So here we are on the eve of the Rugby World Cup and lots of Irish people have had a flutter on Ireland winning the tournament outright. All of us here at Metis Ireland have a soft spot for Joe Schmidt and his Irish Squad since Joe was good enough to speak at our investment conference last year.
And I must admit that I have had a few euro on Ireland to win the tournament outright. As I was placing the bet, I was thinking about the Metis Ireland investment philosophy and how a single bet on a team to win a tournament was not something we would ever recommend! So then I thought are there lessons to be learned from Rugby World Cup betting?
Betting on New Zealand to Win (The Favourites)
The All Blacks are 11/8 with Paddy Power to win the tournament. In investment terms, this bet is like the investor buying one share on the US stock market. It’s probably a share like Coca Cola that is traditionally rock solid and likely to increase in value over time and give a steady dividend.
But what if Coca Cola has a bad quarter? Wouldn’t you be better off having invested in the entire US top 500 companies? Sure, it will probably hurt a little on the upside, but you are hedging your bets and therefore managing your risk.
That’s why Metis Ireland would always prefer to invest in a stock market index rather than specific stocks.
Betting on Scotland to Win (The Outsiders)
Scotland are 100/1 to win the World Cup. On their day they can probably put it up to anyone, but I doubt many pundits would see them going all the way.
In investment terms, this is the purchase of the Oil Exploration stock because the word is they are close to a massive oil find in Outer Mongolia. Sure it’s happened before but highly unlikely to happen again.
Metis Ireland would prefer to severely limit these types of investments and if they have to be made to invest a small portion of the overall portfolio value in a fund that has many different types of exploration shares.
Top Points Scorer (The Punt)
New Zealand’s Dan Carter is 2/1 to be the top points scorer. But what happens if he gets injured in the first 5 minutes of the first match? Leigh Halfpenny was 9/1 to be top points scorer and now is injured and will not take part at all.
Did you ever hear the phrase that past performance is no guide to future performance etc?! Well that goes for Dan Carter as well.
What do Paddy Power do? (The Certainties)
They take the bets of course and spread the risk over thousands (maybe millions) of different bets. Some punters will lose and some will win which brings them all back over and over again. I’m sure the financial analysts at Paddy Power have done their probabilities of winning versus losing. The probability of losing on the World Cup book is very low. The probability of losing over 2 World Cups is remote. So the longer the time frame, the more certain they are of results in their favour.
And so this is how they make money. They spread their risk of lots of different customers having a flutter over different time frames.
That’s what Metis Ireland do for our customers. We spread our clients’ investments in lots of different asset classes to ensure that we are managing risk as best as possible. Have you heard us use the term DIVERSIFY before! Of course you have. If you combine DIVERSIFICATION with TIME, you are onto a winner.
That’s what Paddy Power does and that’s what Metis Ireland does. Both leaders in their field with one big difference – Paddy Power would prefer if their customers lost but enjoy the experience, Metis Ireland want their customers to win and enjoy the experience.
Metis Ireland Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland. All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.