Section 2: Summary
When selecting the optimal investment, a bettor should seek a strategy that maximizes their utility. I aim for utility maximization, because depending on a bettor’s long-term financial goals, they can have very different marginal values for their money. Betting strategies can be aggressive or conservative, although in reality even my aggressive strategies are somewhat conservative compared with the ridiculous over betting advice that one will often find online. Strategies can also be either flat (where every unit is the same) or progressive (where units grow or decrease with the bankroll). For both flat and progressive strategies, bet sizing is correlated to confidence (more confidence = larger bets). Yet where other touts’ unit sizing is arbitrary, I size wagers as described by mathematically optimal ratios for growth as correlated with win percentage confidence. Furthermore, all necessary precautions have been taken to avoid over betting, the dangers of which are explained in Section 5.
1. Short Term Investment / Low Risk / High Probability of Positive Return
Short term investors who are seeking a safe, high probability return should bet 1% of their initial bankroll per star, resetting their bankroll size every year. Regardless of how well or poorly I perform in the short term week to week, these bettors should continue to bet 1% of their initial bankroll per star, and should not vary the bet sizes.
For example, in Week 1 Football I may have a 4-Star Best Bet, two 3-Star Bets and a 2-Star Bet and three Strong Opinions. On a $10,000 bankroll, the bettor should wager $400 on the 4-star, $300 on each 3-star and $200 on the 2-star, for a total of $1,200 wagered. Some bettors choose to treat Strong Opinions as 1-Star best bets. While my Strong Opinions have been 55% winners over the past 10 years, I consider them to be more volatile and less likely to win than my best bets. Betting Strong Opinions increases return, but also increases risk and volatility.
At the end of the season, the bettor should remove 100% of their profits, and then apply the same base initial bankroll for the start of the next season.
2. Short Term Investment / Moderate Risk / High Probability of Positive Return
These investors will follow the same model as Type 1 investors, but if they can afford to be more aggressive with their bankroll (i.e. their sports betting bankroll represents a lower portion of their overall net worth) then they can be less risk-averse, and bet 1.5% of their initial bankroll per star, and should not vary their bet sizes. This is approximately the optimal size for investing in my picks for a one to seven season period.
3. Long Term Investment / Low Risk / High Expected Return
Investors who want to achieve the greatest expected return need to have the capability to lock their money away for several seasons in a row, and ignore the month to month swings of Kelly Criterion investing. Progressive growth can be frustrating and counter-intuitive in the short run, and can be particularly frustrating during middling seasons. Kelly growth will outperform flat betting in the very long run by performing much better during very good seasons (winning a lot more) and very bad seasons (losing a lot less) while performing slightly worse in average, middle of the road seasons. Thus, the KC has a higher expected return, but a lower probability of positive returns. This is explained in greater detail in Section 7.
Before committing to a long-term Kelly growth strategy, readers must examine the rest of the articles which follow in order to fully understand the power as well as the dangers of long term growth. Since win-rates are never completely certain, we temper the Kelly Criterion with fractionalization and simultaneous event calculators. Lower risk, long term investors would be advised to use Kelly sizing of around 33% to 40% of a full Kelly Unit. Investors who truly understand the Kelly Criterion and are willing to take a higher risk / very high expected return approach can apply 50-60% of a full Kelly Unit.
Again, I cannot stress enough the importance of thoroughly understanding the Kelly Criterion before committing to it.