Investing

What are the odds of picking a winner?

How picking the Melbourne Cup winner compares to choosing an active fund manager.

There are 24 horses competing for glory at the Melbourne Cup, the race that stops the nation. If you’re one of the millions of Australians expected to bet a total of over $300 million this year, you probably already know your chance of success is not good.

The odds of picking a winner is about 1/24 (~4%). However, believe it or not, these are still better odds than picking a winning active investment fund to manage your money. 

There are hundreds of fund managers trying to win each year by attempting to beat the market. Only 1-3% of them succeed. A very simple indexed portfolio that tracks the market is almost always a better bet than having a punt on an active stock picker. 

Melbourne Cup punters love looking at the form guide to influence their gambling decision – in other words, how the horse has done in previous events. However, this is actually a lousy indicator as horses rarely back up wins with another victory.

For example, let’s have a look at how the winning horse of the Caulfield Cup (what race fans call a ‘useful predictor’ of who will win the Melbourne Cup) and see how they ended up going in the big race. 


YearWinning Horse of Caulfield CupMelbourne Cup Position
2018Best Solution8th
2017Boom Time15th
2016Jameka15th 

Fun fact: The 2014 Caulfield Cup winner came last in the Melbourne Cup! 


Mer De Glace was the winner of the 2019 Caulfield Cup – but how will she fair in tomorrow’s Melbourne Cup being a hot favourite?

A similar pattern appears in the world of picking active fund managers. Investors are often tempted to follow last year’s winner or a fund manager who has had recent success.

It’s usually a poor decision. SPIVAs persistence report highlights that only 2% of outperforming managers continue to do so in subsequent years. So, even if you pick a winning fund manager once, the odds of them winning the next year is slim! 



By far the most profitable bookmakers in Australia are the banks, large wealth managers and brokers. They offer a wide field of ‘runners’ on their investment platforms and take a healthy clip on each investor bet (through platform fees, buy/sell costs etc…).

Their ‘funds’ are packaged up nicely and have highly qualified jockeys riding the markets up and down. But in the end, there are very few consistent winners. 

Don’t look for the needle in the haystack. Just buy the haystack!

John Bogle, Founder of Vanguard

You can always find an expert bookie tip on which horse is likely to win, much like brokers have a ‘buy’ rating on a particular stock or fund manager. Only a handful will be right. Our advice is to always know the odds and place your bets accordingly. That’s why our tip is on low cost ETFs.


Investment Associate

Marc has over 5 years experience in the financials services industry having previously worked for Morgan Stanley, AMP and KPMG. He holds a Bachelor of Business (Finance/Accounting) from the University of Technology Sydney (UTS), and has completed his Chartered Financial Analyst (CFA) Level 1.

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