Posted by Dave on May 18, 2010
I like to gamble – I particularly enjoy gambling on sports. I read and understand a lot about sports, having played them for most of my life. Although I have never really kept track I have never lost money over an entire season (I know this because I haven’t had to put any new money into my online account).
I recently got an e-mail (spam) from an author who I had purchased an e-book from a couple of years ago and is now selling daily picks for the various major sports (Football, Basketball, Baseball, and Hockey). In the e-mail there was a link to the historical results achieved by the picks, which although not impressive (a win rate of around 60%) the returns (if they were not forged) were similarly not overly impressive, but steady over the previous 3 seasons, this system’s baseball results showed an average gross return for of $6,000, which conceivably could be achieved by anyone willing to study the sports involved and employ a similar system of betting. Alternatively, the sports picks could be purchased for a subscription price per season.
What I’m wondering is whether adding sports betting to my retirement portfolio would make sense. I know significantly more about baseball, football and hockey than I do about some of the companies that I watch or indexes that I invest in. There is a lot more transparency occurring in major sports than there is with some of the companies in the stock market (think of the crash that took place a couple of years ago, that started mainly due to a lack of information). Major sports need to provide injury reports daily – their finances are an open book and there are probably just as many reports available on any player in the NFL as there are on most companies listed on the S &P.
The benefit of returns on sports betting is that they are generally tax free1 – a tremendous boon, compared to the stock market. Additionally, there is (for me anyways) a little bit more enjoyment in watching a game to see my possible returns than watching the business channel, or reading business news.
The downside to betting on sports is that it really isn’t passive income. I would have to actively be making bets on an almost daily basis in order for any level of profitability to be feasible. Betting on sports is also not really a socially acceptable way to earn a living – If I told my parents (or spouse for that matter) that part of my retirement was based on how well I can predict the point spread on a football game, I’m not sure how excited they would be.
From a diversification of income perspective I don’t think that betting on sports is any less risky than most endeavours undertaken, whether it be starting a business, investing in dividend-providing companies, or owning property there are different risks that need to be mitigated in one way or another. I’m not sure what level of returns are possible through gambling, but how much more risky is betting on sports is compared to “investing” in the stock market.
What do you think – Is this a reasonable contribution to my portfolio? Do you have any interesting alternative streams of income in your portfolio?
1 Unless you’re a bookmaker or employ a system that minimizes or manages risk. Conceivably, in this circumstance winnings would be taxable, and losses would be deductible as you would be “deemed” to be running a business by the tax code.