Kelly should be applied to one’s total wealth, including the value of future income (see: Lifecycle Investing). Taking future income into account, my Tesla position is a smaller share of the total. Additionally, I want to target something like 2x leverage (Lifecycle Investing, again), so 40% of my net worth is only 20% of what I’d want to allocate to the market.
That said, 40% might still be too much. I haven’t rebalanced after the recent run-up, and I have a pending to-do to calculate my estimate of the expected returns and variance, and then adjust accordingly. I’m not sure which way that will come out.
Kelly should be applied to one’s total wealth, including the value of future income (see: Lifecycle Investing). Taking future income into account, my Tesla position is a smaller share of the total. Additionally, I want to target something like 2x leverage (Lifecycle Investing, again), so 40% of my net worth is only 20% of what I’d want to allocate to the market.
That said, 40% might still be too much. I haven’t rebalanced after the recent run-up, and I have a pending to-do to calculate my estimate of the expected returns and variance, and then adjust accordingly. I’m not sure which way that will come out.