"Given those limits, is the penny-dreadful home-run approach the best way to maximise the risk-adjusted return of your *total* capital ? "
Clarifying this with an example.
a) 5% of your capital in a penny dreadful - a 20-bagger in the first year before it reverts to normal returns. b) 95% of your capital earning 10% per annum
Over a 20 year period, you will be infinitely better off forgetting about the 20-bagger and devote your energy in trying to improve b) from 10% to 15%.
