Expected Value: The Overlooked Tool Every Investor Needs
Expected Value: The Overlooked Tool Every Investor Needs
Abstract
In poker, EV is one of the most common tools used to determine an optimal decision (fold, call, raise, etc.) in the middle of a hand. If you have the best hand and win, and if it does, you’ll win $500, you will most likely lose. If we were to do 100 flips, we could expect that we’d save about $300 per flip by self-insuring. The EV on self- insuring is $30,000 across all 100 flips. In other words, we”d save $10,000. or $30.5% of the time, we would have to pay out-of-pocket.
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