Friday, 8 July 2011

A step in the right direction.

It's official. I am a wreck. A poor excuse for a man.

Having taken a week to shrug off a cold, I woke this morning to a raging eye infection. Seriously, couldn't open my right eye and when I forced it open, the light was a nightmare. Acute conjunctivitis, according to the quack. So, antibiotic ointment and eye patch (yes, an eye patch!) in hand, I somehow struggled into work to receive the sympathy and understanding of my long-term comrades. Perhaps a cuppa and a biscuit brought to my desk? No. One colleague saw fit to take a photo of me looking like a cross between Captain Pugwash and Gabrielle and stick it up on Twitter. Sods!

Another question in the 'Comments' box last night...

Hi,i read a fair few blogs from time to time, the one thing i dont understand is why pepole have so manys racing sevices on the go at the same time. could you please tell me your thinking behind this? from a wannabe.

I can understand this question being asked, particularly when things aren't going so well. During a bad patch, the potential to be losing money at a rapid rate of knots is increased somewhat by there being many drains down which the cash can be swept.

However, by diversifying, the risk of losing more, is actually lessened. Now a proper analysis of the principles of diversification in correlation to risk management is beyond me, I'm afraid. There are people out there much more qualified than I to talk about this - Graeme Dand of The Football Analyst, Mr Gekko at the SBC, and Mat Hare who writes the Secret Diary of a Professional Gambler blog are three that immediately spring to mind. Perhaps though, I can show the relevant laws in action via example...

A lot is made now of the need for the individual to create their own pension pot. Due to longer life expectancies and a larger population, to rely on the state pension and retiring at 60 is no longer an option. So instead, we have to save.

So say at 25 years of age, I start to put some money away each month into a company pension scheme. That scheme is managed by a Fund Manager who decided which shares should be invested in using my money, the aim being that over the years to retirement the overall value of the shares will grow and produce a return. Over the course of my 35 year career, I only put my money into this scheme. But, horror of horrors, in my last year before retirement, there is a stock market crash and my returns from my pot are reduced significantly. I've been stung, simply because all my eggs were in just the one basket.

Now compare that situation to one in which I split my savings between the pension fund, a buy to let property or two, a direct investment in government bonds, in gold and precious metals, etc, etc. My eggs are spread and I ought not, theoretically, be left in the same mess when the stock market crashes, because the price of gold has risen and is strong, and I am receiving an income from the rent on my second property. In other words, you have spread your risk. Yes, the stock market crash has diluted your returns somewhat, but you are not wiped out.

In a gambling scenario, if we look at the first quarter of this year with a portfolio of just PJA NH, you'd have lost a considerable amount of your bank. However, if you had both PJA NH and The Market Examiner, you'd have made an overall profit. In six months time, The Market Examiner may be really struggling, but PJA NH be playing a blinder. And the more services there are in the portfolio, the lower the probability of your entire portfolio performing abominably over a sustained period of time. In other words, the overall returns from a larger portfolio ought to show a smooth upward curve. Yes there will inevitably be short term blips, but over time. the graphline should be nice and steady.

One last thing I would say though, is that ideally, the portfolio of services should show diversification in itself. If all the services that you followed adopted similar methodologies and targeted the same types of race, then you could be in trouble. I think mine reflects this principle. Winning Racing Tips go each way in non-handicaps, Northern Monkey and (generally speaking) On The Nose go each way in handicaps, 4PA targets the big races, Chasemaster the NH chases at minor tracks, PJA NH handicap chase and hurdle races, The Market Examiner win only at long odds in all kinds of races, and ProBandit dutching at shorter prices on the flat. That's a fair old mix.

Anon - I hope that answers your question. One thing though - all this is theory. It makes sense, but when the services are all underperforming at the same time, as they have over the last few days, it is very easy for the brain to forget these principles and simply concentrate the mind on the money being lost. And that is when the devils start to whisper in your ear, getting you to change stakes, reduce services, etc. In the grand scheme of things though, a few days really is completely irrelevant, and that's what we need to focus on.

Today's Betting

Well, that's a bit better. A profitable day at last, and a good one at that.

4PA: I don't know who PCB has upset, but he needs to go find them, apologise, and get the curse lifted. His first bet was an each way bet at a long price which didn't place which is fair enough, but in the second race he played in he had Memory which refused to leave the stalls, and Saphresa, whose jockey raced far too far back before passing every horse except the winner who had first run on him. For the second time in a week, 4PA was on by far the best horse in the race but didn't collect.

On The Nose: Three selections today from Dean and the last of them was a lovely winner (Kanaf - Ascot - 14/1) backed win only. Hopefully this signals a return to a bit of form.

Northern Monkey: Similar story here. A fantastic winner at a good price, and staked more heavily win only (Coeus - Newmarket - 14/1). There were five selections in all and I thought most of them ran well enough to be honest so again, I'm hoping a bit of form is being hit. The signs have been there for a little while now actually.

The Market Examiner: Another nice winner amongst their three selections again today (Jungle Bay - Chester - 9/1). Becoming a bit of a habit.

4PA: Staked 4pts, -4pts.
On The Nose: Staked 2pts, +5.5pts.
Northern Monkey: Staked 4pts, +18.5pts.
The Market Examiner: Staked 3pts, +7pts.

Friday 8th July: Staked £316, +£404.
Running total: -£315.97 (roi -18.19%).

Still a long way to get back to break even, but a step in the right direction.


  1. Hi Rowan,

    Thank you for your detailed answer yesterday. I think it raises a few interesting points - ones that in a similar vein I think are easier explained in a blog post - I'll just have to find time to put my thoughts down.

    In response to this post, I think a simple way to look at it is through flipping a coin (I appreciate that your tipsters may select the same selection and/or different selections in the same race and so it's not a direct comparison).

    If you flip a coin once the two possible outcomes are either heads or tails - so if you bet £50 @ evens on heads the expected value or number of heads is 0.5 and therefore you have an equal chance to double your money or lose all of it. If you decide to flip this coin 4 times you now only have a 1/16 chance of doubling or losing all your money but you also have a range of options inbetween - a 1/4 chance to win £50, a 1/4 chance to lose £50 and a 3/8 chance of breaking even.

    Assuming all your services have the same Expected Value (essentially the mean of their results) then by including more services you are in theory reducing your risk to randomness or, the variance in the results. Of course if your services expected value is actually negative then by reducing the variance you're increasing the likelihood you'll lose although the rate at which you lose will likely decrease.

    I did start to cover your average result/Expected Value and its relation to your ROI and how that in turn could be used to determine the level at which you are over or under performing. I never properly finished it and never moved onto variance and ways that you can improve the accuracy of these calculations as obviously calculating true odds for a sports event isn't the same as for the flip of a coin. Another post to get around to writing at some point!

    Nice to see a more positive result today. Must do a lot for your frame of mind especially with the weekend coming up.

    All the best and hope you're feeling better soon.


  2. Hi Curly,

    Very well put. I shall stick this up tonight, if I may?

    By the way, where can I find your blog?