As I am sitting here trying to figure out what to write about for the Thoughts on Thursday blog, my husband texts me and asks if we want to put in a certain player tonight for our fantasy football team. Then it dawned on me, how can football and finances relate?! Luckily for me, Tim Lemke had the same thought and wrote about this same thing. He stated there are 10 things fantasy football teaches us about personal finance:
1. Have a strategy and know when to adjust-
When preparing for a fantasy football draft, it helps to start by understanding how you want to construct your team. Will you be relying on a great quarterback and solid run game? Or do you want great wideouts and a staunch defense? Having your strategy mapped out in advance can help you make the right picks. Of course, you may not always get the players you want, so you will have to know when it's wise to change your strategy.
Personal finance planning also requires a strategy. It's important to map out your financial goals and outline how you plan to achieve them. If you are investing, decide how you want to construct your portfolio based on your age and the amount you want to save. From there, you can make sensible choices about the investments that are right for you.
2. Superstars can help-
Every fantasy football manager hopes to make a run at the championship with the help of one or two star players. They want a quarterback who can consistently throw for 350 yards and three touchdowns each week, and a running back who can repeatedly run for 100 yards and two scores. These stars can help cover other deficiencies on the team.
The same can be true for investing, if you are lucky. We all dream of a portfolio filled with super stocks that outperform the markets year after year and bring consistent, positive returns. Finding these star investments is easier said than done, but if you can grab a few, you'll be in great shape — and the rest of your investments can get away with being less than stellar.
3. You can get by without a superstar-
So what if your fantasy football team lacks a superstar? That doesn't mean you can't win. As long as you are getting solid production at every position, you can field a very competitive team. It's a little trickier without a superstar, because you can't get away with making as many bad picks. But many of the best fantasy football teams have been comprised of solid contributors across the board rather than a few top names.
When investing, it's important to consider this approach. Look to build a portfolio of stocks, bonds, and other investments that are solid performers, without worrying too much about whether you've got one investment that will go gangbusters. An all-around mix of above average investments can easily get you on the path to financial freedom.
4. Seek substance over flash-
There are some fantasy football players that get treated like shiny objects that everyone must have. But sometimes their reputation isn't backed up by their performance. You may find this is the case with many investments, as well.
Are you drawn to buying shares of a company because there's a lot of buzz around it? Or have you taken the time to analyze earnings reports and balance sheets, check price-to-earnings ratios, and determine whether a company makes for a good investment? In both investing and fantasy football, it's important to let objective information guide your decisions.
5. Understand risk and reward-
You may have your eye on a top quarterback who has been known to put up some big numbers, but he had back surgery in the offseason. You'd hate to miss out on his production if he has a great year, but what if you select him and he ends up on injured reserve? When selecting a fantasy football team, it's important to understand the possible risks in every pick, as well as the potential upside.
These are concepts worth understanding when it comes to investing, as well. Some investments, such as stocks, offer the potential for great returns, but come with risk. Other investments are safer, but you may limit how much you can potentially earn. When assessing risk and reward, it's important to understand your own risk tolerances and your own goals before making a decision.
6. Do your homework-
It's hard to achieve success in fantasy football if you don't know anything about the game. Sure, you may get lucky with a few picks, but to build a championship season, you need to study the players, read up on matchups, and read the independent analysis.
The same is true for investing and other parts of personal finance. It's not wise to buy a mutual fund without studying its historical performance, its holdings, and its expense ratios. You should never get a mortgage loan or finance a car without understanding interest rates. "Just winging it" might work once in awhile, but it is generally bad as a strategy.
7. There aren't many secrets-
Not too long ago, it was hard to get detailed information about football players until you read box scores in the morning paper. Projections were listed in large, printed volumes that were often outdated by the time the season started. Nowadays, there is a mind-boggling amount of up-to-date football information available at our fingertips.
This is also true for data on anything related to personal finance, from investments and the financial markets, to interest rates, to the pricing of products. This abundance of available information means that there's no excuse for being unprepared. But it also means that it's trickier than ever to get an edge.
8. Pay attention and be ready to pounce-
A large part of success in fantasy football is following games closely and understanding which players may be poised for a big game. This may mean jumping at a chance to pick up a team's backup quarterback right after their starter got hurt. It may mean picking up an unknown running back right after he broke out for an unexpected big game.
In personal finance, it's equally important to have your eyes open and be prepared to act. It might mean locking in a loan when interest rates drop to historic lows. It may mean buying a stock right after news of a big jump in earnings. Or perhaps it's simply reading the local circulars for sales and taking advantage of great bargains at the grocery store.
9. Look for value-
One of the keys to any successful fantasy football campaign is finding that late-round draft pick that turns into a stud. It may be a player that other competitors overlooked in favor of more high-profile names. Maybe it's the backup quarterback who turns into a starter and has a great year. These undervalued players often become the difference between good and great.
When investing, it's also important to look for value. Find stocks and funds that are underpriced based on their underlying financials. Look to invest in companies that fell out of favor due to bad publicity but still have strong operations. It's easy to go after the hot name, but real wealth building comes from finding the diamonds in the rough.
10. Be patient and don't panic-
Your fantasy football team came out of the gate slow and you've found yourself a few games behind early in the season. Your quarterback is off to a lousy start and your running backs can't find the end zone. You could blow up your team and try to make it with some different players, but it's often best to wait and see if your team turns things around.
When investing and saving, it's helpful to follow the same principals. Wealth is hard to acquire quickly, and it's best to have a disciplined approach of consistently setting aside as much money as you can. It's also good to have faith in the markets, which generally go up over time. This is not to say you should never sell a bad stock or occasionally adjust your investing portfolio. But making frequent changes based on single events or your own emotions is not the key to victory.
I love this article he wrote. It really puts finances in perspective and makes it fun. Seeing as there are approximately 41 million people who play fantasy sports every year, it is very relatable to compare it to a real life topic.