The barbell strategy

How this financial trading technique will improve your sports betting
 
Those of you who know me, and have read my articles in the past (see here), will be fully aware of my fondness for using a financially-themed illustration when it comes to betting.

And the reason for this is simple…

The world of finance has many features in common with the world of betting (the principle of risk/reward, good/bad investment opportunities, positive/negative growth, capital drawdowns, the potential for large gains, stop/loss, ROI’s, ROC’s).

It also, and I don’t mean to be controversial, and certainly not disrespectful, with this statement…

But it also draws a highly intelligent, well-skilled and, crucially, a fanatically numbers and spreadsheets obsessed practitioner… that the world of punting could learn a thing or two by copying.

There are many successful strategies employed in the financial world that we, as sports bettors, can benefit from.

And it is one such tried-and-tested investment method that I’m going to introduce to you here, and it’s the one known as the “barbell strategy”.

[I’m leaning on an article from the Corporate Finance Institute for this explanation – click here]
 

What is the barbell strategy?

The barbell strategy involves investors purchasing short-term and long-term bonds, but not intermediate-term bonds.

The particular distribution on the two extreme ends of the maturity timeline creates a barbell shape. The strategy offers investors exposure to high yielding bonds with limited risk.
 

Why use a barbell strategy?

The barbell strategy lowers risks for investors while providing exposure to higher yield bonds.

Short-term bonds have a maturity rate of fewer than five years. They are relatively safer than long-term bonds due to less exposure to interest rate risk. The strategy also includes buying long-term bonds, which have maturities of 10 years or longer. The bonds offer higher yields to compensate for higher interest rate risk.
 

What are the advantages of a barbell strategy?

(1) The first advantage of the strategy is that it enables investors to have access to higher yield long-term bonds.

(2) The second advantage is that it decreases risk. The strategy lowers risk as short-term and long-term bonds’ returns tend to be negatively correlated. So, when short-term bonds do well, the long-term bonds tend to struggle and vice versa.

Thus, by holding bonds with different maturities, investors have less downside risk.
 

Sorry, you’ve lost me Matthew…

What’s this all about?

Ok.

The point of highlighting the barbell strategy is that in the financial world it helps investors balance risk and reward – by taking positions on assets at both ends of the spectrum (with the aim of reaping the benefits that each extreme offers).

High yields on the one hand. Low risks on the other.

So with this method of investing…

Some stocks or bonds are shorter, and potentially more volatile.

Others are longer term in nature, and offer a more certain return over time.

But together they offer the investor the best of both worlds.
 

Example. By investing the majority of funds in more stable commodities (like Blue Chip companies on the FTSE100) you have a very low exposure to risk, whilst at the same time enjoying a gradual increase in value. By using the small remaining percentage of your funds in a more volatile sector (say, Bitcoin, to choose a topical example) you have a much higher risk/reward factor, but one that is safeguarded by the fact that most of your funds are ring-fenced in a separate, low-risk alternative like gold, or government bonds, a FTSE100 company, or an annuity of some kind.

 
And this is why the barbell strategy has its advocates.

It provides the opportunity to speculate on shorter term, more volatile positions… whilst at the same time retaining the bulk of an investor’s assets in slower moving, gradually growing, long-term trades.
 

So how does this apply to betting?

A lot of bettors have a natural style, or preference, when it comes to sports betting.

And just like in the financial world, there is a whole spectrum of risk-reward positions within which they might find their particular niche.

To illustrate the breadth of opportunity…

You could favour backing short-price teams in domestic football matches like Real Madrid, Bayern Munich or Celtic… or maybe trying your luck on elaborate bet-builders with any number of moving parts (correct score/most corners/completed passes/shots on target).

You might like to bet on hot-shots in golf like Scottie Scheffler or Rory McIlroy… or alternatively placing your hard-earned cash on a tournament outsider at 200/1.

You can opt to pawn the family silver to bet a Willie Mullins or Aidan O’Brien “good thing” … as opposed to playing the percentages and backing a 33/1 shot in a big Saturday handicap.

None of the above are “wrong” ways to bet…

Each of these conventional betting strategies can, and does, in the right hands, provide the potential to make a profit.

But each of them, as you can see, is quite limited in their range of outcomes.

Both are narrow in terms of what they will generate, statistically speaking.

Backing a short-priced football team – PSG to win a match in Ligue 1 – will land you a win the vast majority of the time, but it won’t generate a huge return (unless you’re prepared to place a big bet).

Likewise, continually betting on 100/1+ golfers demands a lot of patience, because at this price you’re never going to back many winners. When they do win, great, but how often will that be?

So what’s the way to create a more balanced style of betting?
 

Sports betting and the barbell strategy

From my 30+ years of experience in betting, I’ve got a good understanding of what most backers want to get from their betting.

Profit – obviously! But it’s the way in which this profit is made that really matters.

Most amateur punters don’t want to have to place enormous stakes (whether practically or emotionally). But most, almost all, want a steady flow of winners. To enjoy a decent strike rate with their bets.

They also don’t want to bet a lot of obvious, short-priced bets (“I can pick those myself Matthew”) but, then again, they don’t want to wait an age for a winner because they’re backing so-called value bets which, they’re assured, will pay off in the long-term.

And they don’t want their betting bank to be rising and falling with every tide. Having no idea whether tomorrow they’ll need to be topping up their account – when they’d prefer to be making a withdrawal.

In short, most bettors want the ability to land the occasional big-priced winner… but to have that ability to speculate under-pinned with a few shorter, more certain winners to keep things ticking over.

Sound familiar? Well, that’s a financial barbell strategy applied to sports betting.

And you can create this approach with your sports betting in a number of ways.

Two prime examples are to combine together the kind of  “extreme” styles within a single sport that I’ve highlighted above – mixing short priced horseracing bets with the occasional big EW punt.

Alternatively, to blend complementary methods from different sports. Football favourites at short odds, outright golf bets at much bigger prices.

The “weights on the bar” take the form of bigger, stronger bets…

And in-between you have the more speculative, smaller staked investments.

Either way what you can create is a betting portfolio which covers not just the extremes of investment, but all points in between.

In this way you almost create a “bet to nothing”.

So applying the barbell strategy to sports betting… you’re using the capital, or profit, you gain from the bigger, more solid bets to fund smaller plays (at bigger prices) on  a handful of more risky or speculative bets.

In effect this method of bet management allows you to have your cake and eat it. And what’s not to like about that?!

 

OPINION: As punters we always want to have the best of both worlds. And whilst we’d love to enjoy a high strike rate with big odds bets, sadly the laws of probability don’t allow this to happen. But we can have both by adopting the barbell strategy. Lots of winners, and the occasional moonshot and adrenalin rush of landing a big gamble. And for those who find a procession of short-priced bets too dull, or a string of big-priced losers too stressful, this strategy, founded in the financial world, could just be the answer.