I recently read Picking Winners: A Horseplayer’s Guide by Andrew Beyer, a suggestion to me by a financial advisor who stated similarities existed between the two industries. I knew nothing about betting on horse races or handicapping, and this book was an excellent introduction to it. The book describes how there is no singular formula to picking a winning horse, and how there are too many factors that go into horse racing to be able to quickly pick a horse that will win, simply by looking at a chart of race times. I believe this is similar to investing, a list of names are analyzed, patterns recognized, research done, and finally a choice is made, leading towards an investment.

The book talks about how there are many books written about the “secret” to horse betting, but none of them are able to cover the complete complexities and subtleties that indicate a winning horse. No singular method works, and mastery of understanding the mechanics behind each factor that contributes towards a winning horse does not guarantee a winning horse even half the time. The winners in horse racing, and (in my opinion) the success on wall street are not the ones who are able to determine a successful stock or horse, but those who are able to allocate their money properly, putting the majority of stocks in companies they feel most confident about, as well as diversifying their portfolio with smaller investments.

I am still a novice at stock trading, and while I have been doing it actively through TD Ameritrade, constantly reading and leading clubs, there is only so much I can learn from the confines of my school or home. I know even less about horse racing, and often I would have to stop reading, just to search for the meaning of a new word or phrase expressed in the book. Even through my ignorance, there are many important concepts the book covers about factors that play into a winning horse. Factors such as even good trainers, are not reliable, as even the best horse trainers might only produce a winning horse 20% of the time. It is important to study these numbers in more depth, as perhaps the trainer produces a winning horse 30% of the time when the horse runs on grass in a race, and only 10% when the horse runs of dirt. Other aspects of consideration are more superficial such as appearance. Appearance of a horse is much like the appearance of a company. If a horse looks good, or if a company looks polished and professional, that does not directly impact the performance of it, but instead is more of an indicator of the health of the company or horse.

Betting on horses, and investing in the stock market and two completely separate things, but I find it fascinating to draw similarities through the economics of both. The complexities of the world are too difficult to express in a single formula, but instead work has to be done to isolate individual components.