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Sorry to hear. For the benefit of others, I read this as the importance of sizing the bet relative to your portfolio and nobody else’s, and is broadly applicabl
by jbs789 2y ago
Sorry to hear. For the benefit of others, I read this as the importance of sizing the bet relative to your portfolio and nobody else’s, and is broadly applicable.
If someone bets a million bucks on stock A, but is worth a billion bucks, then that’s not $1m conviction, it’s <1% conviction. And that information is then factored into the size of my bet.
Unfortunately I also learned this the hard way.
- wadadadad 2y agoI really like the word conviction here for this concept and this use is new to me; has this been used before? A casual search for me doesn't term up anything.
- jbs789 2y agoI really appreciate this comment! (I think that word just popped into my head given some professional experience recently rather than being sourced from the field.)
- tracerbulletx 2y ago41 Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42 But a poor widow came and put in two very small copper coins, worth only a few cents. 43 Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. 44 They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”
- bhattid 2y agoThere's a formalism in math/information theory describing this idea called the Kelly criterion. Not a common/colloquial phrase, but it describes a similar idea of portioning bet size according to percentage of available cash based on the risk of the bet.
- rqtwteye 2y agoProblem is that your bets have to be of a certain size to make a difference. Making 100% on $100 is not doing much good for you. So the guy with less money has to take much higher relative risks if he wants to get somewhere.
- compsciphd 2y agothat's get rich quick mentality. get rich quick mentality is bad.
- HeyLaughingBoy 2y agoSometimes it's exactly the needed mentality. You can't always assume that you have all the time in the world to get to where you need to be.
- creole_wither 2y agoKelly Criterion
- naveen99 2y agoIf $100 doesn’t mean much to you, it probably isn’t 100% of your portfolio. Consider future cash flow from your labor in your portfolio.