How Averages Lie


Perhaps the perennial top rated roller coaster in the United States is Millennium Force at Cedar Point in Sandusky, Ohio.  With a max drop of 300ft at 80 degrees and a top speed of 93mph, reviews are predictably glowing and full of adrenaline.


“Best ride in the world!! It’s so fun, you feel like you’re flying.”


“The best ride there! So fast, so extreme, amazing drop. No matter how long the line is make sure you go on the ride.”


Just as interesting to me is a stat you won’t find.  At a length of 6595 ft and a duration of 2:20  from start to finish, the average speed of the coaster is a pedestrian 32mph and would be considered safe in your home neighborhood.  If some robotic fan only judged amusement park rides by average speed, the drive there would blow it out of the water.  And a grandmother picturing a smooth leisurely ride would be in for a very rude awakening.  Clearly, averages don’t tell the whole story.

So why is it that when discussing investing people love to reduce portfolio performance down to a single long-term average?  Just like discussing roller coasters only in terms of averages, that masks the entire experience of the ride!