Written by: Corey Janoff
This post was originally published on our previous blog website on August 22, 2017 and has since not been revised and/or updated.
As many people are probably aware, one of the most highly anticipated/hyped/ridiculous boxing matches of all time will be occurring this Saturday, August 26th. Some of you couldn’t care less. Others are wildly intrigued. Some of you may want to place bets on the fight. By no means do I condone illegal gambling, but if you are in a position to legally place a wager, is that a good idea?
Betting on McGregor
Every fighter has a puncher’s chance. MacGregor is the bigger, younger, and possibly more insane person in the ring. He has never boxed before, so he doesn’t even know enough to be intimidated.
Also, because he has never boxed before, Mayweather has no tape to study, so McGregor could potentially catch him by surprise.
Mayweather has a lot on the line with his undefeated boxing resume, but it doesn’t appear he is taking this fight very seriously. Mayweather’s father even said that Floyd is training “just enough” to win this fight – as if they both know he doesn’t have to try very hard to beat the rookie. When people don’t take things seriously, that’s when they slip up.
Nobody really things McGregor stands a chance to win this fight. So betting on him would be like betting on the Browns to win the Super Bowl this season (sorry Cleveland fans). You throw a few bucks down for fun, knowing you are pretty much throwing money away. But if they win! You will be the happiest, cockiest, most braggadocios person in every room you walk into for a month. You will Instagram your betting ticket, take selfies with the cashier when you go to cash in the bet – life will be good! It gets you excited just to think about it, even though you know you are going to lose! Similar to when you buy a Powerball ticket – you know you aren’t going to win, but merely thinking about what you would do with the money is 99% of the fun.
Betting on Mayweather
The obvious argument is Floyd Mayweather is an actual boxer who is undefeated in his professional career and he is fighting a person that has never boxed a professional match in his life. Should be easy money, right?
The odds change by the day, or even the minute, but as of this writing, Mayweather was a -450 favorite. If I understand money lines correctly (someone please correct me if I’m wrong), you would have to bet $450 to win $100. That is the quickest 22% return you will ever make if Mayweather wins the fight.
22% return for a 36 minute (or less) fight. That’s an annualized rate of 321,200%. Dang! If only there were more lopsided events like this to bet on – we could get rich quick!
The media and boxing “experts” make it seem like this is a fight between Mohammad Ali and a paraplegic, so you would be crazy not to bet Mayweather. Might as well cash out all the equity in your house, liquidate your 401k, and bet the farm, because it’s money in the bag!
A Lesson from History
Anytime someone or a team is this heavily favored, proceed cautiously. Nobody seriously thought Donald Trump would beat Hillary Clinton in last year’s election. Nobody thought Enron would go out of business (or Lehman Brothers). Nobody thought the Patriots would beat the Rams in Super Bowl 36. Nobody thought Villanova would beat Georgetown in the 1985 NCAA basketball championship. Nobody thought that USA Hockey would beat Russia in the 1980 Olympics. Yet they did. In all these scenarios, the world was shocked. Should have bet the underdog.
Don’t get too confident if you plan to bet this fight and are betting Mayweather. Don’t be confident at all if you are betting McGregor. Gambling is different from investing. There is a reason it is illegal in most states.
Yes, betting Mayweather to win is probably as close to a sure thing as there is. But what if he loses (or draws)? Then you lose all that you wagered. Only risk what you are willing to lose. If you win, you’ll wish you had bet more, but you will be happy. If you lose, you won’t be devastated.
There are similar parallels to investing. I have plenty of clients who get approached by friends and family members to invest in a new business. “It’s great. This person knows what he/she is doing. I have confidence in them. If I get in early and they hit it big, I could retire young!”
I had one client invest in a friend’s oil and gas exploration company. She supposedly had a government contract lined up, but I don’t think that was the case. Nor did she have the capacity to explore and find much oil or gas. On top of that, oil and gas prices plummeted shortly after it got started. Needless to say, the client got nothing back.
Another client invested in a bar/game room in his college town that a friend was opening. It wasn’t a huge investment and he could afford to lose it (which he did). The bar didn’t do very well and closed after a few years. At least he got free beer when he occasionally visited.
I could go on with plenty of examples. Most start-up business never turn a real profit and fizzle out within a few years. This is the equivalent of betting on Connor McGregor. Highly improbable you will win.
Investing in blue chip stocks would be the equivalent of betting Mayweather. You will probably make a few dollars, but definitely don’t bet your life savings. They could easily slip up in the short term and cause temporary losses. If those companies don’t succeed, it will be devastating. Very few companies last multiple generations. Some of the most valuable companies today have only been around for about 30 years or less.
It’s important to diversify. Don’t throw all your eggs in one basket.
Enjoy the fight, if you watch it. And good luck if you are placing bets!
Disclosures:
These are the opinions of Corey Janoff and not necessarily those of Finity Group, LLC or Cambridge Investment Research, Inc. Gambling should only be done legally and as a form of entertainment only, not for investment purposes.
