I’m a big believer in efficient markets. The case for efficient markets has been shown to exist in many markets, including horse racing. The parimutuel aspects of North American betting provides value, but definitely some challenges when placing bets. A good value one minute, can shift to a bad value by post time.
This is the inherent challenge with using pick sheets or “expert” advice from a handicapper. I have yet to meet one that tells you at what point the horse they are suggesting you bet is a good value.
Example… I tell you to bet heads on a coin flip, you know, cause I have a feeling that heads is going to come out. Where is the talk of value? If I was worth my weight in salt I would add the most critical aspect of making that bet, and that is;
- At what price is this bet valuable?
- How much should be wagered?
I have never seen a handicapper provide this information. Quite frankly, I don’t know if it is ignorance or intentional. Assuming a fair outcome on the coin flip. I should let you know that I believe there is a 50% chance of this outcome occurring, so, the value bet occurs at over even money (1/50% – 1 = odds breakeven point). So, let’s assume you are getting $1.10 to 1 for wagering on heads. Here is how to figure out how much to wager:
Chance of success = 50%
Chance of loss = 50%
Odds = 1.1
Estimated Return On Investment = Chance of Success x Odds – Chance of Loss
Estimated Return On Investment = 50% x 1.1 – 50%
Estimated ROI = 5%
Using the Kelly Criterion as a way to optimize capital growth, the amount you should wager, as represented by a percentage of your capital, is;
Wager % = ROI / Odds
Wager % = 5%/1.1
Wager % = 4.5%
So, this wager will optimize growth of your capital over time, however, remember that you are dealing with parimutuel pools and your wagers will affect the odds. If your net worth is a $100K, I certainly wouldn’t recommend a $4,500 wager, as that is usually enough to shift the odds against your favor in most parimutuel markets (which is why I will discuss peer to peer wagering in another post).
All PonyBettor.com suggested wagers are constantly being evaluated, right up to post time, for value. All the items I discussed above are what you get when you bet on a PonyBettor.com suggestion. I have not included the data yet for estimated ROI on Win, Place or Show bets, but, it is present for exactas. In the absence of data, I would recommend no more than a 1% investment of capital on suggested Win, Place or Show bets.
Remember, every investment situation is a good investment, it’s all determinant on the value you are getting.
