Introduction

Many new bettors and traders stake far too high and go for big winners.

Some of the reason for that is definitely impatience, but also I think that a lot come from a gambling background and are used to chasing that winning adrenaline rush.

In this lesson, I'm going to show you why that's absolute madness!

All you need is a consistent monthly profit and the power of compounding.

What is Compounding?

Compounding is commonly used in the world of investing.

This short video explains it very well...

Compounding and Football Trading

In the video you just watched, Dave Ramsey talked through an example of Ben who started saving at age 19 and ended up with a huge amount of money.

Unfortunately, I'm a lot older than 19!

However, I found an accelerated way to compound my money... football trading.

The FTSE 100 has returned an average of 7.75% annually since its inception in 1984. That's a nice return, but an experienced football trader can make that monthly.

In other words, an experienced football trader can outpace the stock market by 12x.

Football betting is similar, though the returns are generally lower. This is because trading gives you the opportunity for much better risk/reward and that makes a big difference.

Of course, trading takes a bit of time (but not much) so many people prefer betting. Everyone is different, so find what works for you and compound your bank.

The limitation with football trading (and betting) is that you cannot compound your bank forever and keep raising stakes by splitting it into 100pts.

There comes a time when you need to diversify into other investment opportunities, such as the stock market and property.

By the time that happens though, you're set for life.

An Example of Compounding

Here's an example of how your betting/trading career might go.

I'm going to assume that you're 40 years old and that you have a £1,000 bank. I'm also going to assume that you take your time learning to trade so you don't make a penny for three years.

At the start of your fourth year of trading, you split your £1,000 bank into 100pts at £10 each and you make make 7.75pts (the same as the average annual FTSE 100 return).

That's a profit of £77.50 so your bank is now £1,077.50.

You reset your bank to 100pts which means that your new stake size is £10.77.

During your second month of trading, you make another 7.75pts profit. That's £83.50 added to your bank which is now £1,161.

Month three results in the same 7.75pts profit (£89.98) and month four returns £96.95.

By the end of the year, your bank has grown to £2,449.

If you continue to make 7.75pts profit per month, your bank by the end of the next year is £5,998 and by the end of the year after that it's £14,690.

Do you see how your bank is snowballing thanks to compounding?

Albert Einstein quote: Compound interest is the 8th wonder of the world

Compounding has Limits

In the example above, if you made 7.75pts profit every month and reset your stake size monthly, your bank when you hit 50 years old is £528,507!

That's £1,000 to £528,507 in just seven years... because you spent the first three learning!

However, £528,507 split into 100pts is £5,285 per point.

While you'd be able to trade at that level in Betfair's Match Odds or Over/Under 2.5 Goals markets in the biggest leagues, other markets would be a problem.

This is why nobody achieves financial freedom from football trading alone.

Also, say you have a £10,000 trading bank and you're using £100/pt. How much of your bank do you need in Betfair? £500?

Even on a busy day you're not going to need that much, so you'll be quite comfortable.

That leaves £9,500 doing nothing.

In fact, look up the current inflation rate... that's how fast your 'lazy' money is shrinking!

However, if you put that £9,500 to work over the next year and it returns 10%, you'll have made £950 (9.5pts) just by being smarter than the average trader.

Financial Freedom

I've achieved financial freedom and you can do it too. Anyone can.

As a kid, my dream was to have a million pounds in the bank and live off the interest.

Fast forward to today and £1m is not the vast amount it used to be.

I couldn't help but be inspired by Warren Buffett's story. He left college with $9,800 to his name and went on to become the richest man in the world!

After working (and saving) in New York City, he went home to Omaha, Nebraska with $127,000.

Buffett figured that he could live well in Omaha on $12,000 per year and make that much each year from his $127,000 of capital, then get rich on the compound interest.

Unfortunately, it costs a lot more than $12,000 to live in Bournemouth these days!

What I decided to do was live cheaply and pay off my mortgage as quickly as possible. This reduced my cost of living substantially, which meant I could save and invest aggressively.

I've invested in the stock market, I own a number of rental properties, I got into Bitcoin early and now I invest in other crypto projects.

Bottom line... my bank is working hard, whether I trade football today or not.

Your Biggest Enemy

In order to achieve financial freedom, you don't need to get lucky and invest in the next Tesla or Bitcoin. All you need is some income and time.

Your biggest enemy is impatience.

If it takes time to become consistently profitable, that's ok! Do your research, make your daily betting/trading plans, stick to those plans, stake sensibly and control losses.

Your bank is your working capital and it has to be protected at all times. After all, if you don't have a bank then you can't trade at all.

Once you become profitable, stick to a reasonable monthly target and watch your bank compound over the months and years.

The Power of Compounding

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