Calculating Rate of Return in Sports Betting

People who deal with stocks and other kinds of investments are always aware of the term rate of return. The general definition of rate of return is simply a percentage which shows people what kind of return they’re getting on the money they invest in something.

Seeing as how sports bettors invest money in their wagers, rate of return can also be a very useful tool for them as well. Since rate of return is so helpful in sports betting, it’s definitely worth taking a further look at this concept.

Understanding Rate of Return

The first thing you should know about rate of return in regards to sports betting is that the investment you’re making is simply the money wagered in the bet. For instance, if you put down $110 to win $100, then the $110 is your investment. Likewise, your return is the net amount of money that is won or lost in the investment. If you won the bet where you wagered $110 to win $100 then your net return will obviously be $100.

Calculating Rate of Return

Just knowing your net return on an investment is not enough since you want to break this number down to a percentage to get your rate of return. This is easily done by taking your net earnings and dividing them by the investment that you made. In the case of the aforementioned bet where $110 was wagered to make $100, the rate of return would be calculated like this: $100/$110 = 90.9%

So if you were to only bet $110 to win $100 once in your lifetime then your rate of return would be 90.9%.  And this is definitely an incredible return, but it’s obviously not realistic to assume that you’ll win 100% of the time if you keep betting. That’s why you need to come up with a more realistic rate of return over a range of bets.

The more sports bets you make, the better the idea you’ll have of what a realistic rate of return is on your wagers. Great sports bettors can win about 60% of the time which is great, but they also have to factor in that the house normally takes out 10% of the amount invested in vigorish. 

Since this is the case, you’ll want to know how to figure out the rate of return for when you’re not going to win 100% of the time (this is almost certain to happen). Let’s assume that you win 60% of the time which is actually an excellent winning percentage for a sports bettor. After 10 bets the amount won will equal $600 ($1,000 X 60%) while the amount lost will be $440 (1,100 X 40%) providing a net gain of $160. 

Since a total of $1,100 was risked to make the $160 you would have a formula that looks like this: $160/$1,100. When you do the math here you’ll see that the rate of return on this investment equals 14.55% which is an excellent return.

Rate of Return over a Year

Investors in all fields like to find out their rate of return for an entire year so sports bettors should be no different in this regard. To get a totally accurate number here, you can add up all of your wagers along with all of your net gains then do the math for a return on the year. 

However, many people will simplify things by just taking their returns over a span of 3 or 6 months and then doing the math. For example, if you had a 6% return on the first six months and an 8% return over the last six months then your rate of return would simply be 7%.

One more thing to factor into the equation here is if you happen to subscribe to any kind of sports handicapping services. Many people don’t include this in their rate of return analysis which is a mistake because handicapping service fees are a part of the investment. 

With this in mind, let’s say you pay $50 a month for a handicapping service subscription which equals out to $600 a year. Also, let’s assume you make 120 wagers in a year which means you’re paying an extra $5 for every bet you make ($600/120). Now your rate of return on a single win will look like this: $100/$115

Assuming you still win 60% of the time, your net gain will now only be $140 for every 10 bets ($600 - $460). Since this is the case, your adjusted rate of return will be 12.2 % ($140/$1,150).