How can Investors Use Kelly Bets in Practice?
In theory Kelly bets can supercharge your portfolio growth. Using it in practice is tricky.
For a single bet, if you know your probability of winning, and your expected payout, you can calculate how much of your bankroll to allocate to this bet. This calculation when done repeatedly over a large sequence of bets will theoretically minimize your risk of ruin, and maximize your portfolio growth.
The formula is