Visiting casinos is still a negative stigma for Indonesian people. However, the editor of Magic will discuss visiting this casino from the point of view of risk and investment. Let’s see!
For better or for worse, there will be a certain sensation felt when involved in gambling that makes rational individuals make irrational decisions.
For example, in 2018, there was a Mega Millions Jackpot program in the United States with a prize of 1.6 billion USD or the equivalent of 120 billion rupiah. As a result, as many as 370 million sweepstakes were sold, exceeding the need for one lottery for the entire population of Uncle Sam’s country.
Of course, those who buy realize that the chances of winning are very slim and in fact they still decide to invest that money which ends up losing. What you need to understand is: gambling is not an effective way to invest money and gambling addiction will exacerbate other aspects.
If you gamble, winning will be a lot of fun. However, the fact is that making decisions in gambling is similar to making decisions when investing. You want to get the maximum return In this article, we will understand gambling by visiting a casino from an investment and risk management perspective.
Knowing the Chances of Winning
One skill you need to develop in the world of gambling from an investment point of view is knowing how big the opportunities are and how you can increase them.
In betting-based games like Poker, one way to increase your chances of winning is to practice. Although the game of luck has a big role in Poker, the chances of winning will be great if you practice and have a mature strategy.
An example is the Mega Millions Jackpot program mentioned above. The game requires participants to choose five numbers from 0 to 70, and six numbers from 0 to 25. When the lottery spins numbers randomly, the player with the most number of matching numbers wins more money.
The first thing to note is, what are the chances of winning the lottery? The total number of possible draws is 302, 575, and 350, meaning you have an eight times higher chance of tossing two coins and landing on the same side than winning the lottery draw.
One very possible strategy is to monitor the jackpot and buy the draw when the value is higher. Given that the lottery price is 2 USD or the equivalent of 29 thousand rupiah, you can technically buy any combination of numbers by spending 600 million USD or the equivalent of 8 trillion rupiah.
That’s a pretty fantastic number, isn’t it? In short, the higher the jackpot prize, the greater the number of draws that will be sold.
Estimating Bet Size
Another skill needed is knowing the approximate number of bets you take. Even with good odds, participants often use these opportunities too conservatively, hinder potential wins or be too aggressive thereby increasing the risk of losing money.
In a 2016 study, bettors were given 25 USD and allowed to bet on a coin that had a 60% chance of landing on the face of the head.
Although the chances of winning are very high and luck is on the side of the participants, the fact is that all the participants went bankrupt in just 30 minutes due to their mistake in not estimating the amount of bets that were followed.
The strategy of calculating the optimal bet size is a simple matter of mathematics. A researcher from Stanford University named John Kelly discovered a simple way of calculating bet size to optimize long-term profits in 1956.
The formula is called Kelly Criterion which reveals that betting small amounts combined with diversification techniques is the best betting strategy.
f = (pb – q) : b
In the Kelly Criterion formula above, f is a fraction of your money bet, p is the chance to win, q is the chance to lose, and b is the net chance, which is the amount of money you will win if you bet 1 USD and win.
For example, in the previous coin study, the calculations were something like (60% x 1 USD – 40%)/1 USD. If participants on this site http://126.96.36.199/ use this strategy, their profits increase by an average of 2% per bet.
Think Like a Casino with Your Investments
When it comes to gambling, most people want to be James Bond. Doing the impossible becomes a reality and ends up winning with a royal flush which has very little chance of happening. However, for every James Bond, there are thousands of gamblers who lose money because of a game designed to beat them.