For the past month, several personal finance bloggers, myself included, have been competing in a friendly game of fantasy baseball. I am sad to report that for the past month, I have been consistently in 8th or 9th place out of twelve competitors. Here are some of the standings among us bloggers….
1. Free From Broke
2. No Debt Plan
4. Cash Money Life
5. Stupid Cents
7. Budgets Are Sexy
8. Semper Finance
9. Own The Dollar
12. Steadfast Finances
Now that we are a month into the baseball season, I have realized that there are a lot of relationships between fantasy baseball and investing. Below is a list of some of the lessons I have learned…
Offense Wins. I used to have a t-shirt that said, “Offense wins games, and defense wins championships.” Well, defense definitely does not win fantasy baseball! The game is geared to give high scores to the long ball hitters and offensive players. The game does not favor Gold Glove winners (I have four Gold Glove winners on my team) or error free play. The game does not care about the great extra base robbing play Derek Jeter made the other night.
The same can be said for investing for retirement. Having a overly defensive number of positions in your portfolio is great for asset preservation, but it will not get you to where you need to be for retirement if all you are is playing defense. If you have decades until retirement, an overweight in offensive or more aggressive asset allocation is a great option to help you achieve your investing goals.
Don’t Fall In Love. I am a huge Atlanta Braves fan. I have been every since I was a little boy and Dale Murphy roamed the diamond at Fulton County Stadium. I am still a huge, loyal fan of the team. And, it readily becomes apparent when you look at the roster of my fantasy baseball team which includes the likes of Chipper Jones, Derek Lowe, Brian McCann, etc. I actually have six out of my twenty-three roster spots filled with Braves. But, what has my love of the Braves given me other than heartbreak and only one lousy World Series title despite 15 consecutive post-season appearances? This year is not looking so hot either with the Braves tittering back and forth around the .500 mark. But, I am still loyal, and that may be one of the big reasons my fantasy baseball team stinks!
The same is true with individual stocks that I pick to invest in. I personally own some of my favorite companies like Dr. Pepper and Wendy’s/Arby’s Group. I still hold these stocks in my portfolio because I love their products, grew up with them, or became a huge fan of the CEO (Dave Thomas in Wendy’s case). But, things have changed. Wendy’s, for example, is a shell of the company that Dave Thomas founded. This past year the company was bought by Arby’s and continues its downward slide. Even though the business models stink, I cannot bring myself to sell the stock although I know that it is the right thing to do. We should never buy a stock because we love the product. We should buy a stock because we believe that the company will make money (more money) in the future, and when that fundamental changes, that is the signal to sell. Falling in love hurts the wallet.
Diversification. This past week, I learned that having too many Braves on my fantasy baseball team is not always a good thing. On Thursday, the Braves had an off day while they traveled back home to Atlanta from New York. With six Braves on my roster, I had a lot of trouble filling out my line up, and in fact, I had to leave a few positions blank. I am already handicapping myself by not having as many chances as my competitors to earn points.
The same is of course true with our investments. Diversification is a key strategy that helps us weather the financial storms. Despite the bear market’s recent turmoil, diversification is not dead. In fact, it is more important than ever to have your investment portfolio spread between investment asset classes like large cap, small cap, and international stocks or mutual funds.
Never Give Up Hope. I have really enjoyed playing fantasy baseball this past month despite my dismal performance. And, I am really looking forward to having some bragging rights at the end of the season this fall. Playing has brought me back into the game of baseball that I love and grew up following and playing as a kid. Fantasy baseball has also shown me that there are a lot of similarities between our everyday lives and our financial ones. Today, I was offered my very first trade opportunity. Even though I did not take the deal, I have a renewed hope that maybe all is not lost yet in my fantasy baseball league. Maybe I can make some trades soon and change things around for my team, just like the markets are showing some signs of turning around. All is not lost. There is always hope. One of my favorite authors, Alexadre Dumas, said it best, “All human wisdom is contained in two words: wait and hope.”
{ 5 comments }
I hear you about defense. First time I joined a league I put Rey Ordonez on my squad. Great defender but hit under .200. I learned that lesson quick. I think there is a place for defensive investments though but you mention it when you talk about diversification.
Most league don’t credit defense but you can change the options to include it. It’s just not as sexy a stat as HR’s.
To go along with your Never Give Up Hope theme – It’s a loong season and anything can happen. Also most players regress to the mean. Same holds true in the stock market. That stock that shoots out of nowhere may look appealing now but it may only be a flash in the pan whereas a P&G-type company will give you the same Chipper Jones production year in and year out.
Can’t say I’m an Atlanta fan. I respect them but as a Mets fan I must dislike them. Atlanta always seem to come from nowhere and win 20 games in a row to take over the division lead. Grrr. “Laarrryy” Love that chant. Can’t say it ever works though.
Send me some offers!
Nice analogies. 🙂
Like FFB said, and also relating to investing – you have to think long term. Some guys aren’t performing yet, but there is every indication they will. This goes under value investing. 😉
Would it be bad if I said I have NOOOOOOO idea what the F i’m doing in this fantasy thing? If it weren’t for some of these nice pf’ers hinting to change my lineup, i’d still have 5 people on the Deactivation list w/ no pitcher and/or
basemen 😉
And i hear ya on the falling in love w/ stocks part – i recently got back into SIRIUS sat. radio as I did a few blue moons ago when it was $3+!…figured 30 cents was a steal! haha….as long as we’re not doing this with our entire portfolio though, it’s all good.
Oh the shame of bringing up the rear!
One of the better lessons I’ve learned is that the well known names don’t always make the best players. I picked up a few guys during the draft just b/c they were better known names. Bad idea on my part! Made that same mistake a few years ago owning a few stocks that can’t bare to speak of today.
Plus, PF bloggers are among the best hagglers in the world when it comes to making trades… took me a month to get Johan Santana from Free From Broke!
@ Matt – You got it the other way around around! It took me a month to get Jose Reyes from you. I offered you Santana before the season started. But yeah, like Patrick above I like the value players and I think as personal finance writers we do our research and try to figure out projected value.
Good luck everyone! The league has been fun so far.
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