Big Secret

I'm often making comparisons between the worlds of sports investing and financial investing, for there are many, and in recent weeks the subject of sports betting portfolios has been to the fore. This idea is nothing new in financial investments, where the average person would never have all his eggs in one basket. Under the mattress perhaps, but anyone actually significantly vested in the markets will have money distributed across many investment types, sectors and countries.

After a failed attempt at managing my own portfolio by investing in individual shares, my ultimate conclusion was that there will always be people in the market who know more about the direction of the price than me, and therefore trying to beat the market is futile. I decided to adopt the approach of investing most of my money in index-linked funds, keeping costs to a minimum since the investments are automated and need no fund manager to make decisions, and be happy to match the markets each year. Beating the markets consistently just wasn't going to happen and I took the lazy, but more profitable long-term, approach. (Incidentally, the best investment advice I ever read was "Put 10% of your income into an index-fund and leave it alone).

There's a new book, 'The Big Secret for the Small Investor', by Joel Greenblatt, a renowned investor, in which he

"divulges is that market-cap weighed indexes beat most active managers —- and all successful managers go through periods of underperformance. Therefore, investors should avoid chasing managers based on prior performance stats -- as we know, past performance does not guarantee future success. Historically speaking, Greenblatt said 70 percent of active managers have underperformed the market over the past 10 years and "odds are investors are not going to find that superstar manager." Believe it or not, retail investors and money managers really do compete on an equal playing field, he adds. The market is "very emotional," and to separate the emotion from the reward, Greenblatt recommends buying ETFs —- specifically Value Index ETFs".

It was probably JP who first blogged about his experience with a portfolio of tipsters, and for a while all was sunny, before the rain set in and he walked off into the sunset. You know what I mean. Now we have the Portfolio Investor doing a very similar thing, although his efforts are accompanied by a much more interesting write-up each day.

Now some critics of portfolio investing call this approach 'lazy betting', and they have a point, but finding value, maintaining ratings, updating results etc. is certainly time-consuming, and if someone wants to effectively buy themselves time, then that's fair enough, but I get much more enjoyment out of identifying Levante as a value bet myself than opening an e-mail and being handed it, especially if it goes on to win.

So how are tipsters who make up portfolios to be selected? No doubt they are tipsters with a strong recent record. I use just one, Football Elite, chosen based on a strong record over 4 seasons or so, but poor runs can, and do, come along, unless they have access to inside information, which I suspect may well be the case for some horse tipsters. But even if you subscribe to a service who has inside information, there's the additional problem that by the time you get the tip, the value, or at least the best of the value, has been squeezed out of it by the service first, and then by your fellow subscribers who happen to get their money into the market before you. I suspect that running a betting portfolio and maintaining profitability long-term might not be that easy, just as finding a fund manager who can consistently beat the financial markets is proven not to be. Well, maybe Bernie Madoff beat them for a while...

Greenblatt also says the markets are emotional, and the best comparison with the sports markets is perhaps to use the numbers where you can, rather than allow yourself to be driven by those market drivers fear or greed. Baseball is wonderful for this - buy "The Book", and find the probability of a team winning from any game state. No emotion required. If you find value, long-term you will be profitable.

Which brings me neatly into mentioning that I have started tracking the MLB Daily Picks selections, with the results posted over at Gold All Over every so often. I must confess that it doesn't inspire much confidence when one of the key players writes in his introduction "Now I don’t know anything about the sport" followed by "I do know that certain aspects like the pitcher do make a big difference". Er, yes - just a little. While some individual based ratings can be used, team ratings as such in baseball are almost useless. Just look at the prices over a four game series between the same teams with a different pitcher starting each night. A team can be 1.7 one night, 2.4 the next. That is a big difference! Anyway, I shall be tracking the picks, if not actually putting any money on, and here's the write up:

My name is Pete Nordsted and I am the author of Mastering Betfair.

Baseball has become a sport that interests me because the top teams win 60% of the time and the bottom teams win around 40% of the time which means that on any given day any team can beat any other team.

Now I don’t know anything about the sport but I did a simple experiment a year ago where I devised a simple ratings system that highlights the value of a team. Now as I said I don’t know anything about baseball but I do know that certain aspects like the pitcher do make a big difference. That is where our baseball expert Mr Stretch comes in.

Bringing many seasons of profitable baseball betting to the table I found Mr Stretch on the Internet and asked if he would like to test out my ratings theory and see if he fancied any of the rated selections to win. Now for the purpose of this service we are only going to pick those selections we both agree on.

So the picks you see on the site are value from a betting point of view and have also been recommended by Mr Stretch.