A law of the theory of betting is that the optimal procedure is to bet proportionally to one's advantage, adjusted by variance. This is the well-known "Kelly Formula" (aka 'Kelly Criterion'), discovered by John Kelly in the 1950’s. It results in the maximum expected rate of bankroll growth, and is mathematically the optimal strategy for money management in betting games.
The Kelly Formula was popularized by Ed Thorp in his 1962 book “Beat the Dealer” This book inspired millions of gamblers and stock investors alike. The concept is simple – when the odds are good, you bet a higher percentage of your bankroll. All great investors use this formula, either implicitly or explicitly. When Warren Buffett managed much smaller sums