What’s the difference between betting on combat sports and investing in stocks?
Written by Noemie Melendez aka FightNumbers -
Not much at all, according to French Canadian entrepreneur Franco Richard.
You almost certainly know Franco Richard as the colorful fight analyst, or as the founder of Bet on Combat. What you may not know about Franco is that he earned a good chunk of his money betting on combat sports. You don’t become a self-made millionaire by accident in this game. But, despite all his successes as a professional combat sports bettor, Franco suggested in a 2010 blog post that it’s actually easier to make money betting combat sports than trading on the stock exchange.
We certainly agree with him. (You’d probably be an idiot to disagree with Franco Richard when it comes to theories on how to make money betting on fights.)
Here are four reasons why betting on combat sports is better than investing in stocks:
When investing in stocks, it may take months or even years to see a return on your investment. Betting on combat sports, however, enables your capital to be much more fluid. Unless you are betting on futures before the year begins (who will win the championship, over/under win totals, fighter award winners, etc.), you will know whether you made money or lost money as quickly as a few hours after you place your wagers. Then you can do it all again the following day.
Here’s an example:
Both a stock market investor and a combat sports bettor have $5,000. The stock market investor buys $1,000 worth of shares in five different companies, while the combat sports bettor averages three $100 bets a day for a year.
While the stock market investor watches the value of his shares increase and decrease over that year, the combat sports bettor is able to reinvest part of that $5,000 every day. In a full year, the combat sports bettor has actually invested $109,500 ($300 a day x 365 days).
Even if the stock market investor makes an average of 20% ROI (return on investment, a healthy return to be sure), he’s made a profit of $1,000. The combat sports bettor needs only a 1% ROI on every dollar he bets to make a profit of $1,095.
2. INEFFICIENCY OF THE MARKET
Who do you think is easier to outsmart — Gordon Gekko, Warren Buffett and the stock market traders, or the average combat sports fan?
Franco makes this point and a few more about the combat sports betting marketplace in his blog post.
“Most casual gamblers, who are the majority of the money spent, go to Vegas expecting to lose money. It’s part of the entertainment experience,” Franco notes. “People put money in mutual funds and in their brokerage accounts and pick stocks expecting to make money. They don’t find any value in losing money on a stock, fund or other traditional investment. That changes the opportunity completely.”
The common misconception about combat sports betting is that bettors are always playing against the casinos or the bookmakers. That, of course, is not necessarily true. Bettors are often playing against other bettors, may the smarter bettor win, and the casinos and bookmakers collect a small percentage (juice) for being the middleman (similar to a stock broker).
So, again, who is easier to outsmart? The guys whose job it is to buy and sell stocks all day, or Joe Sixpack who just wants to have some action on this weekend’s UFC fight cards and blindly picks all the favorites?
“How efficient can a market be when the majority of investors expect to lose money?” Franco asks.
No argument here.
3. KNOWING THE RULES
Forget about the rare stories you hear about fights being fixed — there have been far more and bigger scandals in the stock market.
Enron, Martha Stewart, ponzi schemes, insider training… and all of this despite a supposed governing agency in the United States — the Securities and Exchange Commission — to prevent it all.
Reputable sportsbooks, meanwhile, clearly state the rules. A bet that wins is a bet that wins, and a bet that loses is a bet that loses. There are no grey areas in constant need of interpretation or monitoring. And, while there are a few horror stories about online sportsbooks that defraud people out of money, there are still plenty of very, very safe sportsbooks out there to use. If you place your bets at any of our recommended sportsbooks — many of which are government regulated — there shouldn’t be any unpleasant surprises.
4. ACCESS TO INFORMATION
Regardless of whether you’re going to buy stocks in a company or bet on a fight, you need to do your research. The problem with researching companies is that you won’t always find out what you need to know.
“Public companies play so many games with their numbers, it’s ridiculous,” Franco writes.
“Should they expense options or not? Per forma vs. GAAP? One-time writeoffs? Buying company after company? Writing down inventories, then reselling them?”
Meanwhile, professional combat sports is very much transparent and in the public eye:
- Injury reports indicate whether the key players will be performing and at what level you might expect them to.
- You can watch the fighters compete in person or on television and draw your own conclusions.
- There are all kinds of verifiable statistics that you can study to analyze strengths, weaknesses and trends.
- You can rely on the thousands of news-gathering organizations out there to tell you what you want to know.
“Reporters are there after every event to interview the fighters and the coaches. They ask the same questions that every gambler wants to know,” Franco points out.
“That’s far better than we get from public companies. Not only can they not disclose material information on a daily basis, they try their very best to hide their actual performance when they are required to supposedly disclose all information.”
There are many negative connotations associated with the terms ‘gambling’ and ‘betting’. The most prevailing one might be the widespread belief that all gamblers are destined to lose all they have. Yet, stock market traders are somewhat revered as sharp businessmen building an empire.
I saw an article on CNN money other day where the write was pimping stock market as a bettor option and his example was that if a stock trader buys stocks $500 he wouldn't lose everything if the stock drops but the sports bettor who bets on a game can lose the entire $500 overnight if his teams loses. That is the most most ridiculous and dumbest example and I was surprised that this writers article was published in CNN money. He completely misses money management. What he doesn't say is that when you bet on sports, you don't risk your entire capital in one fight. General rule is to bet no more than 3% of your capital in one game. So if the game loses you max you would lose is 3%. Combat sports betting is in fact one of the most profitable for those who do it with discipline but the government and the media that works for government does everything to black list sports betting. Combat sports betting is very hard to control or tax and that is the main reason online sports betting is banned in USA.
If you can pick more winners than losers and manage your money properly, you should have more potential to make money betting on combat sports than you do investing in stocks that you know next to nothing about.
Though combat sports betting often gets a bad name, it isn't much different than investing in the stock market. While the two are not one and the same, it's hard to ignore the many similarities. Both require you to take a risk in order to earn a high return. You could also argue that each requires skill and experience to succeed. So, as an investor, what can you learn from successful sports bettors?
You do not have to be a casino junkie, or a roulette roulette addict to be considered a gambler. When you take on any kind of financial risk with an expectation of a financial reward, you become a gambler in your own right. (Remember what you trade is risk and reward). I should point out that combat sports betting markets are analogous to securities markets; A financial trader (gambler) invests through a market maker (bookie) at a market determined price (odds).