## Why Is The Real Rate Of Return Much Higher Than You Think?

2021/01/16
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Today, I would like to show you why the rate of return for a single event is not a real rate of return.

Well, it is significantly underestimated.

Why?

If you want to open a bank deposit, the bank presenting you an offer shows the interest rate on this deposit, so your rate of return (let's assume that there is no tax and inflation).

In exchange, for the fact that you keep money on a deposit, the bank offers you, for example, 5% profit.

Applying this to mathematics - for a deposit of 10,000 you will get 10,500 back.

Just note that this is given on an annual return.

So you will receive 500 after a year.

Another example.

Imagine that you have bought an apartment for rent.

The renter pays you 1,200 every month.

You bought the apartment for 200,000.

You will earn 14,400 annually.

Relating this to the investment, it gives you 14,400 / 200,000 with a 7.2% rate of return.

But again - annual return.

What am I going to?

I want you to be aware, that in the examples given, the same money, 10,000 on a deposit and 200,000 invested in an apartment, earn you profits.

But you have the cash frozen.

You can't do anything else with that cash.

Now let's check what this rate of return looks like in progressive betting draw strategy.

In my analyzes, I provide the rate of return for a given season or team.

But is it real?

If we consider, that it is the rate of return on a given event, then yes.

But it is definitely not the annual rate as in the examples above.

So how is it really?

I will now refer to the analysis of the Brazilian league that you can find on the blog HERE.

See the Sao Bento team, which completed 2 investments in the analyzed season.

But was the money you invested different every time?

No!

Because in betting, the winning coupon returns you the money you invested including the profit earned.

So, ending one progression on Sao Bento, another one was based on the same money.

And this is the most funtastic of investing in sports.

The same money can make us profit many times during a year.

So the real rate of return in the example above is 35%.

When analyzing individual leagues, however, I will stick to the classic calculations so as not to be accused of abuses and presenting too high rates of return.

This post is just to make you realize that it is  higher.