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ROI & Yield: Simple economics at the service of betting

roiGiven that the main purpose of sports betting is to win as much money as possible, developing a way of calculating profit will inevitably become a cornerstone of a punter’s everyday routine. Every player, regardless of his level of experience, should know exactly and at any time, whether he has a profit or deficit on his bookmaker account. Focusing only on the winning rate can lead to misleading conclusions, as a 70% winning percentage, could mean the loss of his entire bankroll, if the selected odds are not high enough.beat the bookie

Most players calculate their earnings or losses simply by checking their account's balance. They also decide what their next betting moves will be according to this sum. This is a common mistake, as everyone thinks that they can win in the long term and will realize how much exactly their profit is by withdrawing funds. This, somewhat amateur tactic, is one of the main reasons that the vast majority of players lose their money, even in short term.

Of course, you do not have to be an accountant in order to accurately calculate how your sports betting endeavors are coming up. However you should become familiar with the ROI and Yield formulas, as they can prove to be extremely helpful tools. These two terms are mainly used in economics, but they are simple enough for everyone to understand and use appropriately.

How to calculate ROI in sports betting

ROI is the ratio of money who is won or lost on an investment (not paticularly a betting one), relative to the amount of money invested. It is also called “rate of profit” or just “return”. ROI is almost all the time calculated on a certain amount of time a bettor has decided beforehand; in finances usually for a fiscal year, but it is also common to calculate the ROI monthly. In betting, it is acceptable to take into account the bets placed during a specific time scale. The return on investment index, can lead to accurate conclusions when the amount of capital has a strong influence on the result. The formula is as follows:

ROI = (Profit or Loss/Starting Bankroll) x 100

roi

If you bet frequently, your starting capital will be turned over and over again: It is effectively the same money you are investing, granted that you win some bets and don’t lose your entire bankroll. The ROI formula looks the same with the yield formula, but there's a huge difference between them: in ROI formula the profit/loss is related to the starting bank, the amount of actual investment. In yield formula is related to the turnover, the total of all stakes.

A simple example: Suppose you have decide to allocate 1.000 EUR for betting purposes on Bet365, for the entire season. After opening an online account and making a deposit, you decide to divide your bankroll into 100 parts of 10 EUR each and bet exactly on one game daily for the following 365 days. Additionally, you will not deposit or withdraw any funds on your account during this time space.

After one year, 365 x 10 EUR bets and a hit rate of 53.4% (195 won, 170 lost) on 1.92 average odds, your betting account would rise to 1.094 EUR. So, you have a 9.4% ROI percentage.

However, if you wish to calculate your ROI more precisely, it is important to take into account everything you spend in order to bet. These include the cost of your internet connection, any hardware or software you may be using, the cost in terms of man-hours and any other cost such as bank fees, eventual cash injections and other top-ups.

If you can account all those elements into your calculations and still maintain a positive ROI, then you can pride into knowing that you are truly, a successful punter. The tricky part of the ROI, is that although it may contain some common elements for every punter, it must, no matter what, feature your personal variables.

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What is yield in betting

Yield is the Profit or Loss ratio applied to the total capital invested and not the starting available amount. The term itself means profit, earnings or revenue, with the objective being to obviously, keep it positive. If your aversion to risk is low, you will select bets with higher probabilities. Bets with higher winning probabilities translate to lower odds, that in turn, amount to a smaller yield. If you enjoy higher risk strategies, you will get a bigger yield with higher odds.

Depending on the strategy a bettor has decided to follow, a fully acceptable result will average a yield between 4% and 10% profit in the long run. In football/soccer betting any yield over 6% is considered to be successful for a betting season. The formula is as follows:

Yield: [(Profit or Loss/Capital employed) -1] x 100

A simple example: On the first day of your betting period you stake 150 EUR in total and earn 160. So, your yield is [(160/150)-1]X100=6.67%. Next day you stake another 130 EUR and you earn 210. Your yield is [(160+210/150+130)-1]X100=32.14%. The third day you stake 160 EUR and win 95. Your yield is [(160+210+95/150+130+160)-1]X100=5.68%, and so on.

In the Yield formula, the sum of money staked includes all stakes, even those that have not been lost (including the money-back option for a draw in DNB asian handicap bets). Some bettors tend to miscalculate their yield and as a result, may overstate their yield results.

It is strongly believed that a higher Yield index indicates a better punter. However, it’s quite difficult to estimate the real Yield percentage limit, according to which we can define what really makes a bettor effective. There are a couple of additional facts we have to check in order to test this formula.

First of all, we have to know the exact number of bets in order to calculate the Yield. It's impossible for anyone to estimate whether a punter is efficient or not if his Yield rises to 20%, without having access to his history of bets. It's common that the Yield has to be checked after a long period of time. If we calculate a Yield for example after only 20 bets, we could find really exaggerating Yield numbers, as high as 20%+. The punter who has the 6% yield in, let's say, a whole year and 300 bets is considered much more efficient than the one having the seemingly impressive 20+% on only a few decades of bets.

The second depends on the time that the Yield was obtained. Of course we must also contemplate the number of bets and analyze the betting history of our players before we can illustrate their effectiveness. This means that, if we take into account a player whose Yield index has been high for several years, then we know that he plays frequently and rarely has suffered long periods of losing streaks.

A win rate during a whole betting season will probably stand between 50%-54% range (single bets on evens odds). With an average 10% vigorish for the sportsbook, you need to hit 52.38% to break even. If you bet 1.5% of your bankroll per bet once a day, at the end of the year you’ll have placed 365 bets. Even with a hit rate over 50% (51.4% to be precise) you would lose your entire bankroll, especially if you pick average odds lower than 1.90.

With a slight increase of your hit rate over the break-even point (53% instead of 52.38%) and at average odds of 1.92, you would get a yield of over 8%, which is exactly what you need for a long term betting investment. If you manage to get an over 54% hit rate your potential yield would increase to more than 15%.

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