Since we are in the topic of the Kelly Criterion and leveraged portfolios can be justified, let’s about Samuelson numbers.
In the book Lifecycle Investing by Barry Nalebuff and Ian Ayres, one controversial concept they spoke about is called the Samuelson Number named after Paul Samuelson, the first American to win the Nobel Prize for Economics.
In this book, the book asks the following question to its readers :
If you would already be retired or financially independent today, how much worth of equities would you have. For some people, it might be, say, $1,200,000 worth of equities.
Nalebuff and Ayres would then go on to suggest that a young graduate should employ 200% leverage to first accumulate $1,200,000 in equities and then pay off the amounts owed subsequently with investment returns and salary contributions. So a fresh graduate would start with a leverage of 200%, after reaching $1,200,000 the …