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ROI calc

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  1. mjf21 mjf21 is offline

    Boston, MA
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    Jan 6th, 2006 (1/6/2006 7:34am)

    Here is a problem I have with the ROI calc that is the generally accepted method for figuring out how you're doing, and I'd like to know if I'm crazy, or not. Let's say I put 1000 bucks into an etrade account. I put that money to work over the course of a year. Throughout the year, I'm buying and selling stocks, and at the end of the year, my ROI is my ending balance-1000/1000. So let's say my ending balance is 1200 bucks, my ROI is 20% (1200-1000/1000). Now, let's say I take that same 1000 bucks and open a Poker stars account. Why is it that all of a sudden your investment becomes a function of your many buy ins, as opposed to being, just 1000 bucks? I think the ROI figure is completely flawed in this regard. If I buy and sell a stock multiple times over the course of a year using a portion of that original 1K, well you don't count the multiple buys as additional investments of capital. In other words, if my avg buy price on that stock is 20 bucks, you don't add 80 to my original 1K and say, well, your investment is now 1080 bucks instead of just 1K. So why are we so concerned with this ROI figure in poker, when we should really just be concerned with our bottom line?
  2. Randers Randers is offline

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    Jan 6th, 2006 (1/6/2006 8:21am) in reply to mjf21

    Mjf...you have some great reasoning.

    But....

    Look at buyin's as a capital investment that garners a return, that is how it is traditionally looked at.

    Now, at the end of year, you can have an itemized IS that provides the initial capital investment (owner's original equity) and calculate what the return was on the original equity or capital investment.

    But the return on each capital investment (buy in) is important to a poker player who is estimating their return each month versus time alloted.
     
  3. epicatc epicatc is offline

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    Jan 6th, 2006 (1/6/2006 8:28am) in reply to Randers

    Another important distinction: if you put $1000 in your trading account, it's not invested yet, it's just been moved from one bank account to another, in this case a brokerage account. When you actually buy a stock,that amount is now considered invested. Same with poker...when you put $1000 in your stars account, you've just moved it to a different holding account. Each buyin, however, is an investment.
  4. -EME- -EME- is offline

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    Jan 6th, 2006 (1/6/2006 8:36am) in reply to Randers

    I just posted about using Quickbooks. If you are a poker pro or semi-pro YOU must have a CPA or use a top notch accounting program.

    ROI IS a concern for someone "estimating their return each month versus time alloted" because you need to consider the Opportunity Cost of being a poker player each month.

    Why play and make only $100k per year when you can work half as hard in Corporate America and make $250k and get all the Benefits. Plus you risk no capital in working a day job except for a few grand spent at Brooks Brothers. Just think an extra 2 hours per day to work out and fuck the cute brunette who just graduated from Harvard. Therefore you must calculate the value of the intangibles.
  5. mjf21 mjf21 is offline

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    Jan 6th, 2006 (1/6/2006 8:37am) in reply to Randers

    I definitely see that point, and it's a useful tool for monthly and weekly calcs. Where I think people get carried away though is if you're trying to assess how you've done overall after 6 months, a year, or whatever it is, and you've only deposited 100 bucks, and you have 180 in your account, don't kick yourself too hard if you are figuring out your ROI in the traditional manner and are basing on, say 1000 dollars of buy ins, b/c then your 80 dollar profit looks pretty bad. Now, you may be putting in considerable time to only make 80 bucks, but don't be too hard on yourself b/c if you enjoy it and are constantly trying to improve, then hey, an 80% real return is pretty damn good regardless of your buy in ROI calc telling you you only returned 8%.
    Thread Starter
  6. mjf21 mjf21 is offline

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    Jan 6th, 2006 (1/6/2006 8:39am) in reply to epicatc

    That's correct, epic, but if you've only deposited 1000 bucks into your stars account, and you've had 3K in buy ins, you haven't "invested" 3K. You've still only invested 1.
    Thread Starter
  7. nklhd nklhd is offline

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    Jan 6th, 2006 (1/6/2006 9:04am) in reply to mjf21

    I think the ROI calc is just a relative calculation as to how well you a playing. Clearly two players can generate the same "return on bankroll" but we can distinquish who played better.

    Player 1 -- $1000BR, plays 300 $10SNGs, and ends with a resulting BR of $1300. Return on bankroll 30% (300/1000), but ROI 10% (300/3000)

    Player 2 -- $1000BR, plays 50 $10SNGs, and ends with a resulting BR of $1300. Retrun on bankroll is the same 30%, but ROI is 60%. (300/500)
  8. Randers Randers is offline

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    Jan 6th, 2006 (1/6/2006 9:43am) in reply to -EME-

    Very good EME....

    But i don't think the real world works out as you envision it in while daydreaming during you 3000 level Marketing class.

    The corporate world is very grating, and can become a whip of immense proportions. As well, looking into corporate america, what % of employees are pulling down 100k+, much less 250k+. And stress and pressure to perform and time away from family are all thing you WILL face in the corporate world....especially as a neophyte.

    So if a bright faced Teen or 20something can muster 100k!!!!!!!!!! a year playing what is essentially a game (but you better treat it like a business),,,,, I'm going to tell that talented youngster to chase that dream down!!!

    Regards
     
  9. Malfaire Malfaire is offline

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    Jan 6th, 2006 (1/6/2006 12:47pm) in reply to -EME-

    EME, good point and I agree. The only thing I have thought of to offset the intangibles are the monitary gains and the future value of the money. such as the extra 30k i'm making in poker, invested correctly, could make me far more money in the long run vs. having that 250k income down the road. compounding at its finest.

    so let's assume I can make 250k+ in my corporate job. reasonably, i don't think i'm going to be pulling that sort of salary for another 20 years, at most (possible if i were in pharm sales, though). in the meantime, i am paid very well, but nowhere near the value i could pull down full time playing poker. i can say without ego that even though i haven't seen massive results in my game, but i know that if i had a full 40 hours a week to playing, i could make 100k a year or be near that.

    i saw you had an ira in another thread of yours, sweet; me too, i fund this with poker and have maxed it fully for as long as i've been playing, which is what i plan to do until i retire (or find a better way of making money through passive income). in the meantime, i'll be toiling away at work, occasionally posting here, and hitting on all the hot ass college hires in my marketing department.

    life is beautiful.
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