Remember a few weeks back when we discussed stock market investing using the Kelly Criterion to determine asset allocations? Today we’re going to go in a different direction and use Kelly for what it was intended – betting!
The Kelly Criterion is a formula you can use to determine the proper size of a bet when there are known odds and a definite payout. With a little hand waving and some basic math (as I proved a few weeks back), you can also use it to help guide your investment decisions – namely when determining the size of a position you should take. Let’s hop into some calculators.