Most people are into football games. The other game that goes well with football … is gambling. And as you can imagine, there are many who go broke from betting on football matches. So in this article, I would like to talk about the stock market and betting on football, because surprisingly they are not all that different. What makes them alike is that they are both ‘Zero Sum’ games: someone’s gain is somebody else’s loss. Those who lose often will eventually have to exit the game.
Let’s look at the losers
who are always the first to lose money: the main reason they lost is because they made a quick decision to risk their money into the bet, knowing very little and on-the-surface information.
In football betting, the information that most people find out include the competing teams and the odds. For example, Brazil versus Chile with Brazil with 2/1 odds. Here’s how it works: if we bet on Brazil, and Brazil wins from the second goal onwards, we will win the bet. But if Brazil scores only one goal, we will neither win nor lose. If Brazil loses, however, we will immediately lose money.
If you ask who are the players, which positions, where the match is held, who are the referees, what are the past stats, how many times has Brazil won, how many goals have they scored… only a few can answer all of these questions.
This group of people never even calculated the suitable odds, or the likable percentage of Brazil beating Chile with a 2/1 odds (this is calculating the chances of us not losing our bet), and with this percentage, is it worth it for the return that we are going to get, versus the chances of us losing money.
This is quite similar to the stock market actually. Most people who lose money from the market only know the stock’s name and the stock’s price. But when we ask them about what the company’s business, how it’s performing, it’s suitable value, etc., they were unable to answer. This means that they were unable to calculate the risk and opportunity in making money.
So when they don’t have so much information to help make their decision, they use their emotions instead. For example, they like Brazil because they “think” Brazil “might” beat Chile at 2 goals onwards; or they “like” Company ABC and “think” that the price “should double”. Worse, some may not even think of themselves, but bet on Brazil because “a friend suggested” that they would beat Chile, or purchase Company ABC because “a friend suggested” that the price will double.
Repeatedly making these mistakes will cost these people, and force them to eventually leave the betting floor and the stock market.
Now let’s look at the winners
who are the investors that profit from the stock market constantly and the football betting host. These two groups have a few things in common.
- Carefully analyzing all the information in detail and only entering the game if the chances of winning are high.
For investors, we analyze the quality and valuate the company that we want to invest in, and only invest when we see that the chances of losing are very low, while the chances of making profits are high.In the field of football betting, this entails analyzing the information of the competing teams in detail, and betting with good odds that ensure profit in the long-run, regardless of what teams other people will get on. This is basically making our own bets, in the rates that we have already calculated, that will maximize our return.
- Using only logic and reason to make decisions, not emotions.
Good investors are not attached to anything and do not use emotions to make their decision in buying or selling stocks. No matter how much they like Company ABC, they wouldn’t invest if the price is too high. Every decision is based solely on information regarding whether in the end, they will be able to make the return as planned or not. If so, they would invest. However, if in the end, Company ABC did not perform as planned, these investors would not hesitate to sell it instantly.
Of course, in the football betting floor, everything is business. There are no emotions involved -the team you cheer for should not have anything to do with your bargaining rate or betting team. Everything is purely based on logic and reason to ensure the highest return in all your bets.
- Keeping track of results and being ready to adapt to changing conditions.
For investors, this is monitoring the progress and the situation after having made an investment. Keeping updated with the news, reading financial reports from the company to see whether it is performing better or worse, whether it’s value is greater or lower, in orders to make a decision on whether to sell or buy more stocks.
For football betting, when you open the betting floor and collect different bets, you need to keep track of the amount of money placed in the bets from different parties, and adjust the rates if things aren’t looking good.
For example, if too many people are betting on Brazil, you might want to adjust the he odds from Brazil 2/1 to 3/1, to increase your chances of winning.
- Managing and diversifying risks appropriately
To invest well, you need to manage and diversify your risks appropriately. This is why investors need to adjust the proportion of stocks in their portfolios from time to time, to avoid having most of their investment money stuck in only one stock or one group of stocks in particular (more than 50% of total investment); and to avoid investing in too many stocks, as that would lower overall portfolio return.
With football matches, there are many bets placed each night for many pairs. It is okay if you lose money with some pairs, but overall you are still making profits from that entire night if matches. Also, you wouldn’t personally undertake a risky bet -for example, if you are hosting a 1 million Baht worth of Brazil bets, no then someone comes along and bets 10 million Baht, then you might accept only the 1 million portion and transfer the other 9 million to other betting tables. Just wait until you have more money to increase your betting floor to accept the rest of the 10 million Baht bet.
You will see that the main cause for people losing money is making a mistake in #1. That is because if we are unable to evaluate quality and the value of the company, we may never correctly execute numbers 2, 3, and 4. So go back and think about this: when you are buying and selling stocks, are you like the careless gambler who will eventually go broke, or are you the host of the football betting floor, collecting your winnings night after night?