Thought Leadership in Action

Don’t treat your investments like a bad coach runs a football team

Are you among the group of 60 million football fanatics who recently drafted players for your fantasy football team? As you sat online with millions of other fans and fanatics scattered nationwide, chatting about and nabbing the best running backs, quarterbacks and kickers for your imaginary team, you may feel like you could use your strategy to invest. Wrong call.

One of my buddies runs his team like an insane National Football League owner: always making changes, scanning for prize picks and offering ridiculously one-sided trades. My friend seems to think that mere motion equals progress. He never wins the fantasy league.

What if you ran your investment strategies like a fantasy football team? Here are mistakes to avoid on the make-believe gridiron and in our very real stock market.

Overconfidence. You entered the draft prepared and consider yourself a superior evaluator of fantasy football talent. You won’t win fantasy league this season.

Overconfidence can be terrible when investing or when building a fantasy team. We believe that our forecasting skills or ability to time the markets will improve results. Most of the time, our overconfidence causes us to miss important details and leads only to suboptimal performance. Recognizing our limits is key to success in both arenas.

Flexible plans. You should have an investment strategy based on your goals, risk tolerance and time left to reach these goals. You should adjust these plans as your situation changes.

Everyone has a strategy entering a fantasy draft, as well. Usually your draft goes great until the person picking before you starts grabbing the players you want in every round. This usually drives you to take either the next-best available player or get frustrated and before you know it, you end up with nine players for the same position on your roster.

With your investments, market events will inevitably throw you off course from time to time. You need a flexible plan that keeps your investment strategy and long-term goals in mind.

Concentration. Owning too much of your company’s stock or holding concentrated positions in one industry or sector (such as utilities or technology) can produce predictable outcomes: terrific or disastrous. Guess which is more likely over time?

In fantasy football, too many specialist players from the same team makes for similar outcomes. Diversification in your investment portfolio helps reduce its volatility.

Be patient. Every league has someone like my buddy who turns his roster over several times a year, benching pro stars Aaron Rodgers or Todd Gurley or Antonio Brown after one bad game and always chasing last week’s big hero.

Being patient that your time-tested performer in football or investing gives you your best opportunity at success. Pursuing performance is usually a recipe for frustration and ultimately, failure.

Don’t talk about it. You don’t want to overshare your fantasy wins, bad defeats and season-ending player injuries with the world. Similarly, don’t post your 401(k) balance or net worth on social media or even flaunt them in company.

Good luck with your fantasy season wherever it takes place. And please don’t treat your investments like a bad coach runs a football team.

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