INVESTMENTS: The biggest winner in last weekend's coup by Frankie Dettori was a man who won pounds 550,000 on a pounds 60 bet. Yet such outright speculation on long-odds outcomes is still a losing strategy in the long run

It was, said one of the country's leading bookmakers, a catastrophe for the bookmaking industry. Bookies collectively lost an estimated pounds 30m, and one company, Stanley Leisure, was forced to issue a profits warning, probably the first time in stock market history that such an event has been prompted by a single day's horse racing.

Yet last weekend's coup by Frankie Dettori in winning all seven races on the card at a big Ascot meeting tells us a lot about how Britain as a nation handles its money. We all know that gambling is a big industry and that it only prospers because those who take the bets are better able to calculate the odds than those who place them. In a free, capitalist country, there is nothing wrong in grown-ups taking such gambles if they so choose.

Yet surely as surprising as the amount which the bookies lost last Saturday on this historically unique occasion, is how many punters actually had bets which could only pay off with such a statistically outlandish result. The biggest winner was a man who won pounds 550,000 on a pounds 60 bet. It was such a long shot that for practical purposes it was off the scale of probabilities.

The winning odds that he received were more than 25,000 to 1 against. And yet this punter was not alone. The number of those who won with various multiple bets as a result of Dettori's success numbered hundreds.

The one thing you can be certain about is that most of the biggest winners were drawn from the ranks of those who normally subsidise the professional punters. Nobody seriously interested in making money from betting on the horses ought to be making such outlandish wagers. But statistical research has demonstrated clearly that most amateur punters back more outsiders and fewer favourites than they should do if they are pursuing a rational, money-maximising strategy.

Those who make such bets are clearly drawn by the same irrational lure as those who regularly bet on the National Lottery. It is the size of the potential payout relative to the scale of the bet - and to the wealth of the individual - which is the real draw.

Such bets as the Dettori accumulator only make sense if the person making the bet knows that his own lifetime earning power is not going to free him from financial duress. He needs a bonanza, a jackpot, a goldmine to satisfy his needs. The Klondike spirit, consciously or otherwise, is what drives him on. Sometimes miracles do occur and the bet pays off.

Yet such outright speculation on long-odds outcomes is still a losing strategy in the long run, which is why the professionals will always be found going the other way. In the stock market, "get rich quick" investors tend to be drawn to penny shares and to buy traded options, attracted by their unlimited upside potential. Now and then such investments will pay off spectacularly.

But more often than not, they do not. It is no coincidence that 90 per cent of all call options expire worthless. That is one reason why professionals in the options market mostly "write" options (ie act as the counter-party to the buyer) rather than buy them. Taking the investor's bets is a more certain way to make money over the long haul.

The truth is that attitudes to risk, in the stock market, as in horse racing, are not strictly rational. Recent academic research has highlighted how lopsided people are in their approach to money. By and large, we overpay to insure against possible loss, however small or improbable, and under- invest in things that offer steady, rather than dramatic, returns.

So, while some investors will throw all their money at long-odds speculative shares, the vast majority of Britons go to the other extreme and ignore shares altogether because they wrongly regard the risk of losing money as too high. The Weinberg report on wider share ownership earlier this year demonstrated conclusively that most people are put off buying shares by their absolute aversion to losing money.

Yet the long-term returns from buying shares in established high-quality companies, or simply from buying an index tracking fund, are quantifiably higher than most investments of similar risk. It is true that the chances of outperforming the equity market as a whole may be statistically poor. But the consolation with shares is that you don't need to outperform everybody else in order to make a decent return over time.

The long-run average return on shares is about 7 per cent in real terms. The risk of an equity investor losing all his money, assuming he holds a diversified portfolio, and has not borrowed to finance it, is to all intents and purposes zero. The risk of losing say 25 per cent of his wealth in any one or two-year period is of course high, but over longer periods that risk diminishes too.

The fact that there is nobody to write up the odds in chalk on a blackboard does not mean that the odds are not there. But nor does it mean that we should react sensibly even if they were. As last week's dramatic day of racing showed, life would be much the poorer if we were all "desiccated calculating machines" capable of working out all of life's odds correctly. They also remind us that whole industries, from insurance to bookmaking, depend on the fact that we are not.