Your Fantasy Team; on the Field and in the Market
If you're an enthusiastic football fan, or you're married to one like I am, then you are well aware football season is upon us. And with that comes cooler weather, tailgates, and of course, Fantasy Football.
A few weeks ago, as I watched my husband diligently study this season’s draft picks, rosters, and all things football, in hope of constructing an unstoppable fantasy team, it occurred to me just how many parallels exist between managing a “team” and managing your investment portfolio.
It all starts with an end goal in mind, followed by completing the necessary steps to achieve that goal. In fantasy football, it’s about winning, beating all of the other teams in your league and being crowned this year’s champion. With investing, it’s about obtaining a specific financial goal in the future – most commonly for a large purchase, to supplement income in retirement, or build wealth for future generations.
Once the goal is defined, it’s time to get to work and see it through. But where do you start? What’s your strategy?
First, in fantasy football, you’ll need to draft various players for multiple positions (i.e. – quarterback, tight-end, wide receiver, kicker, defense, etc.). Understanding the different positions and the importance of each is critical to ensure you draft a diversified line-up that is best equipped to handle the opposing team’s game play. The same goes when building a portfolio – understanding the types of investments and their role in your portfolio is key. You’ll want to consider companies that can move your portfolio forward, also known as growth stocks, and companies more defensive in nature which can provide some stability during volatile times, referred to as value stocks. For both fantasy football and investing, you need a nice blend of players or stocks for the best opportunity to succeed.
But finding that nice blend takes work. In football, you review a players “stats”, the individual player’s commitment to improving their skill and maintaining their health. For stocks, it’s important to evaluate a company’s management team, understand the product or service provided, and review their financials which consists of cash flow, revenue, earnings, debt ratio, etc., considered the fundamentals of company. And while you can always rely on analysts for their opinion (in both the world of football and stocks) they might not have any more insight when either a player or a stock significantly underperforms.
Which brings me to my last point, which is discipline. Inevitably players will get hurt and markets will go down-that’s life. However, having a disciplined strategy in place will help provide focus and ensures emotions are held in check when making decisions, so you don’t wind up sitting on the sidelines missing future opportunities. This is especially important when it comes to investing, allowing emotions to drive your actions will often keep you out of the market when you should be in and in the market when you should be out.
In summary, whether building an all-star Fantasy Football Team or an All-Star Investment Portfolio, the following components are critical:
- Define your goal
- Analyze the fundamentals
- Remain diversified
- Have a disciplined strategy
It is my hope that you found this little piece both educational and entertaining. As always, if I can ever be of any assistance to you, your family, or your friends, please do not hesitate to call me. I am happy to help in any way I can.
- Amanda Simconis, Senior Investment Portfolio Analyst
Views expressed are not necessarily those of Raymond James & Associates and are subject to change without notice. Diversification and strategic asset allocation do not ensure a profit or protect against a loss, Past performance in not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.
