- 23 Май 2019
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ROI OR PERCENTAGE OF INCOME - WHAT TO CHOOSE
There are two types of players in the bookmakers. The first ones are amateur players, they just come to relax, have fun and try their luck. Putting 1000 on your favorite team, they fervently “support” for it, without thinking too much about making profit in the long term. Such players never keep statistics of their own bets, do not adhere to certain strategies, do not apply financial management. If you lost money - replenished the balance, and so on in a circle.
The second type of players consider betting as a real way to make money and get a steady income. It is important for them to adhere to the strategy and financial management, plus you need to keep statistics on rates and evaluate your success. Many betters here are faced with a choice: take into account the ROI or the percentage of profitability, which of the counting methods is the most correct and preferable? To answer the question, it is necessary to examine each aspect in detail and compare their strengths and weaknesses.
What is the percentage of income?
Profitability is an indicator of the profit received from investing money in a particular business, investing in stocks, deposits on bank accounts and other financial transactions. It is calculated by the following formula:
D = ((P2-P1) ÷ P1) * 100
Here D is the yield, P2 is the total profit, P1 is the investment. Yield is expressed as a percentage, but sometimes, for ease of understanding, simply net profit is indicated. For example, if 1000 rubles are invested and 2000 rubles are earned, then the income amounted to 1000 rubles. Substitute the numbers in the formula and we get the following values:
((2000-1000) ÷ 1000 * 100 = 100%.
That is, the percentage of return on investment is 100%.
It does not take into account the time interval. How long is the profit? For a day, a week, a month, a few years? This is the main drawback of the indicator.
Profit in sports betting
As stated above, bets are also a kind of business, which carries financial risks and requires initial investments. The player must correctly invest every euro of the total deposit in order to receive profit and not lose the entire bank in a short period of time. That is, to develop your own strategy and follow it, making a bet only on strictly marked events.
The percent of income in betting is calculated using the same formula as above. If you write everything in simple words, it will look like this:
Income = ((total bank - starting bank) ÷ starting bank) * 100
A total bank means the final amount of money in a player’s account at the time of calculating the indicator. Starting bank - deposit made to the balance of the bookmaker. Using the formula it is easy to calculate how much the better made profit by replenishing the gaming account in the bookmaker.
For better understanding, a concrete example with a positive indicator for the player. Player John made a deposit in the bookmaker’s account in the amount of 100 euro, so he decided to invest finance in betting and make a profit. By placing bets on his own strategy, he managed to increase the starting bank to 110,000 euro. To calculate its success, apply the formula:
((110-100) ÷ 100) * 100 = 10%
10% profitability or 10 euro net. The player got a plus, his investments were successful, bringing a tangible profit in a short time, even the best financial institutions cannot boast of such performance.
But again, the question arises: in a week the deposit has really increased significantly, but what will happen in a month, in a year, in a longer period? It is too early to judge the effectiveness of John’s strategy at this stage.
The percentage of profit may be negative. Again a example. The same John replenished the account in another office for 100 euro, but already began to apply the new strategy, which seemed to him more profitable. However, the player made a mistake, his system failed, in the end, after a week, the amount of 85 euro was on the balance sheet. Substitute the numbers in the formula:
((85-100 ) ÷ 100) * 100 = -15%
Losses amounted to 15%, or 15,000 euro net loss. The player went into the negative, losing a significant part of the bank in a short period of time. But again, the question remains: maybe the strategy is not so bad, and in the future it will turn out to be positive? After all, a week is too short a time for final conclusions.
The percentage of profitability is an absolute indicator that does not take into account the time, the game cycle, the number of bets. Therefore, to focus on it to determine the success of the beta is undesirable.
What is ROI?
ROI stands for Return on Investment. It is an indicator of the profitability or loss of a business or financial investments in a certain area. It is expressed as a percentage. The calculation formula is basically the same as for the percentage yield, but here an important element is added - a period of time. For example, the income received for the month, half a year, quarter, year, and so on.
For example, an online store for 1 year invested in the purchase of goods 500,000 euro, and sold them for 1,200,000 euro. Calculated by the above formula:
((1 200 000-500 00) ÷ 500 000)) * 100 = 140
That is, the profitability of the business was 140%.
All professional betters measure their success in ROI, this is the most objective indicator that takes into account the distance. The formula here will be the same as for profitability, but the player will calculate the value for a particular game cycle. It can be measured by the number of bets, for example, for 100, 500, 1000, and so on, and a certain period of time: for a month, half a year, a year.
It should be understood that it is completely ineffective to consider ROI for 1 bet or day, the indicator will be completely biased. It is necessary to take a long-term perspective, or a sufficient number of bets. ROI can be either positive or negative.
John, who was familiar to us, invested 500 euro in the stakes, a year later he had 600 euro in his account. He decided to calculate the ROI, for this he used the formula:
((600-500) ÷ 500)) * 100 = 5
Revenue was 5%. What is already considered a good result. The indicator can be considered quite objective, because quite a distance of 1 year is taken into account.
On average, a player made 2 bets per day, which means that about 800 were collected in a year. The number of wagers is also acceptable for an objective assessment.
In another institution, John's business did not go up the hill, in one year his bank “sank” from 500 to 420 which means that he went into minus. Substitute the numbers in the formula and we get:
((420-500) ÷ 500)) * 100 = -16
As a result, the loss was 16%. Investments were unsuccessful, and ROIs were negative. The number of bets and the distance is similar to the first example.
A quite reasonable question may arise: why use ROI if you can just calculate the percentage of profitability? On the one hand it is logical, but on the other: such an important factor as the game cycle will not be taken into account. It is expressed in a certain number of committed bets, or for a specific time period. In bets this is called “distance”, the success of any bettera is shown by her.
For a better understanding, you can give an example from life. The bricklayer worked for seven whole days without days off, from morning to evening, he had a hard work. He received a salary of 50o euro. His brother is a lawyer, for the month of work he was paid 250 turo. At first glance, the builder works more efficiently, but the numbers are deceptive. The lawyer for 30 days held two meetings in court for 3 hours each, plus held several consultations with clients. Its labor costs are significantly lower, which means that the activity is more profitable and efficient.
The rates apply the same scheme. For example, capper №1 earned 1000 "clean" for 1000 rates. His colleague №2 reached such a mark in just 100 wagers. In this case, the second capper works much more efficiently, although both profits are the same. Therefore, the ROI indicator is so important in betting, but precisely for a certain game cycle, and not just for the size of the final pot.
Comparing the activities of forecasters, you should focus on their ICs, and not on simple returns.
So what to choose: percent of income or ROI? From the analysis above it is obvious that the ROI are still preferable, and there are several good reasons for this:
- The percent of income is an absolute indicator. It only helps to calculate how much net money the better has earned, it does not take into account how long he has done it, and how much he has made a bet.
- ROI primarily takes into account the distance, otherwise it is called the game cycle. Evaluated either the number of committed bets, or a certain period of time. That is, the player's efficiency is taken into account, and not just the bare totals on the balance sheet.
- ROI helps to objectively evaluate your own achievements in betting and shows whether the chosen game system is correct. In addition, you can study the capper, whose predictions there is a desire to use.
- Using ROI makes it easy to compare two cappers. If the first earned 500 euro for 1000 bets, and the second for only 50, and for the same period of time, then it is considered more effective. Since actually spent less money to achieve a result.