Kelly

The Kelly criterion is a mathematical strategy used to determine the optimal size of a wager or investment to maximize long-term growth while minimizing the risk of losing everything. It calculates the ideal percentage of your capital to bet based on the probability of winning and the payoff. By following this approach, you balance risk and reward, avoiding bets that are too big (which could lead to ruin) or too small (which limit growth). Originally developed for gambling, it’s now also used in finance and investing to guide position sizing for optimal growth.