With the first two rounds of the 2016 NCAA Tournament in the books, we have all seen our brackets that we felt so strongly about go bust. I don’t think anyone saw 2 seed Michigan State going down to Middle Tennessee State in what was by far the biggest upset going into the Sweet 16. Probably by this time you know you are no longer in contention for Warren Buffet’s Tournament challenge that would guarantee yourself 1 million dollars every year for life if you correctly guessed every first round game of the tournament.
Believe it or not, There are many similarities that go along with investing and the careful choosing of the bracket that will earn you bragging rights in your respective family or office pool. All of your efforts on the hours spent choosing your bracket do not have to go to waste and can be related back to investing. Here’s how.
Investing in the “Cinderalla”: It’s great idea to blend the household names and the smaller schools for your brackets. We have already seen the likes of Stephen F. Austin & Middle Tennessee State be bracket busters (including mine) and investing is no different. It’s always a great intention to have a mix between large cap that can be seen as more stable and small caps which are historically riskier but can also provide large “Cinderella” like payouts.
Perfection Doesn’t Happen– The odds of achieving the heralded “perfect bracket” is currently 1-in-9.2 Quintillion. That’s with 18 zeros. For the sake of making it comparable, you have a better shot of hitting 4 hole in one’s during a round of golf. Beating the market year after year is almost impossible to achieve as well. It doesn’t matter if you’re Warren Buffett or Jimmy Buffett, the odds are certainly not in your favor. Creating and sticking to a long-term investing plan has proven time and time again to be the best way to achieve your goals of reaching financial success amid short-term fluctuations in the market.
Risk is needed: one of the best ways to win your office bracket is to take some risk and choose some upsets that your associates don’t have the nerve to pick. You know they’re going to happen at some point. It is a necessity to pick teams with low expectations compared to the power house teams such as choosing University of Little Rock Arkansas over the Purdue Boilermakers. Keeping the less familiar names as a small portion of your portfolio can provide huge benefits from a diversification and performance standpoint.
Experience Counts: Statistically speaking Tulsa, Iowa State & Little Rock are the most experienced teams in this years tournament. Two of these three teams advanced in the first round. Experience matters. Without veterans that have been in the spotlight and had experience on this stage are at a serious disadvantage. The same theory goes with investing. Investors will make mistakes along the journey but learning from these mistakes can turn you into a productive, seasoned veteran.
Unlike March Madness, There’s never one winner in investing – As with every competitive tournament, at the very end someone is crowned the winner. Have you ever heard the saying “Don’t count all your eggs in one basket.” This saying goes hand in hand with investing. Having all your money in one fund is hazardous to your portfolio. It’s great to have a diverse, well-constructed portfolio that contain many different funds and sectors of the market. Diversifying doesn’t guarantee against loss but is singlehandedly the most important factor of achieving long-term financial success.
Mystery doesn’t work in your favor – When filling out your bracket you wouldn’t pick a team that had their star player on the bench with a season ending injury would you? Conference Championships can be brutal and leave even the best teams entering the tournament beat and battered. Staying on top of recent news for both investing & March Madness is imperative. You should stay informed with the companies that you invest in. Things such as manager changes, destitute earning reports & factors that could affect production are all variables that can change the landscape of the company you have your hard earned dollars invested in. Take the time and do your research.