Three caveats: (1) The Kelly Criterion may lead to wide swings in the total wealth, so most users choose to bet some lesser fraction, typically one-half Kelly or less; (2) for investors with short time horizons or who are averse to risk, other approaches may be better; (3) an exact application of Kelly requires exact probabilities of payoffs such as those in most casino games; to the extent these are uncertain, which is generally the case in the investment world, the Kelly bet should be based on a conservative estimate of the outcome.
