How important is ROI really?

[windoor]

ROI over time

This came up in a thread not long ago, and I thought I would explore the differences.

It was said that a high ROI is not the end all of all factors to consider when looking for profit. Looking at this, I agree.

Disclaimer: This is from a UDM that I did not play

As I was trying to improve the hit rate on one of my spot plays, I found this.

I can add a filter to one of my long shot plays and increase the win percent by 10 points.

From 23% to 33%

Let’s see what happened.

1st quarter 2011:

23% hit rate returns $26,000 with a $1000 starting bank and 5% wagered to a $200 maximum win wager. This has an ROI of 2.28 over 169 races and an average odd of 9 to 1.

Add a filter and the same three month period has a 33% hit rate and a 4.62 ROI, (doubled) But returns only $2800 over the same time period.

With the filter in place the plays were very restrictive.

Which would you rather have?

A 23% hit/2.28 ROI and suffer through the losing streaks for a gain of 25K.

Or have a nice 33% hit rate/4.62 ROI with short losing streaks and gain $1800.

Of course it remains to be seen if the results can be validated when moving forward.

The first two months of the second quarter show an increase in hit rate to 26% over 123 races, but the average odd is down to 5.5 to 1 giving an ROI of 1.75. The ending bank is at $5100 at the end of May.

It is still very encouraging and I will be watching very closely, with the “could have, should have” thought racing through my brain.

Regards,

Windoor.

[Overlay]

Which would you rather have?

A 23% hit/2.28 ROI and suffer through the losing streaks for a gain of 25K.

Or have a nice 33% hit rate/4.62 ROI with short losing streaks and gain $1800.
As you say (and as Quirin also noted in Winning at the Races), it boils down to a decision based on the temperament and personal preferences of each individual handicapper as to the relative importance of the percentage of profit, the desired size of the final bankroll, and the risk of losing the entire starting bankroll; as well as the ability to judge when a horse or combination is worth a bet at its given odds or payoff.

[thaskalos]

There has to be some sort of balance between the ROI and the number of plays over a given period of time. A very high ROI cannot make up for a very restricted number of plays.

Instead of keeping track of his ROI...the horseplayer would do better to consider the period of TIME it would take to double his bankroll.

The best method is NOT the one offering the highest ROI; it's the one which makes us the most MONEY over a given period of time.

[Fastracehorse]

ROI over time

This came up in a thread not long ago, and I thought I would explore the differences.

It was said that a high ROI is not the end all of all factors to consider when looking for profit. Looking at this, I agree.

Disclaimer: This is from a UDM that I did not play

As I was trying to improve the hit rate on one of my spot plays, I found this.

I can add a filter to one of my long shot plays and increase the win percent by 10 points.

From 23% to 33%

Let’s see what happened.

1st quarter 2011:

23% hit rate returns $26,000 with a $1000 starting bank and 5% wagered to a $200 maximum win wager. This has an ROI of 2.28 over 169 races and an average odd of 9 to 1.

Add a filter and the same three month period has a 33% hit rate and a 4.62 ROI, (doubled) But returns only $2800 over the same time period.

With the filter in place the plays were very restrictive.

Which would you rather have?

A 23% hit/2.28 ROI and suffer through the losing streaks for a gain of 25K.

Or have a nice 33% hit rate/4.62 ROI with short losing streaks and gain $1800.

Of course it remains to be seen if the results can be validated when moving forward.

The first two months of the second quarter show an increase in hit rate to 26% over 123 races, but the average odd is down to 5.5 to 1 giving an ROI of 1.75. The ending bank is at $5100 at the end of May.

It is still very encouraging and I will be watching very closely, with the “could have, should have” thought racing through my brain.

Regards,

Windoor.

...but why would the filter restrict your plays?

fffastt

[JustRalph]

...but why would the filter restrict your plays?

fffastt

less horses qualify. the plays go down. put enough filters in and nobody would be left to bet.

[HUSKER55]

hey guys, if you are going to the bank ...does it really matter? If it works then use it.


what am I missing?

[raybo]

Wouldn't a higher hit rate/lower ROI, with shorter losing streaks, promote churn?

It really depends on what your game is. Some play multiple tracks and bet a lot of races, in this case a high ROI isn't necessary, as you're churning your money more often, and your lower losing streak lengths don't eat up your bank.

For others who play 1 or 2 tracks, and/or are extremely selective in their wagering, a higher ROI is more important, as your churn isn't as high, and your losing streaks are longer, negatively affecting your bank more.

At least that's my opinion.

[raybo]

hey guys, if you are going to the bank ...does it really matter? If it works then use it.


what am I missing?

very true, as I said, it really depends on your game, and what is working for you right now.

There's much to be said for comfort level and confidence.

[thaskalos]

hey guys, if you are going to the bank ...does it really matter? If it works then use it.


what am I missing?
Yeah, but you could go to the bank with a little...or you could go to the bank with alot. And going to the bank with ALOT is better!

Like I said...the object of this game is not to achieve the highest ROI possible; it's to make the most MONEY over a given period of time.

ROI does not stand alone as the determining factor of the profitability of a handicapper. Things like, total number of plays, and winning percentage, play major roles as well.

[raybo]

Yeah, but you could go to the bank with a little...or you could go to the bank with alot. And going to the bank with ALOT is better!

Like I said...the object of this game is not to achieve the highest ROI possible; it's to make the most MONEY over a given period of time.

ROI does not stand alone as the determining factor of the profitability of a handicapper. Things like, total number of plays, and winning percentage, play major roles as well.

Yes, but, it still depends on your game, and what you're comfortable with, you obviously want lots of hits and churn on a lower ROI, someone else wants just the opposite, me for instance. Of course, I never play straight bets, as you know. You, on the other hand, may, and in that case, churn is absolutely necessary to making a large amount of money in whatever period of time you have in mind.

[windoor]

Here is my take on it. As someone who suffers through some god awful losing streaks from time to time, I can tell you, it is not easy to lay down some money on the same type of horse(s) that has been draining you bank roll.

It took me quite a while to realize that this is just another part of the game were a lot of people fail. I include myself a member of this group for a long time. Now I know better.

My journey into data base handicapping has just started, but I have been doing research since the 70’s.

I'm thinking about a change in strategy, where I can make my plays as profitable as possible over time and throw a small investment bank at each individual play. Like picking stocks. Find a play you like, that has shown to be profitable historically. Invest the appropriate amount and move on to the nest one.

Let the PC make the selections, just like the research did, and play blindly after that. No emotions, no second guessing, no mistakes.

There was a guy on this forum some time ago, that showed a fully automated wagering system were his PC downloaded the cards, handicapped the card and then proceeded to place the wagers for him.

Set it and forget. Don't laugh, this just might be a very good idea.

I would like to see it set up with a stop wagering command, if at anytime the bank lost more than fifty units of a previous high bank total. Give me a big red flashing light on my wagering PC when any play has been stopped. Then investigate, tweak as needed and reset.

Check in once in a while to see how things are going, then go play a round of golf or something. A lazy man's way to play the races.

I like this idea, but it would not be good for all handicapping methods.

Regards,

Windoor

[therussmeister]

I haven't look at my ROI in years. To me the most important statistic to determine handicapping and wagering proficiency is average profit (loss) per handicapped race. If your bet size varies due to change in bankroll you need to throw bankroll size into the mix.

[Cratos]

In a financial analysis ROI is a good metric, but in horserace wagering bettng is about profitability which is an economic analysis which says that investments (betting) should be about profit maximization.

[raybo]

For the vast majority of players, high hit rate, high volume, low ROI wagering might be the way to go. They have a chance of minimizing their losses while gaining much experience, knowledge, and practice.

"Maximizing profit" is well and good, for profitable players, but has no value for losing players. One must become profitable first, before profit maximization becomes a priority.

So, many players are trying to follow everyone's instructions and suggestions, regarding everything under the sun, when all they really need is to learn to make more than they wager.

High hit rate/low ROI, low hit rate/high ROI, profit maximization, etc., on and on. Just find a way to play, within yourself and your means, while showing some degree of profit.

Baby steps before you try to run.

[Robert Goren]

First, you have got to find something with a positive ROI that isn't a quirk in the numbers. That is not easy. Once you get that the other stuff will fall into place if you don't over bet your bankroll.

[windoor]

For the vast majority of players, high hit rate, high volume, low ROI wagering might be the way to go. They have a chance of minimizing their losses while gaining much experience, knowledge, and practice.

"Maximizing profit" is well and good, for profitable players, but has no value for losing players. One must become profitable first, before profit maximization becomes a priority.

So, many players are trying to follow everyone's instructions and suggestions, regarding everything under the sun, when all they really need is to learn to make more than they wager.

Baby steps before you try to run.

I see what your saying, and in this context, I agree.

With one exception. Keeping the losing steaks to a minimum has to be a priority when starting out. It is way to easy to get discouraged when facing a long one.

The more plays you have (hi volume) the more likely this will occur.
The second example I gave with the 33% hit rate, short losing streaks, and high ROI would be better suited for someone with a small bank or just starting out.

Can you get both?

I was playing with some other filters and managed to get the win percent close to 30% with a higher ROI and only cutting out 54 races. Back fitting and red boarding, but the numbers are still very interesting.

Who says you can't make big money with win only wagers.
Assuming you had 10K to invest.

Stay tuned for 2nd quarter results at the end of July. I will not change anything on the filters.

1st quarter 2011:

Data Summary Win Place Show
Mutuel Totals 700.40 396.60 312.70
Bet -230.00 -230.00 -230.00
Gain 470.40 166.60 82.70

Wins 34 49 60
Plays 115 115 115
PCT .2957 .4261 .5217

ROI 3.0452 1.7243 1.3596
Avg Mut 20.60 8.09 5.21

Ending BankRoll: $56,994.80
Starting BankRoll: $10,000.00
High BankRoll: $56,994.80
Low BankRoll: $9,800.00
Bet Percentage: 0.0200
Max Bet: 200.00

46K in three months? I could live with that :)

Regards,

Windoor

[jsk42069]

I totally agree with this statement. The toughest part is finding something that is very consistent with having an ROI. You can find certain circumstances and methods that seem to work for awhile but in the long run the ROI is disappearing. A good talk on finding something that has a consistent ROI would be great. I love this forum. Have a Great Day everyone.

[raybo]

I totally agree with this statement. The toughest part is finding something that is very consistent with having an ROI. You can find certain circumstances and methods that seem to work for awhile but in the long run the ROI is disappearing. A good talk on finding something that has a consistent ROI would be great. I love this forum. Have a Great Day everyone.

IMO, what must remain consistent, is your method, not your handicapping factors or their weightings.

This game is in a constant state of flux, and as you noted, what works today probably will decline at some point in the future. Which means that, in order to remain successful long term, you must constantly update and tweak your handicapping process, regarding what factors and weightings you are currently using, while remaining consistent in your overall approach and method, if that method is proven to be sound.

Even if you are not using a database, what you must do is still related to database methodology, in that you must keep things current and adjusted/tweaked for changing racing environments.

[highnote]

The only thing that matters to me is NET INCOME at the end of the year.

After you subtract expenses, how much money do I have left over?

You could bet $1000 in a year and make $1000 profit -- that's a 100% ROI.
But if you only attended the races one day and it was a Breeders' Cup event then your expenses for the day might cost over ove $1000 -- event tickets, plane tickets, hotel, meals, transportation, tips, etc. So your Net Income from betting could be negative.

On the other hand you might bet everyday from your home and shove $1,000,000 through the windows and make $100,000. That's a 10% ROI.

ROI is a useful metric, but maximizing your personal utility function is more important.

Do you want to grind away 16 hours per day to make $100,000 per year betting horses or do you want to work at a job you might love and enjoy going to the races occasionally?

It all depends on your own personal Utility Function.

[Cratos]

What should be consistent given that your handiapping is good; is your patience and discipline for wagering. Wagering make far more losers than handicapping

[HUSKER55]

Cratos, I think you are correct! :ThmbUp:

[raybo]

It's nice to see that the last 3 posters agree with what I've stated previously in this thread, even if they may not realize it.

[speculus]

Not much.

RoI, return on investment, is a concept that has come to us from the financial world where there is a time factor involved, which is ONE year.

Warren Buffet does not calculate his ROI every half hour, or every day, or every week or every month. Even when he does his calculations before choosing to invest, he is looking at an yearly RoI.

With that thinking, most horse players (being losers long term, and a year is a long time if you bet every day) would show a negative ROI, or loss.

Perhaps a better, and surely more sensible, concept for winning horse players, is RoC, Return on (betting) Capital (set aside for the purpose), because in any case they calculate their bet sizes in relation to the bankroll set aside exclusively for the purpose.

[raybo]

Not much.

RoI, return on investment, is a concept that has come to us from the financial world where there is a time factor involved, which is ONE year.

Warren Buffet does not calculate his ROI every half hour, or every day, or every week or every month. Even when he does his calculations before choosing to invest, he is looking at an yearly RoI.

With that thinking, most horse players (being losers long term, and a year is a long time if you bet every day) would show a negative ROI, or loss.

Perhaps a better, and surely more sensible, concept for winning horse players, is RoC, Return on (betting) Capital (set aside for the purpose), because in any case they calculate their bet sizes in relation to the bankroll set aside exclusively for the purpose.

Yeah I got into that discussion on this board years ago and had the same belief as you stated that an ROI should be calculated on your starting bankroll, or how much you had invested before you attained profitability. This means that some would have to "restart" their bankroll several times, adding more money to it until the bankroll starts to grow and never goes broke again. The first year I wagered through an ADW I invested a total of $400 into the account and at the end of the year the account had grown to $7700+. A huge ROI when looked at in that way.

Of course, everyone said I was figuring ROI wrong, and I finally agreed. The ROI that the ADW figured, for the same period was 46%.

[windoor]

I have been looking at monthly, quarterly, and now yearly reports for the last couple of years. There are some interesting trends when you can see the whole year.

My only concern now is with quarterly reports, but I still take a keen interest in the monthly ones. Losing days and weeks are of no concern to me anymore. Ok, sometimes they annoy me, but no more than that.

I believe you need to do this, if you want long term profits. You also need to understand the losing streak and how to survive it. A yearly report can be a ghastly sight, but if you can understand what is required going in, it just might save you next year.

I know many here use the % of bank number or a value based method to determine the size of the wager.

I think the % of bank wager is a good way to start off if you are playing a new angle or method of handicapping, but once the bank has grown to an appropriate size or you are satisfied with the long term hit rate and average payout, you would be better served with a flat wager with at least a 100 unit bank to back it up.

I think ROI is still a good yard stick if used for quarterly and yearly reports only.

Of course nothing beats the profit/loss sheet.

Regards,

Windoor

[pondman]

ROI over time.

This is data from a track I modeled a few years back:

Allowance-- 39 races, 16 wins, net $5810, ROI 1.7
MSW-- 17 races, 5 wins, net $4820, ROI 2.4
MC-- 43 races, 14 wins, net $3400, ROI 1.3
other (graded, stakes)-- 5 races, 4 wins, net $4,500, ROI 4.55
claimers -- 63 races, 15 wins, net <$2,580>, ROI -1.2

I made the decision to never (ever) play claimers at the track. For the maiden claimers, I decided not to play anything at less than 8-1. All else I play.

I''m +$18,000 ahead (at this track) for the year 2011, expecting to break $40,000. Does ROI matter? I think it will help you reason.

[thaskalos]

I''m +$18,000 ahead for the year 2011, expecting to break $40,000.
You sound as if you are running a retail convenient store...:)

[raybo]

ROI will tell you whether or not to keep using your method, for sure.

My ROI for 2005, 2007, 2008, 2009, 2010 (took a year hiatus from racing in 2006) was net 45+%, for each of those years.

I think I'll stick with what I'm doing. :lol:

[pondman]

You sound as if you are running a retail convenient store...:)

Keep in mind, this is at just one track. I'm running a chain of convenient store...