Money Matters

Money Matters

Before getting into the meat of the post – we’d like to announce that we will again this year be issuing our annual (and highly profitable over the last 12 years) Kentucky Derby Report. (Order link at the end of the post – and on our order page)

Betting the big race days – like the Derby and Breeder’s Cup day/s – is a different animal than day-to-day race betting. I’m not a proponent of the “go for the jugular” philosophy when it comes to betting the horses as a way to make an income – mainly because when it fails, it’s my own own jugular that gets sliced!

Rather – as I’ve talked about several times – I like a “middle-way” approach that is conservative at base while also putting me in front of potentially high-paying horses fairly frequently.

I was thinking on these matters the other day while reading a financial blog that I follow.  There was an article there where the famous (or infamous according to your point of view) Tony Robbins had interviewed several of the world’s most successful investors (Ray Dalio, Kyle Bass, Paul Tudor Jones), and he then boiled down their various approaches into four succinct guidelines.

I (as always) related the ideas to horse racing, and here’s what I came up with . . .

(the consensus advice of the investors interviewed – are listed in the numbered bold headings below)

1. Don’t lose.

Now in horse race betting – the concept of not losing seems almost alien – as we all lose individual wagers daily.  But these guys were talking about the bankroll as a whole.  Their idea was that “defense” was 10 times more important than “offense.”  Think about it: if you have a bankroll you’ve built from say $2000 to $6000 – good on ya – you’ve tripled your starting bank.  But – there is an important factor here that is often overlooked . . .

Let’s further say you were smart and took $2000 out in profits. You now have a BR of $4000, but importantly – in your mind the idea of the $2000 starting bankroll has disappeared – only the new starting bankroll base of $4000 retains importance.

Okay – now say you start playing more ‘loose’ – raise bet amounts too rapidly – include trifectas, or a few pick 4’s – etc. – and you lose 50% of that $4000 and run it down to $2000.

It will now require that you make (though you only lost 50% of your BR) 100% of your current bankroll just to get back to even!

Conserving the BankRoll is of utmost importance – you must live in order to fight another day. Make it your obsession to protect your winnings.


2. Risk a little to make a lot. 

This one may not seem to fit with the one above, and some players might interpret it to mean “swing for the fences” with relatively small wagers in the big payoff pools – like carry-over pick sixes and pick fours, or the various specialty wagers certain tracks offer where no minor payouts are made before the whole pool is hit.

I interpret it much differently.

Here is a quote from famed investor and billionaire, Paul Tudor Jones, ” I don’t make an investment until I can potentially get a return of at least $5 for every $1 risked . . . and that is a $150,000 MBA in a nutshell!”  So you can see that these ‘big boys” are actually very conservative relative to your average horse player.  “Risk a little to make a lot” – to them – is as little as us concentrating on 5/1 odds horses.

You would likely be better off money-wise if you never wagered on another horse at less than 5/1 – BUT – the losing streaks this brings into play need to be seriously considered.

Let’s say the player mentioned above with a starting BR of $2000 hits at a good rate of 13% winners betting one horse to win at 5/1 or greater, and that in fact his average winner pays 8/1.  For every 100 horses bet – 13 of them win and pay – say – an average of $18.60 each time.  If the bet level is $75 (3.75% of BR) – he’s got $7500 in and gets back $9067 for a very good ROI of nearly +21%.

Unfortunately – this player has a 10% chance of hitting a losing streak of 17 races and drawing down his BR just shy of 50% and will be in the position mentioned earlier of now needing to make 100% on his current bankroll just to get back to even.

Let’s compare that to the current year’s results of the Horse Racing Gold Index (optimized odds approach with 500+ races issued to date) to show how – for your peace of mind, and for the priority of protecting the BR – that situation can be ameliorated.

  • First we suggest betting two horses in most races.
  • Then we also suggest accepting odds (according to contender rank) of only between 2/1 and 15/1.

Our hit % because of betting two horses then becomes 38.4%.  Our average odds winner – also because of betting two horses and allowing one of them to be at a lower odds level – drops to 9/2 and pays $11.80 on average.  Coincidentally, we have an ROI almost exactly the same as the example given above = +21.3%.  So what has that done for our projected potential losing streaks and our worst-case scenario BankRoll draw-down?  

The same 10% chance losing streak number is down from 17 races (in the above example) to 5 or 6 races – while the max draw-down drops from 50% of BR (above example) to 17% of BR.

This – for me, and for horse race betting – is a way to ‘marry’ the billionaire investor guidelines #1 and #2 given above.

3. Anticipate and diversify.

Like those billionaire investors, we ‘lowly’ horse bettors also have to make decisions with limited information.  Often we lose a wager in spite of our decision-making process having been correct:  to diversify for us is to add a layer of ‘padding’ against that certain eventuality.

Examples of diversification for a bettor can include;

  • back-up exactas (or trifectas) where the combinations have our main contenders in the back slot/s rather than on top (exacta as place bet)
  • using the low priced favorite in those exacta combinations – only to the extent of covering original wager amount (insurance bet)
  • adding new tracks to replace tracks that have gone,  or seem to be going “cold” to our approach

4. You’re never done. 

The high-rolling investor-interviewees all said that they never stop learning.  The game is never over, and increasing excellence is always a goal.  If you labor seriously – it should become a labor of love – otherwise you become a grinder who would actually rather be off playing golf, or ordering another at the 19th hole.

For me, in handicapping and betting the horses – the above idea is a given.  I never stop trying to improve on my game.  And though money is the scorecard in this game we play, I believe it crucial to avoid being overly greedy – to avoid allowing money to become (to the point of distraction) the one-and-only motive and driving force as to why and how to play.

For many of you – as for me – this has been a life-time endeavor (and for others of you reading this – it will become that).  So – indeed – you will never be “done.” Approach the game with the seriousness it deserves and requires – love the challenge as well as the winnings.






  1. Agreed. Preserving bankroll not much of a consideration “in our youth,” but increasingly understanding it to be a critical piece to the puzzle now. And all else being equal, much prefer the method with shortest losing streak expectation. It’s good for capital preservation and the psyche. You recently stated that you consider racing somewhere in between gambling and investing. But I always try to view handicapping through investor eyes, and I really like the analogy in this article, Gary. Excellent work, as usual.

    • Dave – Thanks for the comment. I think most of us come by that ‘preservation’ instinct only after going through the stage of thinking/hoping the game will be one of exciting big winners and relative riches. I believe I’ve told my story somewhere in my writings before – how the very first wager I ever made was a $5 exacta bet at Santa Anita in 1978 – and hit for $500+ . . . boy, that coupled with some other exceptional “beginner’s luck” hits over the next few months – and it ended up taking me years to get over the illusions those early events planted in my head! But then – knowledge hard-won is the only kind that really sticks. – Gary

Leave a Reply

Your email address will not be published. Required fields are marked *