At some time, many of us will have either taken the plunge or at least considered shelling out money to someone else in exchange for their betting tips. In this article I'll consider some of the issues that you need to think about before parting with your hard-earned! It might also be useful if considering running a subscription service of your own - I'll say a little about that in a future article.
First the obvious ones
1) Reliability. This goes without saying. The internet has been the biggest boon for scams since the invention of the printing press, or maybe since the Trojans took a fancy to large wooden animals. You need to be sure that the tipster will do what he claims, and not simply trouser your money.
2) Profitability. Again, an obvious one. No point in paying for a service that doesn't make a profit. Profitability should be measured in terms of the total profit divided by total staked - i.e. yield. This measure is therefore independent of stake size.
There are also some less obvious ones:
3) Statistical significance. An individual you trust with a profitable service still needs to convince you that he isn't just lucky. Conversely, one who is making a loss shouldn't be written off for ever - they may be worth keeping an eye upon. The basic question to be asked would probably be framed by a statistician in something like the following manner: "What is the probability that the profit/loss this tipster is making is the result of something other than random luck?" The science of statistics gives us various methods for getting answers to these questions. A detailed look is beyond the scope of this piece, but a look in the betting theory section "How do I know if I have a winning system" will give you more information.
4) Churn. How many bets does this tipster generate in a given period of time? Much of this will depend on what sports they tip. For example, someone tipping International Rugby League will have far fewer tips than someone who does Major League Baseball. The higher the churn (i.e. number of bets) the more rapidly a given (positive!) yield will grow your bank. There is also another more subtle aspect to churn - and that is how long your money will be tied up for. If your tipster recommends a lot of long-term bets, e.g. tournament winners etc, then you will have more of your capital tied up at any time and your stakes will therefore have to be a smaller percentage of your bank.
5) Range of bookies used. It's your money you are staking, and you have to be able to trust the institutions you are dealing with. Additionally you may have other reasons - security, legal issues, transaction costs, finance, ease of management etc, that mean you don't have access to the range of bookies quoted by your tipster. The effect of this is that you may not be able to match the same prices, and hence your actual yield achievable will be less than the quoted one of your tipster.
6) Timeliness. You may live in Australia while your tipster resides in the UK - or vice versa. If your tipster provides tips one hour before the race start, or kick-off etc, then you may not be in a position to place the bets. Even if you're not in a different timezone, you may not have the regularity of access to take advantage of all the tips. Ideally you would want the tips provided at a standard time so you know when you can access them
7) Customer service. Its your money and you will almost certainly have a requirement at some stage to deal with an individual at the other end of an email or phone call. Same as any other business, you need to know that any legitimate concerns you have will be dealt with fairly and promptly.
finally:
8. Cost. I've saved this to last because I think it is instructive to look at some typical figures. A survey of some typical tipsters shows that an average of 10 tips a week is about typical. Equally, anything over 5% yield can be regarded as very impressive. Typical charges (noting that many good tipsters provide their tips free gratis - like on our forum!) are about £25-£35 per month or £6-8 per week So lets make some assumptions and see what the implications are.
Assume that we'll occasionally miss out on some bets, so that in fact we average 9 bets per week. Assume also that we won't achieve quite the performance of 5% due to transaction costs, a smaller range of bookies etc, and in fact we achieve 3%. So we are making 3% profit on 9 bets per week for which we pay £7 (say). We therefore return 27% of our average stake. To just break even, we need this figure of 27% to be equal to our cost of £7. We require our average stake therefore to be in the region of £27. We also need to ensure that our betting bank is sufficiently large to absorb the inevitable negative swings in our bankroll.
Most professional gamblers will operate on a basis of 1-2% of bank for a line bet (i.e. a nominally 50-50 call). An average stake of £27 requires us therefore to have in the region of £2500 in our betting bank. Remember too that the betting bank has to be money we can afford to lose!
Now even if we have overcome the hurdles of reliability and profitability, we don't want to just break even - we want to make a profit! And not just any profit - we want to make more than if we put it in the bank! So let's revisit our calculations.
If we assume we can get 5% bank growth by investing in some high yield account, we will want to comfortably exceed this to compensate us for the risk. 10-15% yield might be a reasonable basis of comparison, i.e. we require our tipping service to grow our bank by 10-15% over the year. In simple terms this means our bank needs to grow by about 0.25% per week. So the excess profit, after accounting for the £7 cost of the subscription, has to be about 0.25% of the bank.
We are staking 1% of bank on each bet, and therefore we expect the gross return per week to be of the order of 27% (9 bets at 3% each) of this, i.e. 0.27% of bank is our gross profit per week. Our target growth is 0.25%, so we need the difference, i.e. 0.02% to cover the costs.
So, 0.02% must equal £7. Our required bank therefore, to make it worthwhile investing under these conditions, is a whopping £35,000 and our average stake is £350-£700 - the sort of stake size that is quite likely to be knocked back by a bookie, or prove impossible to match on the exchanges.
That tipping service doesn't look so attractive any more does it?
BBC
