Investing Story
A $100 bet on the best horses and the best shares has been profitable. Source: National Features
- Payouts on Melbourne Cup bets compared with share performance
- Shares come out about $1000 ahead
- "big differences between gambling and investing"
HAVING a punt is a big business in both the world of shares and horseracing.
More than $4 billion worth of shares is traded on the Australian Securities Exchange every day, while Australians are expected to spend more than $550 million betting on this year’s Melbourne Cup.
But which winners deliver the biggest financial bang for your buck?
Your Money has analysed the payouts from the last 10 Melbourne Cup winners and compared them with the best performing share on the all Ordinaries index for each of the past 10 years.
Anybody lucky enough to put $100 on each of them every year since 2001 would have made a $12,030 profit on the horses and a $13,184 profit on the shares.
Of course, bookmakers would argue that picking a winner in a field of less than 30 horses is more likely than a field of 500 shares that make up the all Ords.
Financial experts say shares offer tax benefits and other positives for investors.
They stress that trying to pick one winning stock is more like speculation rather than sound investing and unlikely to be successful.
"It’s been a pretty horrific 10-year period for shares and they still win despite that," says financial strategist Theo Marinis, managing director of Marinis Financial Group.
The best financial gain from the Melbourne Cup was 40/1 winner Viewed in 2008, and the best annual share performance was a 4205 per cent gain by Sandfire Resources in 2009 as the market bounced back from the global financial crisis.
Resource stocks dominated the share gains, not only for the all Ords but also the larger companies that make up the ASX20 and ASX50 indices.
Fortescue Metals Group and Rio Tinto were notable winners but both also suffered heavy falls during the GFC.
None of the major banks were star performers in any given year although most were solid, paying out a high level of income.
Marinis says people need to stop thinking of investing as a form of gambling.
"Investing is about buying and holding, riding out the volatility and achieving returns in the long term," he says.
"trying to time the market is like trying to pick a winner at the races. Investing is doing what the casino does, not what the punter does."
For example, a blackjack dealer will stick strictly to the casino’s rules about whether or not to draw a card at a certain time, regardless of what the other players hold, he says.
"they have crunched the numbers and worked out long-term averages," he says.
"the punter doesn’t work on that the punter speculates.
"trying to time the market and missing it by just one day can be worse than staying in the market. I have economics and accounting degrees and I don’t know what’s going to happen."
Wealth for Life Financial planning principal Rex Whitford says there are big differences between gambling and investing.
"the longer you play the casino, the greater your chance of losing. but the longer you invest with a sound strategy, the better your chances of winning," he says.
"you don’t get a compound return from a horse win and you can’t get a franking credit from a horse win."
Unlike a wager on a horse race, share investors can "bet on the whole pack and win something" by buying index funds that hold many different shares, Whitford says.
The ASX has examined the share price growth of companies over the 10 years to September this year, and found a mixed bag of results, even among the major companies.
Winners include Newcrest Mining rising 865 per cent, BHP Billiton climbing 309 per cent and Origin Energy increasing 342 per cent.
Those who suffered losses have included AMP dropping 78 per cent, Telstra falling 41 per cent and Tabcorp sliding 72 per cent, the ASX found.
<a href="http://www.dailytelegraph.com.au/money/investing/shares-beat-horses-by-a-nose/story-e6frezcr-1226181302256tag:news.google.com,2005:cluster=http://www.dailytelegraph.com.au/money/investing/shares-beat-horses-by-a-nose/story-e6frezcr-1226181302256Mon, 31 Oct 2011 00:31:45 GMT”>investing story
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