What Fantasy Sports Taught Me About Stock Investing

Fantasy sports is now a global phenomenon. Over the last decade, it has taken off as a popular pastime. Millions of men and women join fantasy leagues where they have the opportunity to create their team, select their roster, sell players and earn points in hopes of winning bragging rights and even cash.

However, fantasy sports isn’t just a pastime. It’s also an amazing learning tool when it comes to stock investing. If you haven’t realized yet, fantasy sports and stock investing have a lot in common. Let me walk you through the similarities.

First of all, in both fantasy sports and stock investing you need to be careful how you spend your budget as every move can lead to a major success or terrible failure. Next, both fantasy sports and stock investing require thorough research, in-depth knowledge,  and consistent attention to current events. Finally, your roster choices are crucial in determining your final score. Similarly, the choices you make in stock investing can determine your financial success.

As you can see, fantasy sports and stock investing aren’t too different. I’ve personally become a better investor by playing fantasy sports. In fact, here are six top lessons I’ve learned about stock investing.

  • Don’t Follow the Crowd

In fantasy sports, the main goal is to finish in the top of your league. In order to make this happen, you need to make wise choices. Getting to the top of your league means you have to trust your own judgments and listen to your own instincts. Ultimately, you must trust your own research instead of following the crowd.

Just because everyone’s talking up some player and his performance, it doesn’t mean he’s a good addition to your specific team. The same warning applies to investments. Just because everyone’s talking about a potential investment, doesn’t make it a good fit for your particular portfolio. Trends among the crowd aren’t always the best decision-making factor in stock investing.

  • Research, Research, Research

Your success in fantasy sports, especially in daily sports, depends on the quality of your research. It’s important to stay up to date with results, games, transfers, injury updates, starting rosters, and everything else. As a result, you’ll be able to create a great lineup and get more points. In fantasy sports, your research is the most important thing, and stock investing is exactly the same.

Some investors rely on their hunch, but that can only get them so far. For consistent results, you need to keep informed and do your homework. After all, you can’t work with old information. The stock market changes every second. Being misinformed prevents you from getting the best results. Fantasy sports require the same quality of research.

  • Don’t Rely on Predictions

Predictions and fantasy sports go hand in hand. There’s always a popular opinion about a team that’s going to win the game and the league itself. Sometimes predictions may seem like a reality. You have a clear vision about who’s going to win and take those predictions as a guarantee. But you can’t forget that things happen, sports are unpredictable, and sometimes solid predictions turn out to be failures. Then, you lose points.

Likewise, stock investing is closely tied to predictions. In some occasions, those predictions may seem so obvious, but be careful. Predictions aren’t a guarantee and can prove costly. You need to think things through before you make an investment decision based on a prediction. One failed prediction could negatively affect your portfolio.

  • Be Unbiased

Are you always trying to include your favorite team’s players in your lineup? Do you have a favorite player that you keep in the lineup even though his performance sucks? Well, you’re not alone.

Sometimes we’re biased and make decisions based on our likes and dislikes. Don’t learn the hard way, in fantasy sports being biased is a huge mistake. Likewise, being a biased investor can cost you. If you prefer a stock because of some family connection or personal bias, it may end in a disaster. In order to be a successful stock investor, you need to be unbiased. Don’t treat stocks based on preferences, connections, and memories. Look at them objectively. It may be difficult at first, but you’ll succeed.

  • Diversify Your Portfolio

The golden rule of successful investing is to avoid putting all your eggs into one basket. Clinging to one stock may seem like a reasonable idea at first when it’s profitable. But, things can change in a second. Its stock value can suffer a major blow. As a result, your portfolio will face a huge challenge too. Fantasy sports are the same.

Sometimes we make the mistake of relying on one specific player to carry our lineup.  Sure, he gets the job done on the pitch. You get your points, and he keeps carrying your fantasy team. But, what happens when the player gets injured? Your entire fantasy team will suffer. This is why diversity is the key. By keeping your fantasy lineup and investment portfolio diverse, you can avoid extreme losses

  • Avoid Overpaying for a Name

Everyone wants to have a famous player on their team. Investors want to invest in “big” names too. However, big names don’t guarantee big wins. Sometimes big names fail in the market, causing your overall investments to suffer. Similarly, big-name athletes can have a lousy season.

It’s tempting to be swayed by big names and popularity. But this isn’t the best criteria. Before making an investment, do the research, evaluate risks and benefits, and make a sound decision. The same steps apply to selecting your fantasy lineup.

Make sure the brand name isn’t the only criteria for an investment decision. That way, you’ll know the investment is based on good judgment, thorough research, and great understanding. All these things are vital for selecting both your roster and stock investments.

Bottom Line

At first glance, it may seem like fantasy sports and stock investing have nothing in common. But that’s far from the truth. Fantasy sports and stock investing share a surprising number of similarities. Plus, you can learn a lot about stock investing by playing fantasy sports.  You learn how to do your research and make wise choices. You are trained to avoid making rash decisions. Also, you learn that predictions and big names don’t guarantee anything. Finally, you learn to rely on your skills, knowledge, and research for consistent performance.

By Vladimir Mirnii

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