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March Madness and Investing: Lessons from the Court to the Market

March 18, 2024

March Madness and Investing: Lessons from the Court to the Market

With over 70 million March Madness brackets filled out every March, college basketball’s
biggest tournament always captures the nation’s attention. But you and I will never be a part of
March Madness! Yet, beyond the court there is a strategic journey we are all on that doesn’t
involve basketballs but instead portfolios. But how similar are they really? Let’s discuss some
ways that a college basketball tournament can relate to your investing journey!

1. Filling Out Your Bracket – When you fill out your bracket you get a wide variety of people
who just blindly fill one out, to those who do extensive research about which teams have the
edge over others. The same is true for investing. We see people that just seemingly chose a
random selection of stocks or funds and others that are incredibly meticulous with each
investment that they choose. Now, to have more success in both your bracket and your
portfolio, putting in the effort does have an impactful difference. Whether you engage in the
research or someone is doing it on your behalf, make sure you have a proven strategy to your
selections.

2. Risk Management – Some people enjoy sports betting and betting on certain games. Now
would a sports gambler put all their money onto one team? Of course not! They would spread
their money out across multiple games and teams to better manage their overall risk. When it
comes to investing, you wouldn’t put all your funds into one single stock or fund would you? Well
you shouldn’t at least. Rather, you spread it out over multiple different strategies to better
diversify your risk. Risk management through diversification is incredibly important. Yes, there
could be big payouts to those that have high risk, but for most people they do not need to take
that risk on to hit their financial goals.

3. Predicting Your Outcomes – No one has ever completed a perfect March Madness bracket.
Everyone is bound to make incorrect choices, it’s just a fact of life. You can do as much
research as humanly possible and yet, some of your choices will go against you. Even the most
seemingly obvious and safe decisions can still go against you. And the same holds true with
your investments. Whether you choose well-known, blue-chip companies or seemingly safe
bonds, we have seen countless examples throughout history of extremely safe investments
resulting in poor outcomes. Even the most thoughtful and seemingly safe and obvious choices
still carry some risk. I would encourage you to know that it’s okay and by accepting it, it will
make it less painful and easier to move forward.

4. Emotional Discipline – The most successful athletes at any level all share significant
strength in controlling their emotions. That especially is the case for college basketball players
playing in March Madness where there are tens of thousands of college kids screaming at you,
trying to rattle you and get into your head. Yet, these superb athletes block out the noise and
focus on the game ahead of them. They don’t get rattled by it. Likewise, the best investors share
this same trait. They are able to decipher what in the craziness of life is actually pertinent to
them and what else is just fluff designed to rattle them. The vast majority of noise is not relevant
to them or to their investments, just like how a 21 year old college student yelling at a player on
the court in actuality makes no difference to that player’s life or skillset.

5. The Joy of Winning and the Pain of Losing – March Madness never fails to deliver crazy
buzzer beater wins and absolute hearting breaking losses. It can play with our emotions so
rapidly and make our hearts skip a beat! Some people, like my mother, cover her eyes during
the final moments of an intense game because she can’t handle the suspense! But the wisdom
that she shows is that she understands what she can and can’t handle. Investors need to be
aware of this as well. It’s okay as an investor to not be able to handle massive amounts of
volatility! Some people have much stronger stomachs than others when it comes to the roller
coaster of investing. What then is not okay, is situating your investments to not align with your
risk tolerance. Make sure you have an investment strategy in place to meet your long term
goals, but once that is addressed, then the question becomes how much risk can you
reasonably have. For some, they want a lot of risk to get the thrill of hitting a home run
investment. While others, the pain of loss is greater than the joy of winning so making sure you
are protecting yourself from massive downside exposure is incredibly important. Watching the
joys and pains of March Madness can be just like watching your investments - sometimes it’s
best just to not look!

6. Great Coaching – March Madness starts out with 68 teams and certainly some teams come
into the tournament with better coaches than others. Those great coaches have such incredible
talent but also incredible work ethics. They are always improving and adapting to how the game
is played. They are great leaders and can take their teams through proper preparation, practice,
and guidance through tough times. Just like great coaches in the game of basketball, there are
great coaches in the world of investing and finance. It’s imperative that you have a great coach
on your team. Someone that will properly position you and your finances to have the highest
likelihood of success and someone that will be there for you to be a great leader when times are
tough. The combination of talent, hard-work and leadership can’t be beat.

I bet you didn’t think that I could get 6 similarities between March Madness and the world of
investing! So much of the commonalities of life can be seen in different, seemingly unrelated
areas. So later this month when you are watching some games, think about what you are
observing. From the fierce heckling, the great coaching, and the rush of emotions, ponder how
you can use that to better your financial and investing journey!