Even though it's not a widely known term, the Kelly Criterion is a very unique and important tool for value investors who want to generate the best returns. Even if you're not aware of it, you're likely to be using a version of this tool in your portfolio.
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...
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