Don’t Manage Your Investments Like A Fantasy Football TeamSubmitted by Castlebar Asset Management on September 9th, 2015
I had my fantasy football draft on Tuesday evening. It was very typical with 10 mostly 30 and 40 somethings sitting in a basement talking smack about players they knew absolutely nothing about. Most of us were up past our bed time, we were getting crabby especially when some wise guy had to ask if LeSean McCoy had been drafted yet in each and every round since the 2nd round. Sound familiar?
One of my buddies runs his team like an insane NFL owner. He is always making changes, searching the waiver wire for picks and suggesting ridiculous trades. He sometimes thinks motion is the same as progress and has never won the league. It had me thinking what if people ran their investment strategies like their fantasy football teams? Here are some mistakes to avoid in both worlds.
I know I am going to win my league this year. I was well prepared for the draft (which means I spent 15 minutes on the web and bought an app for my iPad) and I am a superior evaluator of fantasy football talent. Overconfidence can be a terrible trait when it comes to investing or your fantasy draft. We believe that our forecasting skills or ability to time the markets will lead to improved results. Most of the time our overconfidence will cause us to miss things and lead to suboptimal performance. Recognizing our limits is key to success in both arenas.
Have a Flexible Plan
Our clients all have an investment strategy that is created based on their goals, risk tolerance and time to reach these goals. This is adjusted as their situation changes. Everyone has a strategy entering their fantasy football draft as well. Usually your draft is going great until the guy before you drafts the player you want, in each and every round! This usually leads you to taking either the next best available player or getting frustrated and before you know it you end up with 9 wide receivers on your roster. In terms of your investments, things are going to throw you off course from time to time and you’ll need to have a flexible plan with your investment strategy in mind.
Owning too much of your company’s stock or holding concentrated positions in a certain sector or industry can lead to predictable outcomes. It will either go very well for you or it could be disastrous. In our fantasy football world having too many players from the same team will lead to similar binomial outcomes. Diversification in your investment portfolio will help reduce its volatility and the same is true in your fantasy team. Plus it will save you during bye weeks, too bad we don’t have them in the markets.
Every league has someone like my buddy who turns his roster over several times a year. They bench Andrew Luck or Jamal Charles because they have a down week. They are always chasing last week’s performer in hopes they can catch lightening in a bottle. Being patient that your time tested performer in football or investing will give you your best opportunity at success. Chasing performance is usually a recipe for frustration and ultimately failure.
Don’t Talk About It
You don’t post your 401k balance or net worth on Twitter or Facebook ever (I hope!). So let’s not overshare our fantasy football wins, bad beats and season ending injuries with the world. Somethings are best left to our own consumption!
Good luck with your fantasy football season, unless you are in my league. Please don’t treat your investments like my buddy runs his fantasy football team!
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.