The parable of the six foot man who drowned in the stream that was five feet on average is a reminder to plan for the possibility of low ends when building a portfolio. The average can be misleading because there can be large swings that still average out to something you might mistakenly believe is survivable.
An example Howard Marks shared in an investor memo was about commercial real estate investments that, on average would pay off handsomely but if the market turned, would be disastrous. As the economy shifted from a low-interest rate environment, many of these investments are in danger even though, at the time, they looked like reasonable bets.
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