BUILDING A PREDICTION MARKET PORTFOLIO
Plain English
Treating prediction markets like a portfolio — not a series of individual bets — is the approach that generates consistent returns. Diversify across event types, calibrate your probabilities carefully, size positions by your true edge (not just intuition), and track your calibration over time to identify where you're systematically wrong.
Going deeper
Portfolio approach to prediction markets: (1) Diversification — hold 15-30 active positions across different event categories (economic, political, financial, sports/weather). No single category should exceed 30% of deployed capital. (2) Calibration tracking — maintain a spreadsheet of every prediction you made and its actual outcome. Over 50+ predictions, your calibration tells you if you're overconfident (actual resolution % < your predicted %) or underconfident. (3) Specialization — develop expertise in 2-3 event types where you have genuine informational advantage. An economist trades CPI contracts; a political scientist trades elections. (4) Expected Value discipline — only deploy capital when (your probability × payout) > (1 - your probability × loss). Small edges repeated over many events compound. (5) Win/loss tracking by category — identify which event types are profitable for you and which aren't. Cut losing categories, increase winning ones.
Examples
Sample Portfolio Allocation
PM portfolio: $5,000 deployed. Fed/Macro contracts: $1,500 (30%). Economic data releases: $1,000 (20%). Financial market range: $1,000 (20%). Political/elections: $750 (15%). Other categories: $750 (15%). Average 20 open positions. No single position > $300 (6% of capital). This spreads across different resolution catalysts and event types.
Calibration Tracking
After 100 predictions: Your 70% confident calls resolved correctly 58% of the time. This shows overconfidence — you're saying 70% when reality is 58%. Recalibrate by using lower confidence estimates (50-55%) when you feel 70% confident. Systematic calibration tracking is what separates skilled PM traders from lucky ones.