Really Rich Guys - Top 10 Traders

[crazy canuck]

[ QUOTE ]

I thought Buffet had been a stud for three decades or more. Am I wrong? If not, is he a complete outlier or aberration? If not, what's the problem in your correlation between Kelly curves and market success?

[/ QUOTE ]

Yes, he is a stud. But like DcifrThs said the top traders/investors must be taking on excess risk, otherwise they would not be on top.

Maybe there is an investor with Buffet's exact skill who blew up after 10 years and nobody knows about him. And there might someone else who made good money for 30 years but not money people know about him because he didn't take on too much risk. For example Ed Thorp (yes the blackjack guy) comes to mind.

In Kelly betting the percentage of the current bankroll to be bet is proportional to your edge. If you're edge is 10%, it means that you have 55% winners in a game where the 2 outcomes are doubling your bet or losing it. So this means your supposed to be betting 1/10th of your roll! If your edge is 20% (so you have 60% winners), you're supposed to be betting 1/5th! While you'll never go bust the variance of such a strategy is extremely high.

Therefore, even half Kelly is too much risk and quarter Kelly seems to be much more optimal.