Some time ago some dude said “compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it”
(Albert Einstein comes to mind ☺)
Anyway…
What is compounding ?
Well in financial terms it is the process of earning interest where the interest itself can earn interest. For example if you put £1000 in a bank that pays 3% interest monthly that is compounded in the same timescale the interest paid in the first month would be £30 (3% of £1000). The next month interest would be £30.90 (3% of £1030) and so forth, so in this instant the more frequently the interest is compounded the higher the yield.
Can you make it work in the context of betting ?
I have read quite a few articles on the subject and there is differing opinions through the betting community so I thought I would write a piece myself and then perform some type of test to see if you can in fact make it work.
There are quite a few ways of compounding to achieve the goals of increasing our banks to astronomical amounts so that we can grab the fast buck and retire happily ever after without having to look a bookie square in the eye ever again. DO YOU KNOW ANYONE ? me neither anyway I will see if there is any achievable way of actually growing the bank size sensibly so that we can make gains year on year.
There are plenty on the internet using different forms of compound staking and the one that comes straight to the fore is the football betting guys on facebook always touting the £10 to £1000 challenge of £20 to £5000 challenge. One thing for sure is they get a very high following from people wishing to grab the easy buck.
So how do they do it ?
Basically after the initial bet everything is then bet on bet two and if that wins everything then goes onto bet three…etc..etc until the magic target is reached and we all totter off and spend our riches on all sorts of glamorous things or not..This is all a bit of a kamikaze approach but I suppose when it comes off it’s a good feeling, but how many people actually see it too the end ?
Another way we can achieve the goals of significantly increasing the bank through compounding is to bet a percentage of the bank each time we place a bet whether that be 1% or 10% it all depends on how quickly you want to grow the bank and it will also depend on how good you are at finding winners of course. Another alternative is to set a daily winning percentage of the bank again that can be whatever you like , but you have to bear in mind how big are the stakes going to get and will you be able to get the bets on at those stakes.
If you were to grow your bank by 1% per day you would double said bank in around 72 days ( rule 72).
% Target Days to Double Bank
1% 72 days
2% 36 days
3% 24 days
4% 18 days
5% 14 days
6% 12 days
7% 10 days
8% 9 days
9% 8 days
10% 7 days
12% 6 days
15% 5 days
All the figures in the above table are approximate.
Realistically you have more chance of success of achieving your goals at the lower percentage marks due to stake sizes and as long as you have patience it is quite possible to succeed.
If you had a starting bank of £500 and increased daily by just 1% in a years time that would be £16,000, but what we need to consider is the odds and stake sizes, now for the £500 to £16,000 even at odds of 1.5 for every bet our stake sizes would eventually add up around the £100 per bet and the question then becomes do you still have the nerve to carry on to the end.
So £16,000 tax free income per year even if you started with £200 that could rise to £6400 per year on both banks once the target is reached you just take your profit and start again.
What you now have to ask yourself can I actually see it through until the end ? Well I can’t answer that for you but as usual it’s all about the long term where we make our profits, you could even break down to each quarter before you start again, there are endless ways in which you can play the game.
The above table shows the daily increase and stakes if each bet was at 1.5 on betfair. So on day 72 you have pretty much doubled your bank.
I hope I have given you an insight at how powerful compounding can be if structured correctly and sufficient time is taken to achieve the goal, it all requires discipline and patience.
All The Best
Mick
P.S
I will be testing the above theories on my face book page MC Racing from tomorrow if your interested. One test will involve 1 bet per day on the betfair place market at minimum odds of 1.5 to see if I can the daily percentage of 1% per day with one bet only.
The second test will involve a stop at winner approach, which will entail lose recovery until I hit the daily 1%.
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P.P.S
You will also see what I will be betting on at the Aintree Festival, which is separate from my normal service.