Everybody knows that betting, in the commonly understood sense of the term, is a mug's game. There is a simple reason for this, and that is that bookmakers build in their own commission whenever they offer a price. This is known in the field as the "house edge".
The house edge is a very simple concept. What it means in essence is that the price offered to you, the customer, on any particular event is not the "real" price. Meaning that it is not an accurate reflection of the probability of your bet being successful.
EVENLY MATCHED
A good demonstration of this would be a contest between two players or teams who are precisely evenly matched in their sport. In such an event the "real" odds for either competitor would be 1/1, or Evens. However the bookmaker will always quote a price that is less generous than this, typically 5/6 or 10/11. The "missing" amount is the house edge. Please note that you still have a 50% of winning money on the bet. However as the amount that you win does not reflect the true value of the wager it follows that if you were to continue to bet on different events on the same terms you would ultimately lose and the bookmaker would win. In fact the more bets you place the more certain your making a loss would be.
Another simple example would be a random toss of a coin. Should somebody offer you 80p if the coin shows heads but demand £1 from you if it shows tails would you take it? You are, after all, just as likely to win as you are to lose. However, repeat the exercise ten times and you will probably be down on your money. Repeat it a hundred times and it is a racing certainty. The other person is certain to win because he or she has the house edge.
Bookies make their living by paying customers less than their winning bet is worth. That is the bottom line.
It figures then that were you to find a bookmaker who was prepared to consistently offer you a better price than the bets you are making are worth you will end up better off. This is not just a likelihood, it is a stone cold fact.
Other than through special offers and bonuses, it is unlikely that you will find a book that is knowingly prepared to offer you more than a bet is actually worth. However on rare occasions the bookie does get it wrong, and a price is quoted which is more generous than the facts would seem to require.
ODDS COMPARISON SITES
With the widespread availability of odds comparison sites it is often easy to spot a rogue price. It is always an inexact science because it is nigh on impossible to determine the exact probability of a particular sporting outcome. Some value betting companies like to try to work these things out by reference to a complex mathematical formula. The simple fact is that an element of it will always involve some guesswork.
When a price is noticeably out of line with those being offered by other bookmakers the house edge is effectively reversed. This doesn't make it any more likely that you will win your bet. But it does mean that, if the opportunity arises to repeat the exercise often enough, you will inevitably profit and some point. This is called value betting.
The ability to identify a value bet is sometimes quite an art form. It is further complicated by the fact that a bookmaker may have inside information that a particular athlete or competitor is carrying a injury, information which may not be available to others. With this information the price of the favoured party will drop and that of the injury victim will inflate. The value better needs to be wise to this possibility.
Anybody who is prepared to try to follow this path to potential success needs nerves of steel, and also a considerable amount of patience. Only bet when you know a wager is overpriced. Use a reliable sportsbook or a leading betting exchange and don't panic. If you are calculating the reverse in the house edge correctly you will be a winner overall.
Sunday 26 October 2014
Sunday 19 October 2014
Is This the End for Payday Loans?
By Sam Collin - Communications Manager, CDFA
It can’t have escaped your notice that Wonga has been back in the news. After its meteoric rise, it seems things have taken a turn for the worse for the payday lender.
The company has just posted a 53% drop in profits for 2013, though still a not-too-paltry £40million. Just a few days later, Wonga announced it would be writing off £220m of debts for 330,000 customers after putting in place new affordability checks.
The changes came after discussions with its new regulator, the Financial Conduct Authority (FCA). Wonga’s new stricter lending criteria should mean it will accept far fewer applications from new and existing customers in future, and it has admitted it will be a smaller, less profitable company.
Is the FCA making an example of Wonga? It has certainly been the most high profile payday lender, and the one that has attracted the most criticism from the likes of the Archbishop of Canterbury. It has also demonstrated some of the worst practices. Earlier in the year it was revealed that Wonga had sent letters to customers in arrears from non-existent law firms, threatening legal action.
CRACKDOWN
The FCA’s crackdown on payday lenders comes after a scathing report into the industry from the Office of Fair Trading, which found widespread bad practice and lending to those who could not afford to repay.
An interest rate cap will soon be introduced, and the Competition and Markets Authority has just announced plans to bring greater transparency to payday loan products through price comparison websites. Could this be the end for payday lenders? The FCA is predicting 99% of companies will close down. Many people will be celebrating, but will their customers?
1.6 million people in the UK took out a payday loan last year. They borrowed a staggering £2.5 billion. Some of these people can afford to repay the loans on time. It is those that can’t, however, that roll over loans and see their debts and interest repayments climb out of control, that provide the profits for payday companies and that consumer groups want to protect.
It is the poor treatment of vulnerable customers that has caused so much outrage and distress. Ian Jordan of Southampton took his own life after running up debts of over £20,000 with payday loan companies. He couldn’t cope with the pressure they put him under, and his daughter is now demanding more be done to stop their behaviour.
So if payday lenders leave the market, is the problem solved? There is a fear that this could open the door to even more unscrupulous behaviour. The unregulated, illegal loan sharks could crawl back onto our streets.
There is some hope, however, that the ethical alternatives will take root and grow to fill the gap. Alternatives like credit unions and CDFIs. Credit unions are mutuals that provide savings and loans for members. They are well-placed to deliver services for the ‘safer’ customers who can save as well as borrow and benefit from low interest rates.
POOR CREDIT HISTORIES
The ‘riskier’ customers can turn to a CDFI (community development finance institution) that can provide loans to people with poor credit histories and no savings, as long as they can show they will be able to repay.
Last year, CDFIs helped 42,000 people with fair and affordable credit. They provided financial literacy support to 8,100 people and helped 4,200 people open a bank account – moving them to mainstream finance and away from cycles of debt.
The numbers are good, but they are a long way from meeting the current customer base of payday lenders. If they are to grow in scale and reach, CDFIs need a lot more capital. Last year they received only £2m of new capital funding (compared to £9million the previous year). This represents 5% of the profits made by Wonga. The funding, from public and private sources, is small change compared to the size of the challenge.
Loans are obviously not the only answer, and steering people away from short-term debt, helping with budgets and savings, accessing other support and advice and using longer term, affordable loans to manage finances better are all services on offer from CDFIs.
But to provide these vital services on the scale that is soon to be needed, will only be possible with a lot more support from local and national sources. Without it the loan sharks may be back.
Reproduced with acknowledgements to The Information Daily
It can’t have escaped your notice that Wonga has been back in the news. After its meteoric rise, it seems things have taken a turn for the worse for the payday lender.
The company has just posted a 53% drop in profits for 2013, though still a not-too-paltry £40million. Just a few days later, Wonga announced it would be writing off £220m of debts for 330,000 customers after putting in place new affordability checks.
The changes came after discussions with its new regulator, the Financial Conduct Authority (FCA). Wonga’s new stricter lending criteria should mean it will accept far fewer applications from new and existing customers in future, and it has admitted it will be a smaller, less profitable company.
Is the FCA making an example of Wonga? It has certainly been the most high profile payday lender, and the one that has attracted the most criticism from the likes of the Archbishop of Canterbury. It has also demonstrated some of the worst practices. Earlier in the year it was revealed that Wonga had sent letters to customers in arrears from non-existent law firms, threatening legal action.
CRACKDOWN
The FCA’s crackdown on payday lenders comes after a scathing report into the industry from the Office of Fair Trading, which found widespread bad practice and lending to those who could not afford to repay.
An interest rate cap will soon be introduced, and the Competition and Markets Authority has just announced plans to bring greater transparency to payday loan products through price comparison websites. Could this be the end for payday lenders? The FCA is predicting 99% of companies will close down. Many people will be celebrating, but will their customers?
1.6 million people in the UK took out a payday loan last year. They borrowed a staggering £2.5 billion. Some of these people can afford to repay the loans on time. It is those that can’t, however, that roll over loans and see their debts and interest repayments climb out of control, that provide the profits for payday companies and that consumer groups want to protect.
It is the poor treatment of vulnerable customers that has caused so much outrage and distress. Ian Jordan of Southampton took his own life after running up debts of over £20,000 with payday loan companies. He couldn’t cope with the pressure they put him under, and his daughter is now demanding more be done to stop their behaviour.
So if payday lenders leave the market, is the problem solved? There is a fear that this could open the door to even more unscrupulous behaviour. The unregulated, illegal loan sharks could crawl back onto our streets.
There is some hope, however, that the ethical alternatives will take root and grow to fill the gap. Alternatives like credit unions and CDFIs. Credit unions are mutuals that provide savings and loans for members. They are well-placed to deliver services for the ‘safer’ customers who can save as well as borrow and benefit from low interest rates.
POOR CREDIT HISTORIES
The ‘riskier’ customers can turn to a CDFI (community development finance institution) that can provide loans to people with poor credit histories and no savings, as long as they can show they will be able to repay.
Last year, CDFIs helped 42,000 people with fair and affordable credit. They provided financial literacy support to 8,100 people and helped 4,200 people open a bank account – moving them to mainstream finance and away from cycles of debt.
The numbers are good, but they are a long way from meeting the current customer base of payday lenders. If they are to grow in scale and reach, CDFIs need a lot more capital. Last year they received only £2m of new capital funding (compared to £9million the previous year). This represents 5% of the profits made by Wonga. The funding, from public and private sources, is small change compared to the size of the challenge.
Loans are obviously not the only answer, and steering people away from short-term debt, helping with budgets and savings, accessing other support and advice and using longer term, affordable loans to manage finances better are all services on offer from CDFIs.
But to provide these vital services on the scale that is soon to be needed, will only be possible with a lot more support from local and national sources. Without it the loan sharks may be back.
Reproduced with acknowledgements to The Information Daily
Thursday 16 October 2014
Online Surveys
Completing online surveys is an easy way for anybody to generate a regular income from your computer. Just sign up to a survey website, give your details and within half an hour you can be making money.
It is important to understand that nobody ever got rich by answering survey questions on a computer screen. As an occupation it is poorly paid, and if you are eligible to pay income tax then you also need to bear in mind that survey income is tax deductable. A few pounds an hour, in cash or in store vouchers, is as good as it gets. However you can work your own hours, from home, whilst eating a meal or watching television. You are entirely your own boss. If you are at home and doing nothing, why not use that free time to supplement your income?
There is a whole host of survey providers who pay for your opinions. Amongst the better ones are YouGov, Populus Live, Valued Opinions and Ipsos, but there are literally dozens. One other very popular site with survey enthusiasts is Swagbucks, chiefly because there are a whole range of games and videos from which one can accumulate points.
An excellent source of further information on using online surveys is Money Saving Expert. There the top twenty or so survey operators are listed and linked to, and advice is given on how best to maximise income.
One word of advice is to use a dedicated e-mail address that is set aside for this purpose only. In this way you will save yourself the anguish of a whole load of spam in your regular inbox.
It is important to understand that nobody ever got rich by answering survey questions on a computer screen. As an occupation it is poorly paid, and if you are eligible to pay income tax then you also need to bear in mind that survey income is tax deductable. A few pounds an hour, in cash or in store vouchers, is as good as it gets. However you can work your own hours, from home, whilst eating a meal or watching television. You are entirely your own boss. If you are at home and doing nothing, why not use that free time to supplement your income?
There is a whole host of survey providers who pay for your opinions. Amongst the better ones are YouGov, Populus Live, Valued Opinions and Ipsos, but there are literally dozens. One other very popular site with survey enthusiasts is Swagbucks, chiefly because there are a whole range of games and videos from which one can accumulate points.
An excellent source of further information on using online surveys is Money Saving Expert. There the top twenty or so survey operators are listed and linked to, and advice is given on how best to maximise income.
One word of advice is to use a dedicated e-mail address that is set aside for this purpose only. In this way you will save yourself the anguish of a whole load of spam in your regular inbox.
Monday 13 October 2014
Money Making Ideas - An Introduction
Welcome to the Money Making Ideas blog - a new online resource for everyday people who wish to make some extra money.
This is not a site for big investors, speculators and share dealers. MMI is about simple ideas for ordinary people who just wish to earn a bit of extra cash to pay those bills or to supplement their main income.
We welcome input from readers who may have ideas of their own to offer and we will publish anything to this end that is literate, legal and constructive. Just contact us and give us your news and you will see it up here within a day or two.
We hope you will enjoy the blog. Please bookmark us and come back as this site will be updated regularly with fresh articles.
This is not a site for big investors, speculators and share dealers. MMI is about simple ideas for ordinary people who just wish to earn a bit of extra cash to pay those bills or to supplement their main income.
We welcome input from readers who may have ideas of their own to offer and we will publish anything to this end that is literate, legal and constructive. Just contact us and give us your news and you will see it up here within a day or two.
We hope you will enjoy the blog. Please bookmark us and come back as this site will be updated regularly with fresh articles.
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