I have created more systems than I have eaten hot dinners, and in my everlasting quest for something different, I have come up with a plan that's a bit odd.

Some readers would have thought of the stock market when they read this month's title. Bears sell shares in the anticipation of a fall in prices (and buy up at the lower rates) and bulls buy in the hope, or even expectation, that the market will rise. Sometimes they are both correct, but not at the same time.

Not so with racing. Sometimes I will be right, sometimes you will be right, but sometimes we will both be right (when we pick the same horse and it wins).

At time of writing, the NSW TAB is about to offer shares to the public in what we all thought, ultimately, belonged to us anyway (a bit like Telstra). If you buy shares at, say, $5 each, and they pay a dividend of, say, 10 per cent per annum, in today's terms you will wait 10 years to get your money back.

Of course, the shares ought to appreciate, so you could end up owning a swag of good shares, and also receiving your divvies fully franked (i.e. much or all of your tax pre-paid). That's what I want you to remember as we try to do something a little different with our betting bank.

It is possible to regard racing as a sound market investment. If you establish a bank of, say, $10,000 and regard it as spread over five years, you would hope to better bank-interest rates and also beat tax payments associated with other investments.

You would be investing 2 per cent ($40) per week, on average, of the $2000 per year (20 per cent of the bank). Hang onto that other $8000 for a while. Whatever is returned each year from your betting would be added to the following year's $2000 allocation, still retaining the 2 per cent weekly investment.

Let's explain: Say the first year is a good one and the bank gradually edges up to $2500 (a tax-paid 25 per cent profit for the year ... try to get that from your bank!). In the second year you bring the next $2000 into play and seek to increase it. You may choose a set amount as a target, but so long as you restrict yourself to 2 per cent ($90) per week of that $4500 you ought to be OK.

On the second year's investment, say you made 10 per cent profit. That's $450. The bank is now $6950, which includes another $2000 for the third year's bank. So, in the third year you outlay $140 per week (round figures, 50 weeks, two weeks off for a break). Let's say it's a good year and you make 20 per cent profit. The bank is $8340 plus the fourth year's $2000 = $10,340. Bets are averaged at $206 per week. This is a bad year and you lose 8 per cent. The bank is now $9512, plus the $2000 for year five. Year five wins 12 per cent and we have almost $13,000 in the bank.

So, over five years, we have managed to win $3000, 30 per cent net on $10,000. But hang on a minute. In year one, $8000 of that money earned interest. In the second year, $6000 earned interest. In the third year $4000 earned interest, and in the fourth year $2000 earned interest.

Then there was the money earned from the interest that $8000 earned in year one, invested for four more years, plus whatever the $6000 earned, invested for three more years, plus interest from the $4000, invested for two years, and, finally, the final $2000's interest.

But wait another minute. Only 2 per cent of ALL the money was in the TAB at any time, and every other cent not being thus used was earning interest. Maybe not much, but some interest.

I am not suggesting that this is the ultimate way of making a fortune, but you should benefit by the realisation that betting with a longterm, time-allotted bank will keep on toting up dividends as your betting progresses.

From five or six different sources! Get the idea? Maybe this ought to be a huge article in an annual, but it will start you thinking. So how do we set this up?

  • Decide on a long-range plan of, say, five years, with $10,000 to invest.
  • Commence with an investment of $2000 for year one on the TAB, betting 2 per cent of the starting bank each week.
  • Invest the remaining $8000 to mature in one, two, three and four years at $2000 each. As we withdraw each $2000, its interest earned will be reinvested for the remainder of the five-year period.
  • Each year we add the maturing $2000 to our bank, still betting 2 per cent per week of the new starting bank.

Sound easy? OK, sounds hard. It requires careful bookkeeping and a starting bank, but it could prove quite exciting. How you invest your capital is your choice. Bank bonds, shares, property loans, gold, whatever . . . it could be a new interest for you to discover. But the betting side is tax-free and, if you are successful, it's the icing on the cake.

By The Optimist

PRACTICAL PUNTING - JUNE 1998