While some people take it way too seriously, it can be a fun way to stay entertained during NFL Sundays, especially if your favorite team isn’t having a good year. For me, the biggest benefit is that it provides a great way to stay connected with friends who have moved all over the country since college.
You will often run across fantasy football players who can’t stop talking about their teams. Usually nobody wants to hear about someone else’s fantasy football team so I generally don’t talk about mine much, unless it’s trash talk with another player. For that reason, you might find it odd that I’d be writing an article about this, but I was struck this year by how my approach to fantasy football matches my approach to the investing world.
It occurred to me that I always seem to do pretty well in both of my fantasy football leagues, but given my first and second place finishes this year I knew this might just be a case of recency bias. Luckily the site we use for both leagues tracks results over time so I was able to look back to see how I’ve actually performed. Each league has ten players and the top four players each season make the playoffs. The top three players in the playoffs each year earn prize money. My average finish in each league is fourth place.
Fourth place might not sound all that great, but that means in an average year I beat 60% of my competitors. It also means I make the playoffs more often than not, and that gives me a shot at prize money. Finishing in the top 40% on average is an admirable goal whether you are playing fantasy football or investing. Here are some ways to accomplish that goal:
Don’t Shoot For The Moon
In fantasy football it can be tempting to try to find the next big undiscovered star who will light up the scoreboard each week. Unfortunately this is a very difficult task and more often than not you’ll strike out. The same is true in the stock market where everyone wants to find the next Amazon stock before it gets big, but this too is nearly impossible. For every Amazon there are countless other companies that looked like a sure thing only to disappear.
Develop Rules and Follow Them
Legendary investor Benjamin Graham once said, “Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” Rather than focusing on your opponents, develop a set of rules for how you will draft and set your lineup and stick to it. In investing, it’s very important to take a rules-based approach to your portfolio. Set a target asset allocation and rebalance back to that as markets move. It’s much easier than trying to pick the right time to buy/sell certain asset classes.
“Price is what you pay. Value is what you get”. This is another great quote attributed to Benjamin Graham by Warren Buffett. In a fantasy football draft you never want to take someone in the first round who you could’ve gotten in the 5th round. Likewise, if there’s a player who could’ve been a first round pick but falls to the 5th round you should probably take him. While value stocks have underperformed growth stocks in recent years, over the long-term value has provided a higher return than the market.
Beware of Too Much Information
There are so many sources of information for fantasy football now, it’s easy to find contradicting opinions that will make it hard for you to make decisions. There are even more sources of financial information out there and multiple cable channels dedicated to it! If you tried to listen to everyone you’d wind up owning every stock and spending every minute of your life buying and selling based on someone’s opinion!
BUT Lean on The Knowledge of Experts
If you can filter through the sea of information to find a source you trust, lean on their expertise and let them do the hard work. There is a site I like to use for weekly fantasy football rankings and I trust in their team of writers who spend every minute analyzing this. If I have to decide who to start one week I just use a consensus of their opinions, which they post in a sortable format each week. The same is true with your investment portfolio. Unless you want to make stock analysis your full-time job you are better off either relying on an expert you trust or just buying simple index funds.
Accept That Bad Luck Happens
Even if you follow the rules above, you still could wind up drafting a great player who gets hurt the first week of the season. There’s nothing you can do about that so you just have to accept that sometimes you’ll have bad luck. The same could happen in investing. Maybe you had some cash to invest and you put it into a well diversified portfolio the day before the market goes into a 10% slide. That might hurt, but if you stick with your process over the long-term you’ll never remember that one instance of bad timing luck.
Bad Years Will Happen Too
Maybe it’s because of bad luck and an injury, or maybe you just made some bad draft picks or missed out on a good waiver wire pickup. Sometimes you’ll have a bad year regardless of whether you stuck to your process or not. Expect that this will happen and it won’t hurt so bad when it does. Even the best investment portfolio will have some years that make you want to tear your hair out. Don’t let that bad year change your approach for the long-term.Now that we are into the NFL playoffs, this year’s fantasy football season has come to an end, but the investing season never ends. Take some of these lessons from the gridiron to your portfolio and maybe you’ll have better success investing than you do in fantasy football!
-Chris Benson, CPA, PFS
The views expressed represent the opinions of L.K. Benson & Company and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. Please see Additional Disclosures more information.