Five Investing Lessons from Fantasy Football
Like many others do when summer turns to fall, I participate in an NFL Fantasy Football league. For those who are not familiar with this activity, it first involves creating a league with a group of friends, family, and/or coworkers. Each person acts as the general manager of their team to select current NFL players using a draft format. Once you create your virtual team, you compete against other teams in your league each week of the season. It’s a fun way to follow a sport you love and have some friendly competition. It occurred to me that there are similarities between investing and the Fantasy Football experience.
- Draft well: As with investing, you have a set amount of capital to use when building your team. You only have a certain number of picks in the draft, and so you need to allocate those resources across multiple positions to ensure you have a diversified roster. Also, like the investing world, where data is overflowing, there is a tremendous amount of information available on NFL players, including previous statistics, predictions of future performance, coaching styles, etc. Having a process to cull through all the information and make an informed decision is critical.
- Monitor your “team”: Once the draft is behind you and you have selected your portfolio of players, the job isn’t over. Throughout the season, new developments emerge every day that must be considered, much like changes in the economy, financial markets, and individual companies. A promising rookie or a seasoned veteran may start the season differently than you anticipated. You can’t play your entire roster each week, so you must decide if you want to take them out of the starting lineup the next week and give another player on your bench an opportunity. Since the goal is to maximize the number of points, you want to try to play the “hot hands” while also trying to minimize risk.
- Setbacks will happen: Players get injured during the season just as some stocks miss earnings expectations each quarter. You need to quickly assess how long they will be down or if it looks like a season ending injury. If the timeline to recovery is too long you need to be prepared to remove that player (or stock) from your roster and move on.
- Pivot to new ideas: After a setback, it is important to pivot to the next idea. Hopefully you planned for the inevitable injury, and you have a backup plan ready to go. If not, or if that player you drafted is no longer a viable option, you will have to make changes in real time and look for another player to fill in. The smart Fantasy Football player, or investor, will have been monitoring other available options continuously. You may not have had the room on your roster or the available capital to add them earlier on, but now that your initial selection has fallen short, you need to be ready to acquire the next asset to help you achieve your long-term goal of winning the league championship at the end of the season.
- It’s a long season: Each league only lasts for a set number of weeks, but it is long enough where your team can make a comeback after a slow start if you are able to navigate the opportunities and setbacks that are presented to you. Thankfully, the investing season never really ends. Your timeline to course correct and get back on track is much longer than a football season. You don’t have to “win” in the short term, but the stakes of long-term failure are much more severe than simply knowing you are not that good at running a make-believe football team.
Having a process that has structure and flexibility is the key to long term investing success. You need to do your research, select the best options for each sector based on your analysis, be ready to pivot with global changes, and be in it for the long haul. You may not get a trophy at the end but doing so should help you enjoy the journey.
Meet Brian Horan, CPWA®
West Financial Services, Inc. (“WFS”) offers investment advisory services and is registered with the U.S. Securities and Exchange Commission (“SEC”). SEC registration does not constitute an endorsement of the firm by the SEC, nor does it indicate that the firm has attained a particular level of skill or ability. You should carefully read and review all information provided by WFS, including Form ADV Part 1A, Part 2A brochure and all supplements, and Form CRS.
This information is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.