As the NFL season begins, millions of fantasy football fans are busy researching and drafting their teams. And this season, as in previous ones, fans will be wondering why some fantasy team managers just seem to have a knack for finding those sleepers and high upside players, while other managers routinely fail to understand and predict player value.
Investors often wonder the same thing: why do some investors consistently get it right and prosper, while others are lucky if they even break even?
Coincidence? Maybe, but there are several important things successful fantasy football managers have in common with successful real-life investors.
Here are three important mindsets that can help you go the whole 9 yards, whether it’s on the virtual gridiron or with your own financial plan.
Research the Players
A good fantasy football manager knows that you need to study all the different variables – including roster positions, draft picks, and expected performance – to build a winning team. Understanding the available options is critical to determining things like how many players you need at each position and which players you think will be the best.
This same principal applies to investing. A smart investor or financial advisor starts by understanding all the different variables, such as capital, types of investments, and asset classes. Understanding the pros and cons of various investment strategies is critical in determining how to choose a strategy that is the appropriate option for your own goals and needs.
Never count on a couple of stars to carry the team
When drafting your fantasy team, you always want to diversify your risk. You might not want to draft multiple offense players from the Green Bay Packers, for instance, even if that team is loaded with talent, because, if Aaron Rodgers and company have a bad week, your fantasy team will be struggling too. Smart fantasy managers build a stable foundation and don’t just count on rising stars.
When building your investment portfolio, risk diversification is critical as well. Wall Street is littered with stories of investors who put all their eggs in one “sure” basket, only to learn the lesson of diversification the hard way. Even if you’re extremely confident that a certain sector is a good bet, it’s usually better to diversify and limit your amount of exposure to individual sectors. That way, even if the sector doesn’t do as well as you had anticipated, your investments are distributed across other asset classes, and your risk should be better managed.
When the going gets tough, the tough stay disciplined
Anyone who has played fantasy football knows the danger of making a snap waiver wire decision you’ll regret later. On one hand, you don’t want to panic and drop your star player after a rough few weeks, only to see him rebound to a MVP-caliber season (and on someone else’s team!) On the other hand, just because an unproven player has a great week doesn’t mean he’s more valuable than the player you’d have to drop in order to acquire him.
When the market hits a volatile patch, it takes a disciplined investor to trust their plan and avoid making snap decisions about buying and selling. A look at the history of the stock market makes it abundantly clear that investors who take a long term view do better than those who shift their investment strategies with every changing wind. This doesn’t mean that any plan should be viewed as foolproof; a good investor or financial advisor knows the value of reassessing and recalibrating appropriately and strategically. What it does mean is that, when the going gets tough, a prudent investor takes the long view, stays disciplined, and sticks to a strategy.
It’s a long season
The only NFL team in history to have an undefeated season is the Miami Dolphins who finished 17-0 in the shorter 1972 season. No NFL team has gone 19-0 to date so it’s highly unlikely that any fantasy team will achieve perfection either. But that doesn’t mean you can’t have a great season and get smarter and smarter about putting together a winning team.
With investing too, there will always be ups and downs, touchdowns and penalties, fumbles and conversions, and a few Hail Mary’s. But with a solid game plan and clearly defined goal, you’ll be on your way to a putting together a strategy designed to stand the test of time and put you squarely where you want to be: heading toward your own end zone with your eye on the ball and your own goals in sight.