It’s time to celebrate March Madness and all of the sports highlights that come with it! It’s a season full of upsets, underdog takeovers, and blowouts –and just like investing, filling out your bracket requires you to balance your risk, reward, and expectations. Here are a few valuable lessons that you and your family can learn from March Madness to apply to your investment strategy:
Lesson #1: Don’t Focus on Perfection. Be Strategic.
The chances that you will ever fill out a perfect bracket are pretty low - and so are the odds of always selecting the absolute top-performing investments. With that said, you can always focus on what you can control to set-up yourself up for successful results. Building a strong portfolio means that you are positioned to maintain return premiums, such as size, value, or profitability which will significantly improve your risk-adjusted returns. You can also fully control your asset allocation, maintaining a low cost on your investments, lowering your taxes, and much more.
Lesson #2: Never Let Past Experiences Shape Your Choices Today.
Just like many real-life factors may impact the future success of a team, the same can be said for market investments. This is important to acknowledge so that you do not continue to chase the same results using the same tactics, regardless of changes. As a rule of thumb, investing based on previous performances will not always lead to success. As circumstances change around each investment opportunity, you will see funds that previously outperformed start to underperform in the next period. On the same note, funds that may have underperformed in the past, could be strong candidates for future growth opportunities.
Lesson #3: Avoid Overwatching Your Investments & Performers.
Just like standing by the door, waiting for an important piece of mail to arrive, the more that you focus on that upcoming news, the more attached and emotional you become about the result. Just like the more you watch March Madness, the more anxious you may become about the game. While this can be highly entertaining, we are all aware of the tabloidization of the NCAA tournament. Similarly, the more you watch the markets, the more susceptible you are to headline anxiety. Investors should always remain steady throughout market fluctuations and separate their emotions from daily stock changes.
Lesson #4: Leave Your Heightened Emotions at the Door!
It is in our nature, as human beings, to use our past memories or experiences to make decisions. Sometimes, we instinctively do this without even considering rational probability or evidence. For example, choosing a March Madness team because they are local to you or represent your Alma Mater is not a wise strategy for success. Instead, challenge yourself to use evidence-based logic; base your investment decisions on research and major indicators rather than intuition, ‘gut feelings’ or minor indicators. This will always help to protect you from devising flimsy investment strategies.
Lesson #5: Always Have a Great Coach on Your Side.
Mentors and coaches are some of the greatest tools to prime yourself for success! There is no doubt that a coach can impact a team’s journey toward success or failure. Coaches serve as motivators and stabilizers in the face of intense competition and distress. Having someone educated who can help to calm your emotions and regain your positive decision-making is an invaluable asset. Similarly, a Financial Advisor will serve as an emotional barrier between an individual chasing returns and fleeing from fluctuating markets. Without a qualified guide, you could lack the understanding and the discipline that is required to approach investing wisely. With that in mind, an Advisor is even more essential when approaching your personal finances as the stakes are undoubtedly higher. Be sure to reach out to a trustworthy advisor before you decide to become involved in the market this season.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.