Before we start talking about Punting as an Investment Strategy, let’s just take a moment to look at the definition of an Investment Strategy from a financial perspective:
A strategy for allocating investments among different categories, such as stock, bonds, real estate and cash. The decisions are made based on the investor’s expectation about each categories potential performance and the investors tolerance for risk. Before an investment strategy is formed, investors have to know what their goals are, such as buying a home or saving for education or retirement, plus they need to understand how much risk they will tolerate.
When it comes to investment strategies, the volatile world of share trading has a cloak of respectability whilst punting seems to carry many negative stigmas. Those that operate in the share trading arena, irrespective of the level of risk involved are seen as investors, while those who are in the racing domain, no matter how skilled, are seen as gamblers.
Whilst on the surface these two areas of investment may seem poles apart, they do share considerable common ground. Both markets are:
- driven by knowledge and information;
- have a large public participation;
- offer indistinct future profit margins; and,
- confront participants with a risk decision making process.
The share market is the more complex of the two. There is wealth creation in this arena by the supply and demand of the market, and the underlying value creation of individual companies. Whereas horse racing is a zero sum game with no real wealth created with each winner being paid from the pool of money wagered on that race by punters. However, both offer opportunities to glean a profit.
Blue chip trading has always been seen as a traditional investment strategy for those following the “long term, low risk” path. Whereas, for horse racing the lure of instant, larger returns has always seemed to outweigh a slower, longer term strategy.
What has changed the whole horse racing industry has been the advent of the internet and the huge advances in technology that have ballooned online punting. Access to the net has spawned a whole new breed of punter who uses data bases, spreadsheets and financial models to analyse the huge amount of information available.
This has led to the rise of a group of punters who now see horse punting as a long term viable investment vehicle to generate a consistent income stream. They have taken out the emotion, removed the stigma and focus on numbers, percentages and working the market within their defined risk parameters.
Coupled with the advent of wagering platforms such as Betfair, the opportunity for savvy punters to win consistently has never been better. In fact, with the right approach and strategies, punting returns can easily outperform the more traditional investment avenues such as the share market and superannuation.
Another very appealing aspect of punting as an investment strategy is that in most countries winnings are generally non-taxable, as the governments tax the operators instead. This feature alone is worth thousands of dollars over conventional avenues.
Like an investment or business to generate an income stream, there needs to a focus on key points such as:
- Understand that there is no magic bullet or market secret. There needs to be a plan, a structured approach and education to identify and manage risk.
- Money management is paramount. And for each individual this will be a balance between operating within the defined risk parameters whilst at the same time maximising returns. That is, playing “too safe” may not give the returns needed, whilst too high a risk can wipe out the bank.
- Even though the aim is long term, there is a need to keep the plan moving.
- Adopt a mindset of win small, win often. Again this is the trade off between controlling risk against the urge to go for higher profits. As is often the case in punting, higher risk takers look to enjoy more success in the short term however those who adopt the reduced risk/lower growth rate strategy will be more successful in the long term.
Identify and Manage Risk
There are a number of ways to look at risk management in punting, and one of the best is to operate in a statistically favourable environment. What does this mean?
- Most winners have either won or been placed at their last start.
- Most winners are in the first four market favourites.
- Horses that race on the speed have an advantage over backmarkers.
- Look for horses that have high strike rates at the race distance and the track.
- Look for horses that are not going to be disadvantaged by a poor barrier draw or track conditions.
- Factor in class and distance.
- Look for fields of ten horses or less.
To further manage risk punters can adopt Dutch Betting or Percentage Punting to back two or more horses in a race to achieve a specific return per race. The returns per race are less than backing one horse but the chances of winning in the race are much higher. This fits with the win small, win often mindset.
CONSISTENTLY FINDING VALUE
Whatever selection process is used to determine what horse to back, the vital component in punting is VALUE. Punters must always be obtaining value to be profitable in the long term. A horse may have every compelling reason to back it, however, whether it is a good bet or not is entirely determined by one thing only. The odds.
This is the crux of successful professional punting. Finding the horses whose price in the market is higher than their rated price based on their probability of winning. Long term profitability will come when the punter consistently benefits from the difference between their price and the market price.
This is described as an overlay. Where the odds on offer in the market exceed the calculated or rated price of the horse. It is also sometimes described as a runner that has been under bet by the general public resulting in an inflated price.
Framing the race market, also referred to as rating the horses in each race, is a skill that all serious punters need. They can either acquire this themselves or, if time poor, purchase this information from professionals who have experience and credibility in framing markets. It is the cornerstone that enables identification of the value in horse racing and will be the only way towards long term profits.
It is crucially important for any punter, and especially serious long term punters, to keep meticulous records. They need to know at any given point precisely where they are financially and if they are on target to achieve their goals.
There’s no question that an investment strategy of this type can out-perform the standard models we are used to and offers other benefits that the others cannot. Besides, has anyone ever heard of a horse racing market crash? Racing markets will always provide an income to those practised in racing skills and Punting becomes a viable investment Strategy. But for every punter who is proficient, there will always be a 1000 who are not.
For those practised in racing skills, RaceBiz PRO tipping package offers the perfect framework to support the individual strategies of this knowledgeable group. Just two months after launching in May 2019, this package is showing a Profit on Turnover of 37%.
For those punters who are not as skilled and want to develop their proficiency, RaceBiz PRO tipping package is a platform structured for them to follow the tipster’s guidance and place their bets following the team’s strategy. The tipping selection sheet will calculate for each horse whether it is a BET (that is, there is an overlay) or a NO BET (that is, there is no value in backing this horse), and follow the general principals of Dutch Betting or Percentage Punting.
Punting on horses can offer far more than the occasional weekly boost to the bank. For punters who adopt a structured and disciplined approach it can provide a regular income stream to either supplement or replace a salary or provide a nest egg for retirement.
The team at RaceBiz are here to help and offer the following:
Find out more about RaceBiz PRO Membership package by CLICKING HERE.
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