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As I have counted down the Apartment REITS, it’s now time to put it all together and invest my $10,000. So, while I had originally selected 5, I kicked out BSR REIT for several reasons. I don’t like the US's concentration of apartments anymore because I don’t know much about it. I’m investing real money here so how can I be sure to survive?

So, I’m left with Killam, Boardwalk, Morguard and CAPREIT.

But how do I divide up my investment?

I technique that could help is called the Kelly Method. It was first discussed as an investment by Warren Buffett and Charlie Munger. Later, Mohnish Pabrai expanded upon it in Dhandho Investing. A book I strongly recommend you get.

It uses a mathematical formula based on the company's performance and allocates a percentage of the portfolio based on the probability of those numbers.

I can share with you, as readers of this letter, that while we are a few months away from telling everyone about our app, you can certainly use it. That’s how I selected the companies and did the Kelly Formula attached below. To use our app, you will need the free version of the Chat GPT app to start. The analysis in our app uses only my rules and does not go out to the web for trash information. I only use trusted financial reporting to do stock analysis. With relationship or child money questions, it ONLY uses my style and knowledge and does not go to the web. Chat GPT is the engine that powers Hank Intelligence. (It really is smarter than I am.)

If you go to the app and say, “Use the Kelly formula on these stocks………so I can invest $1,000,” for example, it will prompt you to think about your own ETF. Remember, it’s a tool. It’s not always accurate. It will use the Hank scores to build the model. But here’s an example that helped me understand it.

If I knew I could flip a coin in my favor 60% of the time and had $10 in total, what should I bet each flip?

According to the app:

The Kelly Formula Explained (Hank Summary)

This information is for Educational Purposes only. Do not make portfolio changes without speaking with your financial advisor. I am not a financial advisor.

1. The Scenario

You start with $10 and can flip a coin that has a 60% chance of success (p = 0.60) and a 40% chance of failure (q = 0.40). Each successful flip doubles your wager; each loss costs your wager.

2. The Kelly Formula

The Kelly Formula determines the optimal fraction of your bankroll to bet when the odds are in your favor:

 f* = p - (q / b)

Where:
- f* = fraction of bankroll to bet
- p = probability of success
- q = 1 - p (probability of failure)
- b = odds received on a win (for even odds, b = 1)

3. Applying the Formula

Plugging in the numbers:

 f* = 0.60 - (0.40 / 1) = 0.20

This means you should bet 20% of your bankroll on each flip.

4. Example with $10 Bankroll

5. Interpretation

Kelly maximizes long-term logarithmic growth of your bankroll. It balances risk and reward to achieve the highest compound growth rate over time. If you bet more than the Kelly amount, your long-term growth rate decreases even if short-term gains seem higher.

6. Hank Translation

Rule #8 (Probability of Success) = 60% chance of reward.
Rule #3 (Recycle) = never risk the entire hive; bet only your edge.
Rule #6 (Little Things Over Time) = compounding works when you survive each round.

In Hank's words: 'The hive risks only 20% of its nectar on each flight when it knows the flower has a 60% chance of reward.'

7. Summary

If you start with $10 and a 60% chance of success:
- Full Kelly = bet $2 per flip
- Half Kelly = bet $1 per flip
- More than 20% = over betting and long-term decline risk.

The Kelly principle ensures survival, compounding, and rational growth — the same principles that keep a hive thriving season after season.

This information is for Educational Purposes only. Do not make portfolio changes without speaking with your financial advisor. I am not a financial advisor.

But remember, you could get it wrong each time and be in trouble, but the chances are better that you would win over time. But to maintain survival, you want to make sure it wasn’t your last $10 or that you borrowed the $10 to bet.

Here is my Hank Apartment REIT ETF, which I put together using common sense and the Ask Hank App. I would put the investment into a TSFA if I had room and set it up for a Dividend Reinvestment Plan (DRIP). The dividends will automatically be invested in more shares. When I purchase the shares, I will set up a small Word document with the purchase price and date, which I will download into the Ask Hank App each month to get updated return numbers to share here. My initial $40 expense for them is also going to be factored in. You may be using a platform that doesn’t charge you $9.99 per trade, as mine does.  Here is the Hank Apartment REIT ETF

Hank REIT Full Investment Plan

This information is for Educational Purposes only. Do not make portfolio changes without speaking with your financial advisor. I am not a financial advisor.

1. Full-Investment Allocation ($10,000 Fully Deployed)

Total Invested: $10,000 (100%)

2. Strategic Rationale (Hank Method Summary)

- The Hive Must Come First: Boardwalk and CAPREIT show strong insider alignment and capital discipline.
- Recycle: Both have improved debt maturity and recycled assets efficiently.
- Focus & Efficiency: Killam’s apartment specialization matches simplicity and durability.
- Be Strong: Morguard’s diversification provides optional upside in office and retail recovery.

3. Optional Portfolio Tilts

4. Hank Guidance

- Reinvest distributions (DRIP) to capture compounding.
- Review yearly and rebalance toward undervalued REITs.
- Maintain a separate 6-month reserve in safe assets (Treasury Bills or cash).
- Monitor management alignment and insider buying activity.

Want your own personalized Hank analysis? Try Ask Hank™ — my cloned brain in an app.

This information is for Educational Purposes only. Do not make portfolio changes without speaking with your financial advisor. I am not a financial advisor.

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