Hello all,
Well this may sound a bit dumb, but can someone please explain how you calculate ROI (Return on Investment) and POT (Profit on Turnover). If at all possible can you put up an example....I just have mental block on this one...cheers

[ This Message was edited by: BottleBoy on 2003-11-17 18:02 ]

Hi BottleBoy,

Profit on Turnover is quite easy to calculate. Let's assume you've had 100 bets at $10 each... Your turnover is $1,000. Let's then say that you have actually returned $1,100 from those bets, so your profit is $100.

Profit on turnover is Profit * 100 / Turnover, so

POT = 100 * 100 / 1000 = 10%.

Return on Investment is similar, except you need to determine what your "investment" is. I have seen a number of people define the investment in a number of different ways. Personally, I would steer clear of ROI, and just consider POT.

Cheers,
Chris.

ROI (Return on Investment)

My interpretation possibly is :

BANK = 500
INVESTED = 100
BALANCE = 400
RETURN = 200
NEW BALANCE = 600
*ROI* = 200
PROFIT = 100
???

The most common "definition" of ROI in a punting sense seems to be your profit divided by the actual amount of money you have put into your betting bank.

For example lets say you start the year by putting $500 into your betting account. During the year you make no further deposits or withdrawals. At the end of the year your total bets have been $30,000 and your account now has $3500 in it.

Profit = $3500-$500 = $3000
POT = $3000/$30000 * 100 = 10%
ROI = $3000/$500 * 100 = 600%

So your "return on investment" is the $3000 profit divided by the $500 you originally put into the account which gives 600% ROI.

I agree with Chris though that this is a pretty useless measure so I wouldn't worry about it too much. POT and maximum drawdown are far more useful bits of information.

I believe that ROI is a yankee term but don't quote me on that....the drawndown is a very useful bit of info because it can tell you how safe you bank is it is not much good haveing a TOP of 45% if you had say started with a bank of 1000 and at one point you were down to say 100 before it came back

[ This Message was edited by: Shaun on 2003-11-18 11:55 ]

ROI is used by punters extensively in the U.K. and many seem to have no idea what POT is.
Strange when POT is a much better indication in my book.

Hi all,

I would like to offer an alternative view. POT is fine in theory, but unfortunately it doesn't pay the bills. The only thing that does is real dollars. As someone who punts quite seriously for profit, my focus is on generating the maximum real dollars profit out of my given bank at the start of the season.

As a punter, you need to make your bank work for you in the most efficient manner. Your bank is the resource you have to generate cash flow and the more cash flow you can generate from that capital the better your performance as a punter. Percentages don't really matter.

If Punter A starts with a $50,000 bank and turns that bank over 20 times in a year for a turnover of $1m and makes 10%, he/she is making $100,000. Thats real money in the bank that can be spent.

Punter B starts with the same $50,000 bank, bets every day but through their strategy they only turn it over 10 times for a $500k turnover. They make a 15% profit on turnover of $75,000 net.

As it happens, both punters had a similar maximum drawdown during the year.

Who has performed better?

There is no doubt that Punter A has performed better. Both punters had the same bank but punter A was able to work his/hers much harder and generate 33% more cash flow than punter B could (even though POT% was 5% lower). If you were deciding where to invest your money you would give it to punter A.

Punter B may have made more POT %, but at the end of the day they had $50k in the bank and made $75k profit with it. Punter A had $50k in the bank and made $100k profit with it. Punter A has more money to spend at the end of the year, that is the measure of success.

Some may say.."well if Punter B turned over as much as punter A they woul make more money!" Thats the point though...punter B didn't turn over as much, they didn't get the maximum out of their bank. Their overall performance was not as strong. Punter B has underutilised his/her bank when compared to punter A who was able to work the bank much harder. Also, increasing turnover doesn't mean punter B would maintain the same POT.

When you are punting to make money, it's about that very thing...making money! Money that you can spend. You have to balance turnover / POT combinations to get the maximum dollars from the capital you are putting at risk.

Personally I measure how many times I can duplicate my bank in profit over the course of a year. I aim to achieve 4-5 times my bank in proit each year. In many respects this is a type of ROI measure.

I don't care if I make 50% POT, 20% POT or 10% POT, if I have duplicated my bank 4x in profit then I know how much money I have to spend at the end of the year, the percentage on my turnover is irrelevant.

One thing I will add is that Maximum drawdown is very important and something every punter should try to understand about their own punting (you have to keep good records to do this). It helps you understand how far you can expect to be down from your previous peak at any one time (very important from a psychological perspective) and subsequently assists in setting your staking limits.

So if you want to get a true measure of your effectiveness as a punter, measure how many times you can duplicate your puning bank in profit over the course of year. It doesn't matter how big or small your bank is. If you can duplicate it 5 times in profit over the course of a year then you are getting more out of your money than someone who can only generate 2x profit out of their bank each year. The percentage POT figure related to that doesn't really mean anything.

Cheers :smile:







[ This Message was edited by: osulldj on 2003-11-18 13:17 ]

Agree osulldj.
POT is however, a good guide to system confidence relating to past results if it is used properly.
As you say the $$$ is all that matters in the long-run.

Nothing like a bit EW CP :smile:

Excellent input osulldj!