What can successful investing teach us about Fantasy Football?
How did your fantasy football season wind up? Early exit, or, bragging rights for a year? Well, no matter how your team performed in 2015, did you know that by applying some of the same principles utilized by very successful stock market investors, you can greatly improve your Fantasy Football performance? Here’s how:
Step 1. The Draft
When assembling your team, it’s necessary to have a well thought-out strategy in advance. A game plan. This starts with focusing on what’s ahead, rather than looking behind you. Does last year’s underwhelming receiver have their stud quarterback returning from injury? Will a former bell cow running back be splitting time with an electric rookie this season? It’s no different with investing. You should never use a stock’s past results as the sole factor in your decision. Without risk there is no return, and there is no risk in what has already happened. Prices are ultimately determined by future events, and thus it is vital to determine forward looking expectations, rather than relying on numbers of the past.
Next in your game plan should be identifying the right depth and diversity. In fantasy football, injuries and other unforeseen barriers are inevitable for your star players. DO NOT overlook your bench. Whether it is handcuff running backs, or 8-12 point per week guys for the bye, carefully selecting depth beyond your starters is essential. Depth in your portfolio is a must too, but it must be strategic. One of the biggest myths in the financial industry is that the more stocks you own, the safer your portfolio becomes. In actuality, it is much better to spend the time finding a finite number of stocks with the greatest opportunity for growth than to simply buy in bulk hoping that one takes off.
Step 2. Week to Week
The WORST thing you can do for your fantasy season (and for your relationships with friends in the league) is being the team owner who “sets it and forgets it.” It’s key to recognize when a player is slumping or has a poor matchup ahead and to be able to pounce on the best available free agents when necessary. It’s no different with investing. Simply checking your stock’s price on a regular basis is not enough. In fact, a stock’s current price has no bearing on whether or not it will do well in the future. Instead, you should be making selections based on future expectations for that company, gathering information from some of the most qualified analysts on Wall Street. And make no mistake, knowing when to sell is paramount when it comes to successful investing. Whether it is with stocks or football players, once you put in place a well-defined process for buying and selling stocks, you gain the ability to make educated and proactive decisions, rather than reactive emotional ones, and you can be well on your way to a high level of success.
Step 3. Patience and Understanding
It’s hard to keep trust in players if they aren’t performing out of the gate. But remember, you drafted them for a reason. It’s a long season and just because a player performed poorly in the early weeks doesn’t mean they won’t rebound down the line. Similarly, the stock market is generally inefficient in the short-term, but very efficient in the long term. In other words, short-term price movements rarely reflect the actual value of the stock. The true value is something that is realized over time. Breaking news is constantly effecting the market, sometime causing wide fluctuations in value. But these sudden changes are often temporary and do not accurately shape what the stocks value will be down the road. Just like a Quarterback may have a down week when facing a great secondary, stocks may hit misleading bumps and investors should focus on the long-term expectations (provided by industry experts) as their rationale for buying or selling.
Last but not least, stay in the know! There are many, many resources designed to provide you with the best advice (in fantasy football and investing) every week!
So, next time you sit down to evaluate your investment portfolio, or plan for your 2016 Fantasy draft, remember to game plan for the future, remain patient, and stay in the know, and we think you’ll find yourself looking at a winning season.
Stay tuned next week for why your New Years Resolution should be to consolidate your retirement accounts!