Investing Lessons Learned from Fantasy Football - The Broke Professional

Investing Lessons Learned from Fantasy Football

 

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Fantasy football is one of the most polarizing things on Earth.  One on end you have people who are deeply embedded in the culture.  They have been playing in multiple leagues for years and have parties commemorating the start and end of the seasons.  It’s a way of life.

On the other end, you have those who think that those who participate in fantasy football are delusional and wish they were real athletes.  I’m somewhere in the middle, as I like playing but don’t do it with a lot of fanfare.  And I do wish I was a real athlete.

For those readers who are uninitiated in the ways of fantasy football, it is a game for football enthusiasts in which you select a team from the pool of current NFL players.  Based on how well the players do throughout the season, the team with the most points at the end of the season is the winner.  You have to keep track of player performance, injuries and other  league events to make sure you are fielding the best team possible.

This is usually played online nowadays and some league winners get cash prizes while others just get bragging rights.  It’s all in good fun, but there are some hurt egos along the way.

I bring this up because football season has just started, and I have noticed a bunch of similarities between fantasy football and investing.  In essence, they are very similar because you have to actively track how your players (investments) are performing and make adjustments along the way to win the league (reach your investment goals).

Here are some other startling similarities between fantasy football and investing:

Past Performance Does Not Predict Future Results

This is an SEC mandated statement that all mutual fund companies must put in their ads.  It’s a warning to investors that just because a company has done well in the past, it does not mean they will do well in the future.  If investors actually heeded this advice instead of listening to the latest stock tip, then we would have a lot more wealthy people in this country.

After looking at the top fantasy players from year to year, I realized fantasy football leagues should also mandate this statement.  Besides the many off the field issues that can affect a players performance (such as injuries, suspension, personal problems etc), even the top players in the league can have unpredictable results.

If a player has a tougher than normal schedule for the year or just a handful of poor performances, it can affect their results for the entire season.  Just picking the best performing players from the previous year is not a terrible strategy, but it probably won’t get you very far.  Many of those players may not do well this year and you will miss out on those players that have drastically improved their play.

Lesson Learned:  Don’t pick investments based on how they performed last year.  And don’t pick players thinking they will replicate their production from last year.  Look at the whole picture.

Everyone Has an Opinion

I enjoy watching Sportscenter and listening to NFL podcasts, so I hear lots of different views about who the best players are.  Everyone has an opinion on who they feel will be “dud” or “stud” in fantasy football.  And if you listen to more than one person, you will probably get more than one answer.

All sports writers and pontificators believe they “know” who will play great and who won’t.  But as history shows, no one really knows.  If they do get it right, it’s mainly because of the broken clock theory.  Even a clock that doesn’t work is right twice a day.

Sure, there are players like Tom Brady, Antonio Brown and my man Odell Beckham who will likely light up the scoreboard year after year.  But it’s extremely difficult to spot those players that come out of nowhere or to guess who will have a big drop off this season.

It’s difficult, but people will still try to guess.  And the same goes for investing.

Watch MSNBC or any other financial reality show for long enough and you will think the entire stock market is going through the roof.  Or that you should stockpile gold bars since the world is coming to an end.  Or that the latest election will produce disastrous results in the market.  Depends on what will drive ratings that day.

There will be so many passionate opinions that the average person won’t know what to think.  Mutual fund managers will urge you to sign up for their funds, but that may or may not be the right strategy for you.

Do your own research depending on your risk tolerance and investing timeline.  There is no one size fits all answer and that applies to fantasy football and investing.

Lesson Learned:  Tune out the noise.  Everyone thinks they found the winners but most of the time your guess is just as good as theirs.

Don’t Follow the Herd

Every fantasy league has “that guy” who is always wheeling and dealing.  His transaction history is super long and he’s always looking to trade away his players.  He loves being plugged into the latest news and is scouring the waiver wire to find the next big thing.

“That guy” usually doesn’t win the league.  More than likely the owner who picks solid and dependable players who perform consistently will win the league.  There is definitely a little luck involved to do well in fantasy football.  But picking solid players on great teams and staying the course is usually the way to go.

You will have the random backup wide receiver who has a great game and then is picked up that same hour.  He will be the “hot” player that everyone is clamoring after.  But then he might not do much the rest of the season.  All the while you’re consistent player will be racking up points riding the bench.

This lemming mentality plays itself out in the investing world as well.  As soon as some type of international incident happens, the knee jerk reaction is to sell sell sell!  So many people sell that the market takes a sharp dip, and this causes even more people to panic and sell.

Nothing good can come from following the investing herd.  Nearly all hugely successful investors got their money by not following the herd at the right time.  As Warren Buffet (one of those hugely successful investors) says, “Be fearful when others are greedy and greedy when others are fearful.”

Lesson learned:  Don’t pick up a player just because everyone is talking about him.  And don’t invest in a stock just because it is the latest “hot” pick.  Do your research.  There’s a reason the herd doesn’t get great returns.

I love football and I love investing, so I’m probably going to find similarities between them.  But the similarities between fantasy football and investing are so clear.  Now someone should do a study comparing fantasy football performance with investment returns!

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Comments

  1. This a fantastic comparison! Luckily I am a slightly better investor than fantasy football player (even though I do have a nice trophy in my office I lucked into last year)!

    • Yeah there are so many similarities between the worlds of fantasy football and investing it’s insane. One other similarity: the people in charge of both industries make a whooooole lot of money!

  2. Very interesting comparisons. I admit I don’t have the risk appetite to engage in fantasy football even though lots of people have had great success with it. I would just be happy betting on the stock market and the tips your shared are spot on. Never follow the heard…

    • Fantasy football is fun but I would never play for any significant amount of money. It would be akin to gambling. You’re right the herd is usually going the wrong way!

  3. What’s Up, Syed??

    This is interesting! I’ve thought of it that way before, and I honestly think picking players is similar to picking stocks. You’re right about past performance.

    I would also add that just because someone is a key player (Aaron Rodgers) or a large business (Apple) doesn’t mean they will produce outstanding results. I’ve picked Rodgers last year and the year before, and both times, he would consistently get me a decent amount of points, but he almost never got me a huge amount of points. So those options aren’t bad, but they also might not be great. It’s not very risky to pick Rodgers or to buy Apple, but low risk often means minimal rewards.

    Just my two cents!

    Cheers,
    Kalen

    • Hey thanks for the comment Kalen. You’re right a lot of times the “sure thing” will give you a decent return but not an earth shattering performance. Sometimes you have to reach in the unknown to find the real high scorers.

  4. Really good takeaways! I’ve been playing for years and will be playing indefinitely as my wife’s father runs a league that I don’t see ending anytime soon. It’s probably me being delusional but I like to think long-term I have an edge on other players due to my extensive experience in poker and making tough decisions that are exposed to variance. Again, I may be delusional haha.

    • Thanks yeah. I’ve been doing it for a while too so it always feels like I know more than anyone else. The dumbest move I ever made? I gave into the picking Michael Vick #1 hysteria that happened a few years ago. Safe to say I didn’t win that year.

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