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An investor should be willing to make a "10% chance for a 100X return" type investment, but no, I wouldn't usually suggest that to my friends and family unless
by patmcc 11y ago
An investor should be willing to make a "10% chance for a 100X return" type investment, but no, I wouldn't usually suggest that to my friends and family unless the amount of money was not significant to them. I don't think that's a red flag; investors have different risk tolerances for good reasons.
- beambot 11y agoWhat you describe is a basic application of the Kelly Criterion: https://en.wikipedia.org/wiki/Kelly_criterion https://en.wikipedia.org/wiki/Kelly_criterion It helps you determine how much of your bankroll you can wager depending on (1) the odds, and (2) the size of your bankroll. It's the same reason why you shouldn't (mathematically) play the lottery (when it's expected value is actually positive) unless you're already filthy rich. The same math applies for hyper-risky startup investing.