UnderGround Forum >> Practical Bankroll Management for MMA Betting pt 2
|2/13/13 4:22 PM|
Member Since: 12/29/12
Part 1 - http://www.mixedmartialarts.com/mma.cfm?go=forum.posts&thread=2132522
If avoiding "going broke" isn't the primary concern of practical bankroll management for the MMA betting hobbyist, what is? The answer is tw0-fold. As an MMA betting hobbyist, there are two major concerns or goals:
1.) Don't become addicted to gambling and ruin your life.
2.) Protection of principal with an acceptable return.
The first and primary concern of practical bankroll management is to avoid becoming addicted to gambling and thus ruin your life. Gambling addiction is a serious disease just like drug addiction and alcoholism. As you read this article right now, people all around the world and ruining their lives because of gambling. Anytime you engage in any form of gambling, even potentially beatable gambling like poker or sports, you must remind yourself that gambling addiction is real and if you cannot gamble responsibly then you need to quit gambling immediately.
To protect against gambling's pitfalls, I advise that the MMA betting hobbyist make one responsible deposit in their MMA betting bankroll each year. How much should that deposit be? The answer is that it depends. The main qualification is that it needs to be an amount that you are okay with losing 100% of. Obviously this amount differs depending on life circumstances, annual income, and net worth. But the point is that it needs to be a small enough amount that you are comfortable losing. By making it a rule that you will only add to your MMA betting bankroll once a year it ensures that you won't be engaging in addictive habits like throwing more and more of your annual income at your MMA betting hobby. If you find yourself breaking your once a year rule and depositing money into your bankroll multiple times throughout the year, then you are engaging in irresponsible and addictive behavior, and it is a sign that you need to stop gambling and betting on MMA immediately.
The second concern of practical bankroll management is protection of principal with an acceptable return. This concern deals with what percent of your bankroll you should be wagering on each bet, i.e. your bet sizing. The answer is, again, that it depends. You must balance the two-part concern of protecting your principal while achieving an acceptable return. How much risk you want to take with your yearly bankroll, and the definition of an acceptable return are subjective opinions that are solely up to you. I have risked 1% of my annual bankroll, 10%, 60%, and many other sizes on different bets.
For me bet sizing comes down to risk/reward and your margin of safety. Let's look at the Velasquez/Lesnar example. I had Cain winning this fight about 90% of the time, while the market had him winning the fight about 40% of the time. This fight had a huge margin of safety and was an extremely low risk, high reward opportunity. I risked 60% of my yearly bankroll on this fight because it was such a great opportunity. Allocating large portions of your capital (or bankroll) on a few great opportunities is called focus investing and is the style of investing that Warren Buffett and Charlie Munger have practiced. To me it is absolutely ludicrous to bet the same amount on a fight like Lesnar/Velasquez that you would on higher risk, lower reward bets, yet that is what other sports bettors do all of the time.
So the answer to the best sizing question is that it depends. The percent of your annual bankroll that you should bet on each fight depends on your subjective opinion of the risk/reward aspect of each fight. When I risked 60% of my annual bankroll on Velasquez to beat Lesnar I knew that I was comfortable losing that amount because of how low risk, high reward a situation it was. I believed in my own handicapping skill and if I lost due to bad luck I was okay with it.
Bankroll management is not the same for the hobbyist as it is for the professional. The professional's career survival depends on his bankroll management skills to a large degree. But as hobbyists with other primary sources of income we can afford to "go broke" and lose our bankroll at anytime. Obviously the goal is to profit, which is the opposite of losing money, but this inherit advantage of being a hobbyist influences my thoughts on MMA betting bankroll management. Let the foolish professional stress out while he devotes his entire life to a zero-value-adding activity like sports betting, while we calmly and coolly make a nice profit from one of our favorite hobbies in MMA.
For the hobbyist the primary bankroll management concern is to avoid gambling's pitfalls and avoid ruining your life. The once-a-year deposit rule is a good check on your behavior. The rule is to only deposit a responsible amount, meaning one with which you are okay with losing entirely, into your MMA betting bankroll once a year. If you find yourself making multiple deposits a year and breaking your promise to yourself, then it is crystal-clear that you are not gambling responsibly and that you should quit betting on MMA and sports immediately.
If you can pass the first concern of practical bankroll management and only gamble responsibly, then the next goal of bankroll management is to avoid loss of principal while making an acceptable return. This is a subjective goal and the amount of your bet sizes is subjective as well. The definition of an acceptable return differs from one person to the next, as does the amount of risk of principal each person is willing to take each year to get that acceptable return. There is no easy answer to bet sizing. The amount of your bankroll that you should risk on each bet is up to you. I recommend letting the margin of safety and the risk, reward aspects of each betting opportunity be your guide.
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