According to recent research, almost 75 million people will play fantasy football this year. Every year, fantasy football seems to gain more popularity. It gives many of us a great way to keep in contact with friends through some friendly trash talking each week. Supposedly, fantasy football will cost employers $17 billion this year. That’s bad. Real bad. But it’s not all bad. There are some lessons that can be learned from fantasy football that can be applied to investing. Go ahead and close out your fantasy football tab and read this article.
Taking a Long-Term View
It’s essential to take a long-term view when you are investing for your future. You can’t expect to have huge scores every week, but you want to make sure you’re clicking on all cylinders when the playoffs come around. Same thing with investing. There will be ups and downs but it’s important to stick to a long-term plan. Research continues to show that investors are their own worst enemies. This is due mainly to overreaction to short-term setbacks. Keep your eye on the prize and believe in your long-term plan.
Buy Low, Sell High
One of the keys to investing is to “buy low and sell high.” Warren Buffett once famously said, “You want to be greedy when others are fearful. You want to be fearful when others are greedy. It’s that simple.” Ok, I don’t think it is quite that simple but it’s a great lesson. What he’s saying is that you want to buy investments when they are cheap, hold them, and then sell them when the price goes up. This is imperative in fantasy football. It’s like when you have a running back on your bench that you rarely use. He has a huge week so you trade him to your buddy for a much-needed tight end. Boom. Buy low. Sell high.
You want to be greedy when others are fearful. You want to be fearful when others are greedy. It’s that simple. – Warren Buffett
Look for Value
Warren Buffett is a notorious value investor. Value investing is looking for an investment that is selling for cheaper than it is worth and buying it in the hopes for a big rebound. Sound familiar? Remember that guy you drafted in a late round of your draft hoping that he has a huge bounce back year? (I’m looking at you, Eddie Lacy)
Manage Your Volatility
When I work with a family to build a portfolio, we establish an investment policy statement. We take into consideration their liquidity needs, risk tolerance, and long-term goals to build out a portfolio that best suits them. This helps us to invest in a way that manages the volatility that their investments are exposed to. Everyone who drafts a fantasy team does the same thing. It’s one thing to take a flyer on Le’Veon Bell. It’s another to take him AND Josh Gordon.
Diversification is Key
It’s important not to “keep all your eggs in one basket” when investing. Remember the Enron fiasco? More than half of the company’s retirement plan assets were comprised of employees owning Enron company stock. The company fell apart and the life savings of many of it’s employees evaporated. This is why diversification is key. How does this relate to fantasy football? You wouldn’t draft 4 quarterbacks to your team would you? Or how about having 4 guys from the same team? Good luck on the bye week.
Impossible to Predict
The quicker you learn that predictions aren’t the end-all-be-all, the better. The only certainty in investing is uncertainty. Many investors rob themselves of returns because they try to time the market. Trying to outsmart the system by buying and selling at “just the right time” is a loser’s game. Even respected economists might as well flip a coin. Control what you can control. There will be good years and there will be bad ones. It’s all “part of the game.” Sometimes you can have your best players all lined up to play terrible defenses but then Antonio Brown scores 40 points against you and you lose. Sometimes, those are the breaks.
There you have it. The next time someone tells you that you spend too much time on fantasy football, kindly inform them that you’re, “sharpening up your investing skills.” Good luck this season!
*Diversification does not guarantee a profit or protection from losses in a declining market.