Quote:
Originally Posted by speculus
Like "class" in a horse and "creativity" in advertising, the "ROI" is the most misunderstood concept when it comes to calculating horse racing profits.
And the trouble is it has almost become a norm that one must refer to the term ROI when discussing returns, never mind the fact everyone else may have some different notion in head as to what it really means, or should mean.
The most glaring flaw--and strangely, never discussed among horse players--with the concept of ROI is this: the term ROI comes from the financial world where there is never any dispute about the term and its meaning. But when we borrow it from them, we simply forget that there is a "time" element involved in their understanding of the term. When an investment gives you 20 percent returns on investment (ROI), it means it does so over a period of "ONE YEAR."
In horse racing our returns, if we wish, can be calculated on the basis of per race, per track, or per day or per week or per month. Only when we keep accounting records for a whole year, we may be truthfully reporting ROI as profits divided by Bankroll (that was set aside exclusively for the purpose).
Talking about ROI for any period other than a year is meaningless.
Racing could possible do with the concept of "profits on set-aside bankroll" or "profits on (maximum risked) part of bankroll", and that will make more sense.
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Very good explanation of ROI and its application
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