Applying Odds Theory to Help Your Bank Balance

Crash 560x319Ever since the great crash of 2008 many people have believed that bankers must have always been the greatest gamblers the world has ever seen – and that doesn’t mean great in terms of success, by the way.

In their case they looked at a worldwide phenomenon of almost unregulated lending. Even though the odds were firmly against all the money ever being paid back by borrowers they carried on regardless. The consequences, as we all know, were huge for everyone.

So it may seem to be an odd suggestion that using theories developed by casino gamblers, another group not always known for their grasp on risk and reward, could be a good strategy for tending our own hard-earned cash. Perhaps the first thing to do is to move away from the area of wagering that hinges around uncertainty to focus more on using statistics and odds that can help to give us a better idea of what will actually happen if we go down a chosen route in any situation.

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As a rule of thumb you’ll find that the most successful gamblers are the people who have a good mathematical understanding of the laws of probability through their knowledge of online casino odds and can apply these quickly and accurately, often when they’re under a considerable amount of pressure. While these laws can be very simple, for example in roulette when the choice of black or red is a straight 50/50 guess, in more complex games like poker many elements come into play. This means that the mental calculations needed can be so complex that a PhD in math can really come in handy.

Unfortunately, life is complex too so when we start trying to apply odds theory to our own financial decisions well away from the casino it’s more like a game of poker than the simple spin of a roulette wheel. What’s more, decisions need to be made in many different contexts and with many separate factors coming into play.

Investment 560x280One of the most obvious example comes when we’re deciding where to invest our money. Do we take a riskier option with the chance of greater returns but with added risk or to take a safer, potentially less lucrative, route?  By taking many elements into account including past performance and future prospects we can start to weigh up our own odds which will help us to make our decision. Related to this is also the gambler’s attitude to money. The old adage of “only bet what you can afford to lose” is just as relevant to our everyday finances as it is at the blackjack table.

Of course, underlying all of this is the importance of relying on logic rather than emotion over every kind of decision whether it’s to twist or stick or sink some of our savings in a stocks and shares ISA. While nothing is ever 100% certain, our own intellectual rigor and analytical skills are two elements we can rely on to help tip the odds in our favor.