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Bankroll Management

Stop risking too much on your picks! 
Sports Picks Money Management
 

You are picking too much on each game! How can I say that without even knowing you? Because I've been doing this for a long time and have spent a lot of time understanding money management. 99% of people who like to make sports picks are risking too much on each pick. Think not? Think again.

Would you risk 25% of your entire retirement account on a single stock that had a 40% chance of going to $0 tomorrow? Of course not. Then why are so many people who make sports picks willing to risk 20%+ of their bankroll on a single game? It's easy to risk too much without knowing it. Please read on to see why...

A Simple Proposition - Would you take it?
If I offered you a 10% advantage in a game of chance (55% for you vs. 45%) for 500 picks, would you take that risk? Of course you would. Over the long haul (500 picks), the law of large numbers dictates that you would end up very close to 55% winners (275 winners vs. 225 losers). If we were risking $100 per pick, you'd be up about $5,000 in the end. Easy money.

Now let's say that I had one constraint. I told you you could start with no more than $500 (your bankroll) and if you ran out of money, you couldn't re-load. In essence, I was forcing you to pick 20% of your bankroll on each pick. Would you still take it? Think you could still take me for $5,000?

You had better not! You are virtually guaranteed to go bankrupt in this situation. Over the long haul, you will come close to 55% winners - it's a mathematical certainty. But, over the short term, you are guaranteed nothing. Strange streaks will happen. They always do. Over 500 picks, you could easily go 5 or 10 picks in a row (or even more) without winning. You could go 2-18 during a 500 pick session. If I forced you to pick 20% of your bankroll, you'd be crazy to do it because I would take your money like taking candy from a baby.

Yet, in sports picks, most people who make sports picks routinely do the equivalent of taking this pick! Almost every person who makes sports picks risks too much per game relative to the size of their bankroll. They don't think twice about laying half of their entire remaining bankroll on one week's NFL games. The conclusion is this...

Why The House Wins
Based on my nearly two decades of sports picks experience, I view this as the most valuable "secret" there is:

THE HOUSE WINS BECAUSE YOU RISK TOO MUCH PER GAME.

You run out of money before you have a chance to let the laws of large numbers work for you. They are banking on your lack of discipline. That's the main reason (not bad picking) that most people who place sports picks lose and why The House laughs to the bank.

Check out this story as an illustration...


A Tale of Two Sports Players

Risky John and Conservative Bob each started the season with $1000 - their bankroll. They both decided to play the same games throughout the season but they couldn't agree on how much to place on each game. John was more of a risk taker than Bob so John decided to risk about $200 per game (20% of his bankroll). Bob was more conservative and decided to risk about $50 per game (5% of his bankroll). Risky John figured that if he risked more, he could win more. And he was right. In week one, their picks went 4-2. John was up $360 while Conservative Bob only won $90. John was very pleased with himself.

Week 2 produced the exact same result. Risky John now had a $1720 bankroll while Conservative Bob was up to just $1180. John was very happy. He encouraged Bob to risk more but Bob wasn't so sure about that strategy. What if their luck started to turn? Risky John preferred to think positively. Besides, they were 8-4 and they knew what they were doing! The first two weeks had proved that.

But then came weeks 3 and 4 in which they went 2-4, 1-3. A bad run for sure, but not uncommon during a 16-week season. In fact, losing streaks are inevitable and guaranteed during a season. Conservative Bob lost $235 while Risky John gave back $940. John now had a lower bankroll than Bob! John was now down to $780. Risky John felt the losing couldn't possibly continue so he stuck with his risk size of $200 per game. The next two weeks they went 2-2 and 1-3.

Guess what? Risky John was now virtually wiped out - down to $280. Bob, meanwhile lost $360 on the terrible four week run but still had $820 left over. One of them was virtually out of money, the other had over 80% of his original bankroll left.

What happened next? Well, John quit. And, the unfortunate four-week run was followed by a great 3-week run where Conservative Bob went 10-3 and another 8 weeks of hitting a very respectable 56% on average. Bob ended up the season at over $1300 - an increase of 30% on his initial bankroll.

The morale of this story is obvious but very few sports players practice it. Don't overextend yourself:

Don't risk too much for your bankroll!

It is very tempting to put down a lot on each game, especially when you are winning. It is relatively boring to put down a little. But, you need to work within your bankroll, whatever that is. There will be bad streaks and good streaks in sports picks. It is inevitable if you do it for any extended period of time. Do yourself the favor of allowing yourself to "stay in the game." Don't miss out on that late-season run of luck because you are out of the game too early.

If your bankroll (amount you have set aside to make picks with) is $10,000 and your average pick is more than $300, you are risking too much. If you have $1,000 to make picks with and your average pick size is $30, you are risking too much. If your bankroll is $500 and you risk more than $15 per game, you are risking too much.

The silver lining in all of this is that YOU CONTROL THE SINGLE BIGGEST IMPEDIMENT TO LOSING. Let me say that again - regardless of how you pick games or whether someone helps you, you have the ability to erase the single biggest reason you may lose. All you need to do is practice safe money management.

So, how much you should you lay per game?
It depends, of course, on your bankroll (how much you are willing and able to lose over the course of the season). But there is a simple rule that applies regardless of whether you are a ten-dollar per game player or a one-thousand-dollar per game player: Risk around 2-3% of your bankroll and don't ever risk more than 5% of your bankroll on any given game on which you have even or close to even odds. On rare occasions where you are sure your chance of winning the game is extremely high (i.e. moneyline favorites), a higher % of bankroll is sometimes warranted. But, for most picks in which you have even odds, 5% is your upper max. There are no locks. Let me repeat that - there is no such thing as a sure thing. Any pick can lose. Losing streaks can and do happen. Even in a season where you hit 60% overall, you'll have weeks where you hit 40%. It's an absolute certainty.

Can you make money with this strategy? Absolutely. In fact, its required to make money. Without this strategy, you will consistently lose regardless of how well you pick games. If you hit 54-58% (what you should expect), you will lose a lot of money (and maybe even deplete your entire bankroll) if you are risking more than 5% of your bankroll per game!

If you are winning and on a great roll, your picks can increase and you can win even more. How? You can simply use a percentage of your remaining bankroll. As your bankroll increases, your risk size increases. As your bankroll decreases, your picks decrease. A nice side benefit of this is that, by definition, you can never get wiped out. It is mathematically impossible to lose your entire bankroll if you are always risking a small percentage of it.

The bottom line: Remember, risk 2% - 5% of your bankroll on any given game (more often on the low end of that range). A good rule of thumb is about 3% per game. If you aren't as sure on a game, drop it to 1% or 2% and if you feel very good about a game, take it up to 4%. For those rare games that you absolutely love, go with 5% but never more.

I rate my picks as 1 to 5 units and I recommend you risk 1% of your bankroll per unit. So, you are always risking between 1% and 5% of your bankroll and now more. Most picks are 2-3 units.

Still not convinced that risking a small % of your bankroll is the way to go? Then please read my article on what winning feels like.

 

To get free picks from Wunderdog Sports, click here: Wunderdog Sports Picks