AdvancedStock Alerts + Tools0:45Risk

The Optimal Bet Nobody Should Take

Kelly gives the mathematically growth-optimal position size, and almost every practitioner uses a fraction of it, for good reasons.

0:45 · 6 scenes

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What the lesson covers

0:00There is a formula for the optimal bet size. Almost nobody uses it fully.
0:05What it optimises. The long-run growth rate of capital. Not comfort, and not the drawdown.
0:14Why full Kelly is brutal. It is growth-optimal and it accepts drawdowns most people cannot live through.
0:23The estimation problem. It needs your true edge. Overestimating it makes Kelly actively destructive.
0:32What practitioners do. A half or a quarter of Kelly gives most of the growth with far less pain.
0:40Understand it, then deliberately bet less than it says.

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