The speed and the destination

When we want to go somewhere, is the speed we can arrive at the destination the only factor to consider?

Let's say that we are to go and visit some friends in a remote area in northern Sweden. 

The winter roads through the forests are full of moose, reindeer, bears, polar bears, and what-not.

What kind of driver (and car) would we prefer for the journey?

Let's make a thought experiment with obvious hints to a financial journey.

One driver promises to keep a good, high average speed, with the performance one can expect of a good, new car, let's say around 120 km/h (80 mph).

Another driver wants to arrive as quickly as possible. This driver proposes a new kind of car (untested on arctic winter roads) that he thinks could go really fast, let's say 160 km/h  (100 mph). We will reach the destination in no time, or so he promises us. All other alternatives seem unnecessarily slow to this driver.

The third driver seems, in comparison, dull and boring, but quite stable from a temperamental perspective, and proposes to drive in 80 km/h. Just in case.

There might also be this guy from the local bank who tells us to walk the whole way.

Quick? Or safer but slightly slower?

Speed might not be the only factor to consider when aiming for a given destination (that doesn't include a dead moose in one's lap).

To arrive at all, in an acceptable time, is for many much more important than being the first to arrive.  

Let's end with the analogy there. 

Many seem to focus on optimizing for just one parameter when considering one's financial journey.

• Insane returns. Including untested assets, which could be anything that is new. New is the definition of tech stocks. Or exotic assets that didn't exist 20 or 50 or 100 years ago. Might be quick, yes. Will it always work? Who knows? And what happens at an unexpected turn?
  
  
• Average speed, known car. Buy the index, or pick value stocks and reinvest the dividends. This is less insane and it's far from impossible to reach our destination. Yet, if one is not that familiar with the conditions of winter roads in northern Sweden, then do we really understand what risks we are exposing ourselves to? And what makes the assumption true, that high average speed is the only factor that is interesting for our journey? Is the assumption that average speed automatically also has a decent reward for the risk? Or that the risk matches our journey and appetite to arrive also if conditions or events are less than optimal?

• Slow yet steady. Even a sharp turn becomes much less challenging with slower speed and higher safety. The big swings, so to speak, of the road  becomes less dangerous, and we can both handle sudden ice and even the odd moose on the road. We might get to our goal in a slightly longer time. But in most scenarios we will get there, alive. 

We have given the question which vehicle will bring us to our destination some thought, and for us, slow and steady might not be so bad, as we prefer to arrive in most scenarios rather than being quick in the average scenario. 

You can read our thoughts on portfolios here, and our thoughts on volatility here.

How about you? Are you mostly considering your speed in your portfolio? Or is arriving at the destination even if the unexpected moose shows up behind a curve also in your equations?

Farewell,

antinous&lucilius