A fractional Kelly Bet gets excellent results for the vast majority of risk preferences. I endorse using 0.2 to 0.5 Kelly to calibrate personal risk-taking in your life.
Because maximizing the geometric rate of return, irrespective of the risk of ruin, doesn’t reflect most peoples’ true preferences
In the scenario above with the red and blue lines, the full Kelly has a 9.3% chance of losing at least half your money, but the .4 Kelly only has a 0.58% chance of getting an outcome at least that bad
Why not normal Kelly?
Because maximizing the geometric rate of return, irrespective of the risk of ruin, doesn’t reflect most peoples’ true preferences
In the scenario above with the red and blue lines, the full Kelly has a 9.3% chance of losing at least half your money, but the .4 Kelly only has a 0.58% chance of getting an outcome at least that bad