My wife used to make fun of my fondness for fantasy sports --
until the day that changed her mind.
Before I had a kid, I played in every type of league you can
imagine -- even a NASCAR league, despite the fact that I am neither
a fan of nor knowledgeable about NASCAR. Many of these leagues were
just for fun, but some hadmoney involved -- not a ton, maybe $20 or
$25 for each league.
In March 2000, my wife and I moved to the San Francisco Bay
area. We didn't know anyone there, so I decided to see if I could
find a local fantasy baseball league to join -- just to meet
people. After perusing websites and message boards, I found one. It
had a $50 buy-in, the largest I'd ever paid, but I did it.
Fast forward to late summer, and I was in the title chase. My
team was clicking. My moves kept working. All was well. So I went
to my wife.
"I think I've got a chance to win this thing," I said.
"How much would you win?" she asked.
That changed everything. This wasn't fiddling around over a few
bucks. This was real money. And in a pricey place like San
Francisco, we looked for every chance to save or generatecash .
As the season drew to a close, we watched games, scoured box
scores and endured more stress than either of us would probably
care to admit. But in the end, it worked out. I took home a little
more than $600. I brought home the bragging rights and the cash,
and my fondness for fantasy sports was rarely questioned again.
It can be similar withinvesting . One who obsesses over
themarket and all the minutiae that come with it can appear to be
wasting her time -- especially if she always gets returns that are
only equal to or less than what the market returns as a whole.
But when you get a big win, things change. You get more
confident. You think about how to get another big win. And then,
inevitably, you lose. After all, in life and in sports, you can't
win them all.
I've never had another big win like that, and I probably
neverwill . My fantasy obsession has waned in the wake of the birth
of my son. But those experiences can carry over into other aspects
of life -- including investing.
Let me explain...
Here are six indispensable truths about investing that I learned
from playing fantasy sports.
1. Micromanaging will kll you.
Every fantasy sports owner has faced this: Your superstar
quarterback or slugger is off his game, and you're not sure what to
do. Do you bench them, trade them or even cut them? It can be
agonizing, but usually you're best served by just waiting out their
slump. For example, last year, slugger Albert Pujols -- arguably
the best player in baseball -- was wretched in his first month with
his new team, the Los Angeles Angels of Anaheim. He barely hit over
.200 for the month. But, as great players do, he turned it around
-- ending the season with a .285 average, 30 homers and more than
Same goes for astock . If the company's fundamentals are good
and you're still confident that you've found yourself a great
company for the long term, hold on tight. Chances are that the dip
or the slump will work itself out over time -- and you'll be glad
you stuck around.
, for example. In March 2009, as the world wrestled with the global
economic crisis, the stock price fell below $20. By late 2010, it
had shotback up to $32 and eventually topped $40 in late 2012.
2. Your biases can cloud your judgment.
I'm a graduate of the University of Texas at Austin. Sure, I love
my Longhorns, and I'm even a football season ticket holder. But if
I kept Texas-ex Colt McCoy as the starting QB on my fantasy
football team, then I'd be a fool. There are just so many other
It's the same with investing. You may have fallen in love with
this one stock because of a hot tip or a family connection, or
maybe because you just love the store. However, if the company
falls on hard times -- losinga ton of money , eliminating their
dividends, cutting employees -- then you have to be willing to let
. You may love the new iPhone5 you got during the holidays, but
that doesn'tmean you should run out and buy its stock -- which has
fallen significantly in recent months.
Be ruthless. After all, it's just business -- it's not
3. The devil is In the details.
Fantasy leagues are won and lost in the late rounds of the draft.
They're won by folks who crunch the numbers and follow the news to
see which players have won or lost starting jobs, have suffered
nagging injuries and have lost a few miles off their fastball. All
that time looking at data can help a fantasy league player uncover
Successful investing is similar. Investors who are willing to
pore overearnings reports, calculate price-to-earnings (P/E )
ratios and dig deeper than anyone else are the ones most likely to
find the stock that other folks say "came out of nowhere." That's
when big successes are possible.
Our sister site, StreetAuthority.com, hasput out anannual report
on the 10 safest places for your money right now. That's out of
more than 14,483 publicly-traded companies on U.S. exchanges.
Despite last year's turbulent market, three of the companies
delivered total returns of 30.4%, 39.0% and 54.1% -- doubling and
even tripling the S&P 500's 15% gain. Get free access to the
names andticker symbols of these companies in our latest report,
"Stocks in America."
4. People matter.
Sports and investing, when you get right down to it, are about
Some star running backs can't make it through a season without
getting hurt. Some baseball players always start slowly and finish
strong; others do the opposite. An athlete who is in the last year
of his contract -- and thus is looking to impress other teams in
hopes of getting a big contract next year -- may end up having the
year of his life. Meanwhile, a player who just signed his big
contract may struggle. The fantasy league player who recognizes
these facts is much less likely to be blindsided by a bad
When it comes to investing, it's crucial to know as much as you
can about the company's top players -- that is, their management
team. It'sWarren Buffett 's biggest factor as he decides whether to
invest. Make it yours, too. The more you know about the folks
running the show at Company A, the more informed your decisions.
And while we all don't have the access Buffett does, we can read a
wealth of information about key executives in annual reports,
newspapers and trade publications.
Don't believe it's that important? Imagine
Berkshire-Hathaway (NYSE: BRK-A)
without Buffett or
Amazon (Nasdaq: AMZN)
without Jeff Bezos. How would that change your perception of the
5. Your gut will guide you.
There will be companies that everyone but you likes. Don't buy
them. There are players about whom you think, "I just don't like
them this year." Don't draft them.
You won't always be right, but whether it's fantasy sports,
investing or life in general, trusting your gut is usually the way
6. Sometimes you just get clobbered.
The team tanks. The stock bombs. It happens -- even when you kill
yourself doing homework and then follow your gut.
Gird yourself for it. Accept it. Move on.
Action to Take -->
Jump in and have fun -- but watch your costs. A fantasy league that
charges you excessive entry fees or transaction fees can leave you
in thered even if your team does really well.
Similarly, choosing a stock,broker ormutual fund with outrageous
fees can eat up all your profits in a hurry. Read the fine print
before you act. Know exactly what you'll be paying for.
After all, the last thing you want to do is set yourself up to
lose before the game even begins.