Are you clever enough to reach $1,000?
Adjust your bet amount and spin the wheel! If you land on green, you'll double your bet. If you land on grey, you lose your bet.
A game like this has many applications. You have a fixed amount of money to start with, and you want to make bets (investments) that maximize your profit in the long run without going broke first.
It turns out, the best approach is to bet the same percentage (given fixed probability of winning) of your current bankroll each time.
Adjust the Winning Multiple and the Probability of Winning to calculate the optimal bet percentage.
It's easier to see the process if we simulate the betting and you can view the outcomes.
Bet Amount ($)
While you can't apply the Kelly Criterion directly to your investment strategy (since rarely are the Winning Multiple and Probability exactly known) it's a useful concept to be familiar with. It can give you a starting point when considering the risk of your potential bets.
If you're interested in more articles like this one, please subscribe for updates.