Sublime

“First, you bought something you didn’t really understand, so it was no better or worse than throwing a dart into the stock market list. Had you bought a low-load mutual fund [no-load funds weren’t available yet] you would have had the same expected gain but less expected risk.”

You might then ask how LTCM would have been any better off with the Kelly system. The answer is that the Kelly criterion can be more forgiving of human error than many other systems—including highly leveraged approaches such as LTCM’s. Recall the example of simultaneous bets on a large number of coins, each with a 55 percent chance of coming up hea

One of the great sayings about poker is that “in every game there’s a fish. If you’ve played for 45 minutes and haven’t figured out who the fish is, then it’s you.” The same is certainly true of inefficient market investing.

Part of the genius of financial markets is that when there is a real demand for a method to enhance speculative opportunities, the market will surely provide it.

It’s the paradox of fund investing today: Gunning for average is your best shot at finishing above average.

“Be fearful when others are greedy and greedy when others are fearful.” His objective was to outperform the market in the long run and so he judged himself largely on his performance relative to the market.

In the idealized model, the portfolio manager has an accurate probability distribution on the future performance of each asset in the universe of potential investments. Kelly’s methodology then provides a quantitative specification of how big a position to take in each of the candidate assets. Not surprisingly, the fraction of one’s portfolio to be

In the abstract, life is a mixture of chance and choice. Chance can be thought of as the cards you are dealt in life. Choice is how you play them.