The terms **Stake**, **Yield** (Revenue) and **ROI** (Return on Investment) confuse many people. We have also noticed many online publications using these terms incorrectly.

## Stake

The sum of money gambled on the outcome of an event. The amount of money played with, or placed as a bet.

In the online world of gambling, stakes are electronically placed on a desired outcome with another party that has agreed to accept your stake, whether this be a bookmaker or an anonymous person/group in a betting exchange.

These ‘adversaries’ are effectively backing with their own money against your selection, hoping to make a profit of your stake if your selection in the event turns out to be wrong.

Once the outcome of the event is decided, stakes are returned to you in full if your bet has won (plus the winnings), or, if you lose the bet, the stake is lost and either retained by the bookmaker, or transferred to the winning side in the betting exchange.

Technically speaking, **stakes are guarantees**! This means that they are short-term deposit payments to guarantee that the losing party can and will honour his debt obligation to the winner of the bet.

## Yield

The Profit/Loss*ratio^{†}applied to the total capital employed (total staked)

**This is Profit or Loss, NOT Profit divided by Loss*

^{†}ratio = the quantitative relation between two amounts showing the number of times one value contains or is contained within the other.

Literally translated, the term **YIELD** means profit, earnings, harvest, income, revenue…

**When applied to gambling, Yield measures betting efficiency compared to total turnover**.

If your aversion to risk is low, you will select bets with higher probabilities. Bets with higher probabilities of winning carry lower odds. Lower odds means a smaller yield.

If you enjoy higher risk strategies, the opposite will apply.

Generally speaking and depending upon the strategy employed, a good bettor will yield between 5 and 10 percent profit in the long run.

In football betting any yield over 7% is considered to be a very good result.

Yield Formula:

PL divided by ∑MS(written as a percentage):PL =

profit/loss(MW minus ML = net profit or loss); equivalent to your bank growth

∑ =the sum of

MS =money staked

MW =money won(purely winnings; returned stakes are ‘neutral’, not winnings)

ML =money lost(stakes lost)

**Example #1: YIELD***A bettor places 38 bets with stakes of 20 units each. The total amount staked [Capital Employed] is 760 units (38 x 20). 33 of the bets win and 5 of the bets lose; the net result [Profit] is a bank growth of 65 units.*

Yield in this example is **8.55%**

We come across many forum threads with people talking about their betting strategies; It is also easy to find plenty of websites offering betting systems for sale.

What many of them have in common is claims of high yield results, probably intended to impress the reader.

If they are to be believed then this is an indication of high risk strategies employed.

It must be remembered that in the Yield formula, the sum of money staked (∑MS) includes all stakes, even those that have not been lost. (In other words, the refunded ‘guarantees’).

People tend not to understand this fully and as a result mistakenly overstate their yield results.

Yield is NOT the same as ROI (Return on Investment)!

## Return on Investment (ROI):

The ratio of money gained or lost on an investment relative to the amount of money invested. In other words, the profit/loss ratio as a function*for investment^{†}(capital employed).

**function = a relation or expression involving one or more variables; in this case, investment, profit, loss.*

^{†}investment = long-term employment of tangible, financial, or other assets that are not meant for immediate gains but are intended to generate benefits (normally earnings or profits) in the future.

**ROI** is also known as ‘rate of profit’ or sometimes just ‘return’.

ROI Formula:

If you bet systematically, your starting capital will be turned over again and again: It is effectively the same money you are investing. (So long as you don’t lose every bet!).

The ROI formula resembles the yield formula, but here, profit/loss is related to the actual investment (starting bank) instead of the total of all stakes (turnover).

For a more accurate ROI calculation, in an ideal world, you should also factor in to the investment all other costs of ‘**setting up** the business’. For example, hardware/software costs (computers). However, we will leave this out of our calculations for the time being for the sake of simplicity; you can always include these costs once you have mastered the concept.

**Example #2: ROI***Returning to our previous illustration, 38 bets were placed, each with a stake of 20 units (760 units staked in total). 5 bets lost but the overall bank growth was 65 units. Let’s assume the starting bank [investment] was 200 units.*

ROI in this example is **32.5%**

ROI is always calculated for a certain predetermined amount of time; in finances usually for one whole year, but it is also common and acceptable to calculate the ROI monthly or, in a betting sense, for only the number of bets within a specific time scale.

The return on investment index is especially suitable when the amount of capital has a strong influence on the result (e.g. with arbitrage).

However, this is probably rarely the case for the majority of punters. Therefore, it is the next formula profitability, which is the * most important* one for the normal bettor.

## Profitability

The relation of profit/loss to the money spent. In other words, profitability is an index for measuring financial success (operationalprofit) in relation to the costs of running the business.

Profitability is **THE** * key indicator* that makes betting success

*and*

**measurable***.*

**controllable**We reiterate: **Measuring OPERATIONAL Profit**!

Profitability measures success connected to the operation (running costs) of the business (* not* the start-up capital, and also

*the turnover of all stakes).*

**not**Stakes are strictly speaking just short-term deposit payments which are returned to the bettor should his bet win. Investment (start-up capital) can be anything – some people may prefer a higher bank than others. However, profitability is the same for all, and therefore a much stronger success indicator than any ROI or yield calculations.

Again, in an ideal world, one would factor in the costs of power, heating and light; apply an hourly rate to the time spend in all aspects of the venture; even the food you eat at your work station.

However, to keep it simple, we only factor in the amount of stakes lost [the money spent operating your betting venture].

Profitability Formula:

In contrast to the yield, where the turnover of all bets counts, or to the return on investment, where the starting capital counts, profitability is all about the truly invested money (money lost or spent running the betting business).

It is, therefore, the most important and realistic index for sports bettors to quantify the overall financial reward they receive from their betting ventures.

**Example #3: PROFITABILITY***Back to our example: Five of the 38 bets lost. The sum of all money lost, ∑ ML, therefore is 5 x 20 unit stakes per bet = 100 units lost. If you remember, bank growth was 65 units.*

Profitability in this example is **65%**