Money Management applies the superior investing principle of wagering a percentage of available capital rather than a constant flat dollar amount. In Sports Handicapping And Money Management – Part 1, we examined “Flat Sports Gambling Systems” and demonstrated its shortcomings. Percentage Sports Gambling Systems are the preferred method for professional sports handicappers and investors, which is the subject of this article.
Some “pros” try to combine the opposing theories by advising that a flat amount determined by a set percentage of a starting bankroll be wagered on games until the total funds are increased or decreased to a degree (50%, for example), at which point the flat amount is recalculated from the set percentage of the new bankroll amount.
This is only a slight improvement on the aforementioned pure flat sports gambling system plan since, after the first wager is either won or lost in such a scenario, the distinct advantage of percentage betting is lost. The inherent flaw of flat betting (increasingly higher-percentage wagers the more money lost, and increasingly lower-percentage wagers the more money won) is then forced into effect. The illogical disparity only increases until the static percentage is finally recalculated from the new bankroll and not the one of days, weeks, or even months ago.
Since percentage wagering is clearly superior to flat sports gambling systems, it is most financially favorable to reconcile the fixed percentage of bankroll before each wager to avoid the mistaken use of a flat betting scheme for any number of games.
Having established the superiority of percentage wagering over any type of flat sports gambling system, the consideration becomes one of determining what percentage is ideal and whether it ever varies from game to game.
Many percentage bettors incorrectly presume that a winning percentage above 52.5% (the break even point due to the 10% sportsbook “vigorish”) will ultimately return a profit sports handicapper regardless of what bankroll percentage is invested, as long as it is consistently and continually applied, and that with a better-than-52.5% winning percentage an increasingly higher percentage of bankroll wagered will produce increasingly larger profits. The potential financial pitfalls of this misconception can be illustrated by the following hypothetical gaming example:
PICK YOUR PERCENTAGE
Two friends enter a casino and are intrigued by a new card game called “Pick Your Percentage”. The game features a dealer taking a single deck of cards and turning the cards face-up, one at a time, while the players wager on each card.
To play, each bettor simply has to declare a starting bankroll and what constant percentage of his bankroll will be wagered on each card. All 10’s, face cards, and aces are winners for the house while the cards numbered 2-9 are winners for the players; thus, out of 52 betting opportunities the players would be guaranteed 32 winners against only 20 losers for a 61.5% winning percentage.
The gentlemen sit down at the table to play through a deck. The first man declares a starting bankroll of $1000 and a wager of 25% of bankroll per card. The second bettor also declares a starting bankroll of $1000 but states he will risk 50% of his bankroll on each card, assuming he will at least double his friend’s winnings.
After the dealer is finished going through the deck, the bettor risking 25% of his bankroll on each card has quadrupled his original bankroll and ends the game with over $4000. The bettor risking 50% of his bankroll on each card has lost more than half of his original $1000 bankroll and ends the game with a little over $400. This, despite the 2 bettors wagering on the same cards as they were turned up one by one.
What Happened?!
What the 50% bankroll bettor (and the average fan gambling on sports) failed to understand is that for the greatest return on any series of wagering opportunities there is a precise percentage of bankroll that should be risked. Even with more winners than losers, betting considerably more than the “magic number” will ultimately result in a net loss. PRO INFO SPORTS has named this ideal figure the “PEAK PROFIT PERCENTAGE” or “PPP”. The sequence of winners and losers in the card game or even in sporting events have no bearing whatsoever on the results of the application of the PPP principle. Using the same percentages, the outcome will be the same every time, regardless of win-loss pattern.