Fantasy football and investing are two of my biggest hobbies. Â As I prepared for my fantasy football draft with my brother and friends, I discovered that the strategies that describe fantasy football, can also be used in investing, and visa versa.
Betting on Rookies: Investing in IPOs
Every year, new rookies enter the league. Â Sometimes they are running backs, sometimes they are quarterbacks, or receivers. Â Question is, should you pick they up and make a spot on your bench for them? Â They could explode in the first couple weeks by providing new and exciting flare to their offense. Â They could also get injured, cut, or produce very little amount of points for you.
When a company files for IPO, we all have to make the same analysis. Â This stock is a little unknown and risky, but it could rise to the moon if we make room in our portfolio for it, or become worth almost nothing. Â Stocks like LendingClub, FitBit, and GoPro come to mind.
Hot Streak: Technical Analysis
After a couple weeks in, you will notice certain players doing than their projections. Â You’ll want to place them in for someone who is constantly underperforming.
In investing, this happens as well. Â When stocks or mutual funds are underperforming the market, sometimes it is logical to dump them and purchase another stock that is doing better. Â It is the mentality of getting rid of the losers and trying to pick the winners, even if the winners are already winning.
Valve Based Strategy
Going through the season, you might want to stick to the veterans and already proven players. Â These guys are the ones that you know will constantly get you points, even if its not multiple touchdowns per game. Â You stick with them because they are predictable and good.
Looking at investing, this is also a good strategy. Â You want to be able to have some steady funds, like bonds, that can always be counted on. Â No matter if the stock market looses 5% over two days, like August 20th-21st, you still have a buoyant fund that can be counted on and not loose too much value.
The main difference I can see between investing and fantasy football is that investing is for the long term. Â You don’t need to score 100 points this weekend to win. Â You just have to put together a good strategy and stick with it. Â Over the years, you will notice the payout.