then you are far more likely to elevate yourself from the 98% of punters who continually lose money through gambling.

The very first task you should undertake is to set up a separate account for your betting funds. It is essential you keep your betting activities separate from your other financial affairs, otherwise you will find it very difficult to see if you are making a profit, and how much return you are getting on your investment.

No-one needs to be reminded that you should only bet with money you can afford to lose, but the more money you can set aside for betting purposes, the more likely you are to see any worthwhile gains. You should view your betting bank as working capital, and an investment you have made in your own business.

Do not be tempted to place a bet using your credit card, or the debit card on your current account.

Anyone following my betting advisory service will know that I am always preaching about getting value when you bet. My philosophy makes perfect sense to me, but then I’ve been trying to drum the principle into peoples’ heads for years! But going back to the analogy of running a business, you wouldn’t pay £10 for a product from a wholesaler if you couldn’t sell it for any more than an average of £5. You may make the occasional sale at £15 or even £20 but if the average return is only £5 then in the long run you will lose money.

The same principle applies when backing a horse – don’t accept a price of 5/1 when the real chance of the horse winning should be represented by a price of 10/1

If you fancy a horse to win, but you cannot get the price you want, then have the discipline to let the horse run without your money on its back. Horse racing has been around for more than a century -- there will be other opportunities. You should not be betting purely for the thrill of risking money, and only putting your investment at risk with the potential of a good return.

Take the time to review how your strategy is working (or not). How much profit are you making? Which systems or tipsters are making you the most? Without continual review, you will not be able to maximise your returns (nor indeed limit your losses).

Your betting bank should be large enough to absorb any losing runs you will encounter from time to time. This is akin to managing your cash-flow of your business. Having a “large bank” does not necessarily mean having a lot of money sunk into your betting account. Moreover, it means you should be staking only a small proportion of your bank on each bet.

The same £1,000 bank fund could be divided into a large bank of 1,000 points, ie £1 per bet. Or it could be divided into a relatively small bank of just 10 points, ie £100 per bet.

As your bank grows, then the same small percentage of your total funds will represent a higher monetary value.

Do not be tempted to increase your stake on any particular bet. Set your proportional stakes plan and stick to it. Yes, review your stakes from time to time, but never alter your stakes on a whim, on hearsay of a strong bet, or for any other irrational reason. Be wary of getting greedy.

This is a good time to warn you of the perils of betting whilst under the influence. Never bet after having a drink. The reasons should not need further explanation.

If your method of selection is losing you money, then stop betting.

Allow me to expand upon the last statement. If you have a losing day, do not be quick to toss your system in the bin or cancel your subscription to your favourite tipster! Everybody has losing days, indeed everyone has losing weeks and bad months. However, after a reasonable period of time you will be fairly certain whether or not a particular source of bets is returning worthwhile profits.

Discipline will play a big part in managing your portfolio of systems. On the one hand you should not be too hasty to give up on a profitable system, if it suffers a downturn in performance. At the same time, you should be prepared to relegate a system from your portfolio if it is consistently losing money.

Always ‘paper-trade’ a system or tipster over a significant period of time (I would suggest at least two months) before actually committing any of your betting funds. If you are then confident enough to risk your own money on a system, then equally you should be prepared to endure two losing months before dropping it.

If you do find yourself starting to lose money at any point, never be tempted to chase your losses. Do not increase your stakes in an effort to re-coup what you have lost, as you may well find yourself with even greater, unnecessary losses.

To summarise, treat your betting activities in a business-like fashion. Develop a plan and have the discipline to stick to it. Below is a list of Do’s and Don’t’s. For those who need help to adopt a disciplined approach stick by these rules and you will not go too far wrong!

DO’s and DON’T’s

DO have a separate account for your betting funds DO try to get value in the price of your bets DO keep records DO take the time to analyse your betting DO be wary risking a high percentage of your bank DO operate with a bank of suitable size DO change or drop a losing system

Do NOT bet when you are drunk Do NOT get too greedy Do NOT bet without paying consideration to the price Do NOT bet if you cannot get the price YOU want Do NOT try and get rich quick Do NOT chase your losses



Betting On Horse Racing: Sensible Money Management (Part 5)


If you fail to manage risk effectively, then you will most likely never make a profit from betting. In this article I will reveal some of the killer mistakes most losing punters make, day-in, day-out.

Everyone knows that gambling is a business of risk. Professional gamblers will successfully manage their risks and make a profit, whilst 98% of punters who consistently lose money, also consistently fail to manage risk effectively.

This is the concluding part to this series of articles, where I have explored the key reasons most punters lose money, in a vain attempt to make money through betting.

We have seen the importance of always getting a value price when you bet. If you fail to strike bets which offer a satisfactory return on your investment, then ultimately you will lose money.

We have learned why you should have a sensible approach to staking. Never put too much of your betting bank at risk in one bet, in an attempt to get rich quick.

I pressed home the dangers of chasing your losses. Experienced gamblers appreciate that you will more often than not lose more bets than you win. Losing is part of gambling – accept this fact and you will not be tempted to compound your losses by trying to re-coup them by deviating from your staking plan.

In the most recent article, we looked at discipline, and why it is critical to treat your betting like a proper business if you want to achieve business-like results.

In this final section, I want to conclude by further exploring the topic of risk management, and developing a profitable portfolio of betting strategies.

Ask any number of professional gamblers and the vast majority will tell you they do not rely solely on one betting strategy alone. They spread their risk by employing several methods, and constantly reviewing the performance of each method. In effect, this is much like an investor managing a portfolio of stocks, shares, and investments. This echoes back to a previous article where I likened betting for profit to running a business.

The disadvantage of relying on just one betting method or system or tipster, is that if the strategy is not currently returning a profit, then you have no income. It's the classic "eggs in a basket" scenario!

If you look at the Stock Market, the value of individual shares goes up and down on a daily basis. Whereas, over time, the value of the market as a whole has historically risen.

So it makes sense to have a number of betting strategies running concurrently. If during one particular month Tipster A is losing money, then probably System B is returning a profit. Your aim should be to manage your portfolio such that you generate a net income every month.

Developing a portfolio raises a number of questions:

1) Which strategies should I employ?

2) How many betting systems/tipsters should I have in my portfolio?

3) When should I relegate a system from my portfolio?


Developing your betting portfolio.

To answer the first question – the obvious response is to follow profitable systems. But this is much easier said than done. Where do you find profitable methods, systems, and tipsters?

It will take you time to develop a good portfolio, but a good place to start is with your own methods. If you can read form, and you understand the concept of value, then you can develop your own methods of making good selections.

Whilst you are developing your own methods, you can employ the skills of one or more tipsters, and/or buy some ready-made systems. Before rushing out to buy a copy of the Racing Post and looking in the classified advertisements for tipsters, I recommend you search on Google under ‘tipster review’ or ‘horse racing tipster review’ or ‘betting tipster review’. Adverts will always say their tipster or system is the best, and makes amazing profits. But this is your money you are investing, and you owe it to yourself to do some home-work.

Look for a forum or discussion board where tipsters and systems are reviewed objectively by customers or people who have actually used the service.


How big should your portfolio be?

This is a question only you can answer really. The more strategies you have, the more your risk is spread across a number of income streams. You could also potentially earn more money. However, the more methods you employ the harder your portfolio will be to manage, and the more of your time will be taken up.

You will need to strike a balance where you are comfortable with the time-input and the return from the portfolio.

A sensible portfolio may have five or six strategies, with another two under review at any one time.


Managing your portfolio.

In a previous chapter I suggested ‘paper-trading’ a method for at least two months to test its profitability. This means you should follow a method or tipster or system for two months to see if theoretically you would have made a profit. Once you are happy with the performance of a particular method, you can proceed to award it a place in your portfolio, and start trading with actual cash.


If the strategy doesn’t make the grade, then ‘file’ it for future reference.

You will have heard the old saying “If it ain’t broke don’t try to fix it” so you should not be too hasty to discard a particular betting method if it returns a losing month.

However, there is also the teaching “Don’t throw good money after bad”. If a system has earned a place in your portfolio by performing well for two months, then it makes sense to allow it two poor months before even considering it should be relegated. That said, if you are not happy with a system and it is losing money, then get rid of it!


Summary:

Develop a portfolio of betting strategies to spread your risk and maintain a regular net income. Use a combination of your own personal methods, purchased systems Business Management Articles, and subscription tipsters. Constantly review your profitability to highlight any under-performing strategies.

About the author: Max Redd has been making a living betting on horse racing for over 10 years. He runs the Redd Racing betting advisory service.


Best Regards, 

Mike Keenan.

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