Stock market vs. Sports market
As many of you know I have a deep background in financial markets and it was this, and a lifelong interest in gambling markets, that brought me to betting exchanges. I thought you may be interested in why I am still active on both the betting and the stock exchanges and the differences I see between them.
At face value, the two markets are not too dissimilar. You can bet on value or price direction on both and betting on both has been around for some time. One issue you have in the stock market though is the high level of transaction costs. If you scratch a trade on the stock market you don’t exit at zero, you exit for zero less costs, these stack up pretty quickly. Also, prices in financial markets can fall and rise at the same time, but in a betting market that’s impossible. IMHO It’s much easier to frame a betting market. One aspect of financial markets is that you can leverage your positions; nobody would let you do this in a sports market for sure!
Some big positives for the sports exchanges is that you get the markets lining up in nice parcels. No need to have the phone on 24.7 to trade them. Just nip in and out when you wish. You also have events that can easily be modelled and managed. No government, war or economic stimulus package will affect the price of the 18:20 at Kempton. Well it shouldn’t at least. Also, they are perfect for smaller bank sizes. I can perform miracles with, say, £1,000 but less so with £1m!! From a return on capital perspective I haven’t seen a market so suitable for turning large pecentages on small bank sizes. The opposite tends to be true in financial markets.
Returning high %’s on small amounts is great, but you can’t do this for long before you run into the other issue, managing larger sums of money. I keep trying to find innovative ways to increase the amount of money I put through sports exchanges but I don’t have to innovate to do that on the stock market.
The big difference for me between the two is that I am not a short term trader on the stock market; I am a good old fashioned investor.
Why am I an investor and not a trader on the stock market?
You and I can sell each other bits of a company on the stock market and if I am smarter than you I will gain what you lose, but ultimately a company is only worth what it throws off in cash over time. No matter how much you and I buy and sell that to each other the value of company stock can only be created on the basis of what the underlying business earns. From an investors perspective the most tangible manifestation of this is dividends. Imagine a trading position where you benefit not only from a price rise but also by getting paid for holding it! This is a good reason to invest long term. You also get the benefit of not needing to be at my screen 24/7. I don’t worry that much about what happens in the next few minutes, days or months. I only look to buy companies that have a decent yield and one that will be stable over time. By focusing on yield you often get the double effect of earning higher dividends and seeing the price rise in response.
In a nutshell that’s how I put my longer term money to use. It also gives me the freedom to mix and match my responsibilities with ease. Most of my time on the stock market is spent reading, researching or speaking to people. You can do that anywhere at your own leisure, it helps if you are interested in it. I actually do very little buying or selling, the complete opposite of what you may expect and nothing like those ‘million dollar traders’ that are the typical stereotype of a modern participant on the stock market. More than one way to skin a cat as they say.
For your interest I have linked to an article I wrote about dividends a few years ago for Shares magazine.
https://www.betangel.com/downloads/060209-Shares-Vol%208-Issue%2006-P45.pdf
Category: Using Bet Angel
