Managing the Money in your Sports Account
Updated: Dec 30, 2019
Managing your money or bank roll is one of the most important aspects of investing in sporting events. Money management can make all of the difference in the world whether you are successful or whether you fail. It is said that 90% of sports betters fail in the long run. We can speculate that this number would be a lot lower if the funds would simply be managed properly. Here we will discuss some simple money management methods that can turn even a losing player into a winner.
Financial people say that you should never put more than 5% into risky financial deals at one time. If you are doing more than one sports deal you would have to make sure that the total amount is not more than five percent. So if you have $100 in your sports account then you should never invest more than $5 at any one time. A more conservative number is 1-3%. I know this seems ridiculously low. But the financial experts know that this is a risky business. If you are going to survive for the long haul you best heed this advice. Ignoring this advise is no doubt why so many have failed.
Keeping the amount that you invest in each deal exactly the same is the most simple and conservative method of money management. This is called the Flat Method. This method will preserve your capital so that you have plenty of cash if you experience a losing streak, which does happen from time to time. Using the account value of $100, you would invest $1 into each deal. Win or lose, you would be putting $1 into every deal. As your account increases in value you could adjust the base amount accordingly. For example, as your account value increases to $200 the 1% would equal $2 per deal. This conservative method will ensure that you can survive over the long haul and build up your account. You should be able to beat your bank savings account easily given the very low interest rates.
There are other methods which are much less conservative. Some are very aggressive and downright risky. We do not advocate using these methods. But knowledge of them could be helpful from time to time if your sports picks get into a rut and you need some help to get out of it. Let's discuss some of these.
One method is called the Martingale Method. This is where you double down your investment after a loss in an attempt to recoup losses. This method is often used by professional gamblers for games at a casino where the odds are roughly 50-50 or the equivalent of a coin toss. Baccarat and Roulette are games where Martingale is often applied. After each loss, you simply double down. If your initial bet was $1 and you lose, your next bet would be $2. After that it would $4. After that it would $8. If you lose again you would bet $16. A large number of losses could wipe your account out as your bet amount gets larger and larger. I personally have lost hundreds of dollars after suffering a bad losing streak.
The problem with Martingale is that it is great method in theory. How bad can a losing streak be? Eventually you will win again. But when you try to apply it to your program it can destroy your account. Plus most casinos actually do have limits on the size of the bets. You could be trying to come back from your losses and then you reach their limit. Martingale is certainly not advised at the casino. But what about for sports?
Martingale can be successfully applied to sports as long as you have a winning track record for the picks. This investor uses Martingale from time to time. I would never use it long term. But if I have a nice bankroll and I just want to keep grinding my account higher it does work in the short term. So, Martingale is certainly suited better for sports than casino games as long as you have a method and a good track record that you trust for picking winners.
Another method is the De'Alembert Method. The system is named after a french mathematician and physicist by the name of Jean-Baptiste De'Alembert. This method is based upon the Gamblers Fallacy that the more often a specific outcome occurs the more likely that the opposite outcome will occur. For example, if we flip a coin 20 times and it has landed on heads 18 times then the odds are good that the tails will eventually start coming up at anytime because the law of averages eventually has to catch up. This fallacy has been proven false. In betting games the history of an outcome has no effect on the future. At any point in time the likelihood of heads or tails is exactly the same. In games with a 50-50 outcome there is no way to predict what that outcome will be in the future based upon the past.
Despite this weak foundation, the De'Alembert Method can be effectively applied to sports investing simply because it will hurt your bank roll less dramatically than Martingale. Here is how it works. It begins exactly like Martingale. After a loss you simply double down the next deal. If you invest $10 into a game and lose then you put $20 into your next deal. If you lose on the second deal then you increase the amount by one unit for the third deal. So in our example here you would increase the amount by $10, putting $30 into your third deal. If you lose again you would simply increase it by another $10, making the total investment on the next deal $40.
Eventually you will win again. Unlike Martingale, when you win you will not go back to the base amount. But rather you would reduce the investment by one unit. So if you won the $40 deal the next amount would be $30. You keep reducing the amount after each win. You keep reducing by one unit until you are back to your base $10 investment.
The problem with De'Alembert is that you could continue to risk more funds, even if you are on a short winning streak. Until you reduce the investment amount back to the base you are carrying the emotion of losses forward to other games. What if your deals get choppy and you just don't seem to be making headway in getting back to the original amount? This poses some serious challenges.
This investor has never used De'Alembert for any sustained period of time for this reason. I have used it with casino games. But I found myself not being able to recover properly and stuck with some high invested amount that never seems to return to the base. A watered down method would be to simply return back to the base amount after a win or two. Unfortunately you would not recover funds from all of your previous losses. But you would get some of the lost funds back and get to live for another day.
These are the some of the difficulties with using Martingale and De'Alembert. For me the emotion is a big part of why I am not really a fan of either. Why carry the negative emotion of losing to your next game when you could regroup and start over again fresh each time with a brand new deal?
There are a couple of other methods we will discuss. One of them is the 1-2-3 Strike Method. Our attempt here is to win three deals in a row. This is where you invest your base amount like any other method on the first try. If you win then you invest your profit plus the base amount on the second deal. If you win again you invest your initial amount plus all of the profits for the third deal. If you win the third deal then you start over again at the base amount. For example, let's say the base amount is $10. If you win the first time you will then have $20. You invest $20 on the second deal. If you win again then you would have $40. So you invest $40 on the final deal. A win would increase your bank roll to $80. If at any point during the process you lose then you reduce the bank roll back to whatever the base amount was and then start over again.
A more conservative method would be the Partial Removal Method. Once again, the focus here is to win three in a row. This is where you remove part of the profits after each win. For example, if your base amount is $10, you could remove 50% of it after a win. You then could invest only $5 more on the second deal. So you invest $15 in your second deal after a win. If you win the second deal you would have $30. You could then remove $5 and put $25 in the third deal. If you win you would have $50. Then you would start all over again after the third win. You would realize a $40 profit. I believe you get the idea. The attempt is to risk less as you accumulate profits. This investor has not personally tried the 1-2-3 Strike or Partial Removal with sports. But it theoretically could work.
The problem with all of these methods is that they are based upon winning and losing single games. This is fine for a casino where you play one game at a time. But sporting games often occur at the same time. So that poses difficulties in the execution of any money management method. One technique which would enable you to use the methods are breaking your games down into categories. For example, my games are always broken down into three different types of deals. One game is an against-the-spread deal. The second game is a money line deal. The third game is an over/under deal. This gives me the opportunity to increase the amount in a future deal in whatever category I lost. This most often carries over to the next day. But it could be done during the same day on a heavy sports day.
If this sound confusing it is because it is. In order to be successful with the different methods you have to track all of your games on a spread sheet so that you can easily see your results and then act accordingly. Always remember that the best and least risky method is the flat investment method where you keep the base amount the same for the duration. Yes, your returns will be slower but you will be protecting your capital no matter what happens with the games. In all investment activities, slow and steady is always better. Remember that you should have no problem beating the banks with their low interest rates. Happy Investing!