I’m at the J.P. Morgan Research Summit today. Yesterday’s sessions were excellent, and one discussion seemed particularly applicable in light of my recent posts on moving averages.

For the past two days, I’ve focused on moving averages—specifically, how investors can use them as warning signals and how they work to manage risk. Today, we’ll talk about their potential costs and drawbacks, which are common to any type of risk management program.

On the topic of using moving averages to avoid risk, one question I often get is, What actually would have happened over the past couple of decades? Everyone has an interest in avoiding a 2000 or 2008, but everyone also knows that market timing doesn’t work.

One of the major causes of stock market losses is unforeseen declines that make people sell out—often at the worst time. This is one of the reasons I’ve focused much of my recent research on using drawdown (instead of return variance) as a measure of risk. In my opinion, it provides a better metric for real-world investment performance.

I’m headed back from a brief vacation today. My family and I were at the Commonwealth Winners Circle conference, then ventured down south of Tucson to stay with Jackson’s Gram and Pop-pop. It’s been a fun couple of days—I particularly recommend the Desert Museum—but today will be spent on planes. That’s the plan.

Las Vegas is a remarkable place. I haven’t been here for 15 years or so, and there’s been a tremendous amount of development in the interim, but as far as I can tell through faded memories, the place remains substantially the same: buildings you’d never see anywhere else, miniature replicas of other parts of the world, and a commitment to spectacle that’s hard to imagine if you’re not actually here.

From my window, I can see the Treasure Island pirate ship, the Venetian with its indoor canal, the Trump casino rising from what appears to be a surrounding wasteland, and the appropriately named Mirage, all set in front of a mountain range that looks like it cuts off the bottom end of the sky.

— Guest post from Peter Essele, senior investment research analyst

There’s been quite a bit of speculation lately regarding the long-term direction of interest rates, particularly around movements on the short end. We’ve heard numerous specialists’ thoughts on the subject, and most believe the Fed won’t hike rates on the short end until late 2015, at the earliest. Although they make for good sound bites on CNBC, there really doesn’t seem to be much basis for many of these prognostications, so we decided to put pen to paper to assess the direction of rates.

I closed last week with a discussion of how, for individuals, the focus should be on actually achieving their goals, and how risk measures (and the portfolio design process) should be oriented to managing the risks that really matter—in my opinion, drawdowns.

Closely related to this is the issue of expectations. Just as variance of returns isn’t the best measure of risk for individuals, longer-run measures of return are also misleading in this context. Many of the guides put out for investors talk about long-run returns, focusing on the need to stay the course. Just as with rationality and variance, this is a pretty good approximation for institutional investors, who have that kind of long time frame and whose liquidity needs aren’t typically onerous. For individual investors, though, whose time frames are measured in a handful of decades at most (and who will actually need to spend the money at some defined point), this is misleading and damaging. As we have seen, there can be multi-decade periods where, in fact, returns do not match previous expectations—and if the money isn’t there when needed, the investment process has failed.

The Yogi Berra post I did a couple of days ago drew a distinction between steady single investments and home-run investments. Baseball is a popular metaphor for a number of things, but, given the intersection of statistics and uncertainty, it’s particularly relevant for investing. Michael Lewis, for example, is noted for writing about both Wall Street (Liar’s Poker) and baseball (Moneyball). Nate Silver, the former New York Times political statistician, has made ventures into both finance and baseball.

A key to success in each of these areas is to determine which numbers actually matter. This is one of the issues at the core of Moneyball. I would argue that we have the same problem in investing, particularly for individual investors. We’re simply looking at the wrong things.