Maximizing Return on Investment
The following demonstration uses actual numbers from our picks for the 2008 MLB season.
Assume a starting bankroll of $1,000 and a betting unit equal to 3% of the bankroll. The starting bet for this bettor is $30 (0.03*1000). We suggest to you in our money management article that you should be recalculating your bet size at the end of every month. The chart below shows you exactly why you need to be doing this.
| Month | +-Units | Bet Size Without Recalculation | Profit Without Recalc | Bankroll Without Recalc | Bet Size With Recalc | Profit With Recalc | Bankroll With Recalc |
|---|---|---|---|---|---|---|---|
| March | -1.99 | $30 | -$59.70 | $940.30 | $30 | $-59.70 | $940.30 |
| April | 34.17 | $30 | $1,025.10 | $1,965.40 | $28.21 | $963.94 | $1,904.24 |
| May | 17.15 | $30 | $514.50 | $2,479.90 | $57.13 | $979.78 | $2,884.02 |
| June | 13.31 | $30 | $399.30 | $2,879.20 | $86.52 | $1,151.58 | $4,035.60 |
| July | 24.6 | $30 | $738.00 | $3,617.20 | $121.07 | $2,978.27 | $7,013.87 |
| August | 1.67 | $30 | $50.10 | $3,667.30 | $210.42 | $351.40 | $7,365.27 |
| September | 35.15 | $30 | $1,054.50 | $4,721.8 | $220.96 | $7,766.68 | $15,131.95 |
| October | 2.1 | $30 | $63 | $4,784.8 | $453.96 | $953.31 | $16,085.26 |
| Total | 126.16 | ----- | $3,784.80 | $4784.80 | --- | $15,085.26 | $16,085.26 |
As you can see in this chart, the person who bets a constant $30 all season will have a net profit of $3,784.80. His ROI is then 378.48%. (Final Bankroll - Initial Bankroll) / (Initial Bankroll) = (4784.80 - 1000) / 1000 = 3.7848.
If instead the person recalculated his bet size every month to be 3% of his bankroll size then his bet size will grow as his bankroll grows. His ROI would then be 1,508.526%. Now that's a big difference. Never underestimate the importance of money management.