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Tuesday, March 23, 2010

Beating the Bank, did I do it?

So a year ago I decided to see if I could gamble my way to a better return on £100 than I could get in a savings account with bank. So how did I do?

First lets remind ourselves of the target.  The best rate was 3.61% AER back in march last year, tax free too, so I needed to make just £3.62 profit to beat the potential return.  I did set myself some rules, such as that I must bet the whole £100 pounds over the year and that I should only ever bet £1 stakes to help spread the risk.  I also only bet when I had the time, and only on events I had an interest in.

So, one year on and my £100 has turned in to ………………


That’s just under a 14% return, more than 10% above the best I could have got by putting the money in the bank!  There certainly was more risk, though if you read my previous posts you’ll see that it was very much a case of small steady returns rather than looking for that big win.  In fact out of 161 bets I lost just 8, so that’s a pretty good success rate (about 95%) with an average return of 8.5p per £1 bet.  Most people wouldn’t look twice at odds of 1.08, for some evens is bad odds, but this shows that with a bit of effort, these sorts of odds can give a solid return.  I have no doubt that had I focussed more the experiment rather than have a few lengthy periods of in activity I could have achieved returns of over 20%, now I bet if you could find a savings account with that sort of rate you would be piling you money in there as fast as you could.

Out of all my investments, this by far out-performed the others.  The next best was Zopa, where I achieved returns of about 8% compared to 2-3% for my cash savings.

There is one investment that could have beaten this by a considerable margin, with very little effort.  If I had put the £100 in a FTSE 100 tracker, I would have achieved growth of around 47%!!!!  Given how bad the markets were when I start, perhaps the main thing to draw from this experiment is that all different investments can offer the best and worst returns at different points in time, so best to diversify and spread the risk so hopefully any poor returns or losses in one investment can be offset by great returns in others.

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