Speed and Velocity

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

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Every high school physics student quickly learns the difference between speed and velocity.  Speed tells you how fast you are going, while velocity is a vector that tells you how fast you are going in a specific direction.  Speed in the wrong direction is worse than standing still.  Speed in the wrong direction means that you are going further away from your goal or objective.  When traveling it is important to get the direction correct first and then worry about the speed later.  Likewise in risk management it is important to get the direction – the objective of risk management – right first and then and only then worry about the speed at which you are going.