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Using The Kelly Criterion In Investing

Using The Kelly Criterion In Investing

The Kelly Criterion is a tool you can use to help decide how much weight you should give each position in a portfolio. Invented by John Kelly, who was originally employed at Bell Labs, the formula enables you to calculate how much of your bankroll you should bet on an opportunity depending on the odds of winning. This is the simple version of the formula: “The simple rule goes like this. Suppose that with probability p you will make a…

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