The Financial Speed Limit: Why Boring Investors Win
Something that has been stuck in my mind lately is a video I saw of a driving instructor teaching the rules of the road. He asked the class, “How many miles per hour can you go above the speed limit?"
Most people confidently said, "Five."
Turns out, that is wrong. It is called the speed LIMIT because it is the maximum limit of how fast you should be going.
The more I thought about that, the more I thought about how we drive on the freeway. Nobody is ever actually going 65 like the sign says. Most are doing 70, if not 80. If you are doing 65, it feels like you are standing still, and the pressure of the crowd makes you want to speed up.
Investing feels exactly the same way. But in finance, speeding doesn't just get you a ticket—it totals your car.
The Speed Limit: 7–10% Returns (Safe and Boring)
In a financial sense, the speed limit is the average return of the stock market. That is historically around 7% to 10% per year. It might be lower if you add bonds to the mix.
I know, that sounds boring. Especially when you could have bought a single stock and watched it shoot up 60% this year. Everyone on TikTok is claiming you can get 100% returns on crypto or options overnight. Why not go for the higher returns?
Because going over the speed limit doesn’t make you a better driver; it just makes your inevitable crash more fatal. Safe and Average gets you to the destination. “Fast” gets you to the junkyard.
Going 5 MPH Over: The 5% "Fun" Allocation
"Well, what if I just want to go 5 over?"
That can make sense for some of us. This is like investing in a few individual stocks alongside your boring index funds. You might get there a few minutes faster, but you have to pay much closer attention to the road.
One distraction—like a bad earnings report—and you’re swerving. Keeping maybe 5% of your portfolio in individual stocks is not a bad idea. But remember: the faster you go, the more hyper-focused you have to be. I wouldn't try to play cute with it, but I understand that most people are okay with a little more risk than usual.
Going 100 in a 60: The Honda Civic Mentality
Now, what about those going 100 MPH in a 60 zone?
These are the people using high leverage trading, "all-in" crypto bets, and taking out loans to invest. Honestly, this makes me think of the dumb kids in the lowered Honda Civic blasting the engine at 3 AM on a Tuesday.
At this speed, a single pebble on the road (a market dip) flips the car. You aren’t just losing your gains; you are losing the car—your initial capital.
Gen Z is being told this is how you get ahead. It’s not. It’s how you end up back at zero at age 25, losing years of compound interest. Please don’t be that person. Keep it safe.
Driving With No Brakes: The BNPL Trap
Lastly, we have the people who never use their brakes.
These are the folks using Buy Now, Pay Later (BNPL) for everything and carrying credit card balances. I’d bet they have nothing invested at all. All their money is tied up in the expensive dinners they ate last month.
This person is driving toward a cliff with no brakes. They have no idea how badly they are going to crash and burn. You can feel fast and free right now, but the stop is coming, and it’s going to hurt. Please help these friends fix their brakes!
The Red Light Theory
Here is the truth: People who speed usually end up sitting at the same red light as the person going the speed limit.
In finance, the person who gambles and loses $10,000 has to work two years just to get back to where the “boring” saver already is. There is no need to speed. Keep the safety in your portfolio and in your life.
Put Your Wealth on Cruise Control
Automation is your best friend. It’s the cruise control for your financial road trip.
Set up your accounts to auto-invest. It’s like setting the speed to 65 and taking your foot off the gas. Maybe you get a 10% return, maybe 7%. Either way, you don’t have to stare at the speedometer. You just enjoy the music and the scenery.
I like to use M1 Finance because of the ability to make a "Pie" in your portfolio. When money goes in, it automatically buys the underweighted funds or stocks to keep you balanced. It keeps you safe on the road to your destination.
Check your ‘speedometer’ today. Are you feeling over-leveraged? Take your foot off the gas, set up an automatic transfer to a safe fund, and enjoy the ride.
