How to Accurately Calculate Return on Investment (ROI)
Initial Setup
- Initial Investment (Bankroll): $1,000
- Average Bet Size: $50
Tracking Bets Over 30 Days
- Total Bets Placed: 90 bets
- Winning Bets: 55
- Losing Bets: 35
Calculate Total Winnings and Total Losses
- Total Winnings:
- Assuming an average payout of $100 per winning bet (which includes the initial stake):
Total Winnings = 55 × 100 = 5,500 - Total Losses:
- For losing bets, each $50 bet incurs a 10% vig, resulting in a total loss of $55 for each losing bet.
Total Losses = 35 × 55 = 1,925
Calculate Total Profits
Total Profits = Total Winnings − Total Losses
Total Profits = 5,500 − 1,925 = 3,575
Calculate ROI
ROI = (Total Profits ÷ Initial Investment) × 100
ROI = (3,575 ÷ 1,000) × 100 = 357.5%
Summary of the Example Over 30 Days
- Initial Investment: $1,000
- Total Bets Placed: 90
- Winning Bets: 55
- Losing Bets: 35
- Total Winnings: $5,500
- Total Losses: $1,925
- Total Profits: $3,575
- ROI: 357.5%
Key Insights: - High ROI: A 357.5% ROI indicates a highly successful betting strategy over the 30-day period.
- Impact of Vig: Understanding the effect of vig on losing bets is crucial for accurate profit calculations.
- Tracking Performance: Consistently tracking your bets helps identify successful strategies and refine your approach.
This example illustrates how to calculate ROI over a 30-day period, accounting for winnings, losses, and the impact of vig on your betting results.
Common Misconception in ROI Calculation
- Collective Bankroll Misrepresentation:
- Many sportsbooks and betting services calculate ROI by treating the total amount wagered (the sum of all bets placed) as part of the bettor’s overall investment. For example, if a bettor places multiple bets totaling $1,000 over a period, some might suggest that their ROI should be calculated based on this total wagered amount.
- This approach implies that the bettor must continuously add funds to their bankroll to keep betting, which isn’t necessarily accurate.
- Impact on ROI Calculation:
- By counting every bet as part of the total investment, it artificially inflates the perceived investment amount. This can make it seem like the bettor is making less profit than they actually are.
- For instance, if a bettor places 100 bets of $50 each (totaling $5,000 wagered) but wins $1,000 in profits, the ROI calculation based on total wagered amount would look less favorable:
ROI = (Profit ÷ Total Amount Wagered) × 100 = (1,000 ÷ 5,000) × 100 = 20% - In reality, the bettor started with a bankroll of $1,000 and only needed to assess their profits against that initial amount.
- Correct Approach:
- A more accurate way to calculate ROI is to use the initial bankroll as the basis for the calculation. This provides a clearer picture of actual profitability.
- Using the previous example, if the bettor’s starting bankroll was $1,000 and they made $1,000 in profit, the correct ROI would be:
ROI = (Profit ÷ Initial Investment) × 100 = (1,000 ÷ 1,000) × 100 = 100%
Conclusion
Understanding how ROI is often misrepresented in the betting industry is crucial for bettors. By focusing on the initial bankroll instead of the total amount wagered, bettors can gain a clearer understanding of their actual performance and profitability. This knowledge empowers them to make more informed decisions and better manage their betting strategies.
