In last week’s Weekend Wager column I touched on the subject of compound interest or ‘compounding’, which is often sold as the magic formula to getting rich quick, especially when betting.
The idea behind compounding is to constantly re-invest your profits back into your original bank. Thus your average stake size will increase as will your profit (that’s the theory anyway).
It’s often backed up by quotes from Albert Einstein where he declares compound interest as “the greatest mathematical discovery of all time” or the “8th Wonder of The World”. Whether or not he actually said these things is up for debate but it’s worth asking the question, does compounding work?
Well it depends on how you utilise it as it can be dangerous especially if you are dazzled by the £ signs and headline profit figures. The best thing to do is to check out the full impact, both in terms of profit and loss.
Take for example one service, which recommends a certain method of compounding (or re-investment as they call it). Via their banking advice, £1000 invested back in December 08 would now be £7718, effectively 671% growth.
The only problem with this is that the size of the bank is too small and they would have actually lost 95.9% of it during one losing run! Imagine you had a £10,000 starting figure, would you have the balls to continue if it went as low as £410!?!
In some circumstances, following such a staking plan will only compound your problems.
Less Boom But Less Bust!
What this service needs to do is effectively double the advised bank, so you are staking less on each selection. Of course you get less boom but also less chance of going bust (Gordon Brown would be proud!)
If taking this approach and compounding, the initial £1000 will still have grown into £3231.47 over the same period. 223% growth – not something to be sniffed at!
That one losing run I mentioned before would have only accounted for 47.95% of your bank, which is a bit more manageable.
I don’t know about you but I would be very happy with 223% long-term growth and a worst case scenario of losing 50% of my bank during a bad spell.
Pick up SBC Issue number 51, due out in the next couple of days for the full rundown on this approach, including details on how you could have made this 223% growth.
How We Can Help Further
I have kept the above example purposefully brief but getting your staking right is incredibly important, especially if compounding.
This is why we devote some much attention to staking in our Secret Betting Club newsletters. We rank and review close to 40 top performing tipsters including suggestions on the optimum bank size to use. Often tipsters themselves get it wrong or ignore staking completely, always double check and if in doubt, we’re here to help.