If you’re a college basketball fan, then you know March is a busy month for filling out the Men’s and Women’s bracket pools. Congratulations to Kansas, Villanova, Virginia, and Xavier in the Men’s Tournament and to UConn, Louisville, Mississippi State, and Notre Dame in the Women’s Tournament for receiving the top seeds. Any team has a chance to win the championship. It is difficult to select the Final Four teams and nearly impossible to have a perfect bracket. In several ways, you can learn much about investing from the brackets:
1) Do your homework and research. If you are not familiar with the teams playing, then you could still win, but you probably have less of a chance of winning. Similarly, if you do not understand an investment, a strategy, a product, or an idea, you might be able to be successful, but the chances of success are less than with preparation. What you may not know could end up hurting you in the long run.
2) Determine your risk tolerance. You probably will not win a bracket pool by just picking all the lowest seeded teams because there are upsets. Any team can beat another team on any given day, and there are various other factors that can influence the results. In your investments, you can stick with companies that you know and trust, but make sure to round out everything with quality advice about other areas of investment to make sure that your overall outcome is achievable.
3) Past performance is no indication of future performance. The chances for the #1 seeded teams to make it to the Final Four seems strong, especially based on how they have played during the season. But be warned as the drama tends to unfold every year! Some companies, ideas, funds, and countries have done well in the past, but it is the forecasting of how they may do in the future that warrants consideration.
4) Don’t count on being right all the time. It’s extremely rare to achieve perfection in anything, be it bracket team selection or investments. Teams and markets go up and down. That’s why it’s such a good idea to have a portfolio that can help you weather the storm and smooth out the ride.
Did you know? According to DePaul University math professor Jeff Bergen, the chance of having a perfect bracket is about 1 in 9,223,372,036,854,775,808 or about 1 in 9.2 quintillion.