Thursday, 31 December 2009

Another Year Over - 2009

The stock market is now closed for 2009, and it has been a very good year. The FTSE250 is up by 46.31%, the FTSE100 is up by 22.07% and the All-Share index is up by 24.96%. Impressive returns, but nevertheless all three are down from the end of 2007 thanks to a terrible 2008.

Meanwhile, Cassini’s Sports Handicapping Investment Trading operation is happy to report a 2009 profit 11.68% up on 2008, with only one calendar month (April) showing a loss. The best months were January, February and June. 67.15% of the year's profits come in the first half of the year. Not sure why this is, with most sports I trade being split fairly evenly between the two halves of the year. The only exception really is American Football, and it is true to say that this season has been a challenge. Also down from 2008 are the profits from Golf, Football, Cricket, Tennis, Ice Hockey and Horse Racing and of course a full year of the Premium Charge has had a big negative impact on profits. Increased profits come from Basketball, Rugby League, Rugby Union, Formula 1, Aussie Rules and 'Other' (Academy Awards, Snooker, Handball, Volleyball etc.) as well as a Baseball season where the play-offs rather pleasingly seemed to see comeback after comeback! So overall a pleasing total, but as my school reports often said, 'could do better'.

A New Year brings new opportunities however, and a steadier approach to football should see 2009-10 end in profit. A loss of £1,758.18 on a stupid gamble on the FA Cup Final still hurts, but the lesson there has been learned. January was my best month of 2008 and 2009 and while it would be nice to start 2010 off with a big month, I am aware of the danger that high expectations can lead to poor decisions. If the value is there, I will be taking it, if not, I will be leaving it. My discipline is pretty solid these days.

So Stock Exchange or Betting Exchange - which investing medium is better – the “respectable” old world of finance, or the less respectable, new world of sports?

Perhaps ‘better’ should be defined here. Investing in financial markets probably doesn’t take up almost every spare hour of your life, although I do have friends who spend hours poring over charts thinking that they can find an edge. It’s probably also less stressful to invest in the stock market, for the simple reason that your investments are usually for the longer term, and that you do not feel any sense of blame for a decision that moves against you.

The time-frame for sports markets is typically much shorter (not many of us are investing on the 2014 World Cup just yet). The result of your involvement is often known within minutes or a few hours, and those minutes can be incredibly stressful. Is it ‘better’ to make money this way and drop dead of a heart-attack in a few years, or is it ‘better’ to make your money a little slower, and live a longer life? This is a rhetorical question – answers on a postcard are not required.

Personally I have learned that staking size is key in regard to the stress level. I honestly cannot give a figure above which I am stressed, but my brain knows when I have over-staked. My fiancée does too – she can tell from my breathing that I am under stress! (It's more of a concern to me when it stops altogether, but touch wood, I should be good for another year at least).

To complicate matters still further, the amount that triggers this reflex isn’t fixed. I can be comfortable with a certain amount at risk in one situation, but very uncomfortable with the same amount at risk in another. This is all due to my perception of how much value (if any!) I feel I have.

When you invest in the more traditional financial markets, you can have no real expectation of consistently beating the stock index averages. You might get lucky one year, perhaps even for two, three or more years, but as described in the book “Fooled by Randomness“ by Nassin Nicholas Taleb, sooner or later you will revert to the mean, unless of course you have an edge, which in financial markets often means ‘inside information’, which in turn means you are acting illegally. Essentially you put your money onto the stock market and the returns, positive or negative, are out of your control. Anyone who claims to be able to predict market tops or bottoms is talking nonsense, and usually trying to sell something.

It’s different with sports. It is definitely realistic to expect to be able to make a profit from sports investing, if you are willing to put in the time. Too many people think that there is a magic system out there, that they can easily make 1% a day.

Of all my 442 posts since I started this blog, it’s interesting that the most popular in terms of comments is the one offering free betting systems. The post was written in November 2008, and the latest request was added just yesterday. Has anyone made their fortune from any one of these ‘systems’? I seriously doubt it. They don’t work. That's why I give them away. Again, anyone who claims to be able to give anyone a winning off-the-shelf system is talking nonsense, and usually trying to sell something.

What there is, are certain patterns in markets that are predictable, and which repeat time and again. It is important to constantly remind yourself that the sports markets are driven by the same human emotions as the financial markets – fear and greed. The odds are not precise. The in-play markets in particular often offer up good value. And if you are in any doubt, remember that you are under no obligation to get involved. Patience is a virtue. There will always be more opportunities coming along.

Maintain a cool head after a ‘significant event’ (see previous post) and you can find value. Value doesn’t always win, but with it you will be ahead in the long-term, and without it, you will soon be broke.

I shall continue with my slow and steady investing of 10% of all income in the stock market, I shall also continue to invest on the exchanges during 2010. Apart from the reasons already listed above, there can’t be many more pleasing ways of making money than from sports, but I shall try to take a little more time away to enjoy life this year. I'm sure I've said before, but setting goals and targets and recording progress is very motivating for me.

Good luck to all in 2010.

1 comment:

My Lesson Cost 70K said...

Love the bit about the fiancee knowing you've overstaked by your breathing.... so true LOL!