When I played fantasy football, I was the equivalent of a day trader in the stock market. Week after week, I’d add and drop players looking for the next great pickup. I’d deliberate over who to start or bench all week right up to gametime. I had the patience of an infant at meal time (not that I’d really even know.) All that work and my team rarely outperformed my peers who did next to nothing. Most years I’d miss the playoffs by a game (or even just a few points.) Fantasy football did little more than create intense anxiety as I regretted the wrong lineup changes and the would be star player I dropped in the middle of the season.
If I invested like I played fantasy football, I can guarantee it would not only ruin my mental state, but also my long-term returns. Great investing is all about gaining control of your emotions and having the right mindset. My mindset in fantasy football was always that if I work the hardest and spend the most time researching, I will come out on top. In fantasy football, as in investing, the most successful are often those who work the smartest, not the hardest.
The similarities between fantasy football and investing run deeper than you think. The basic idea in both is to place a bet on an asset that you hope will provide outsized returns on your investment. In fantasy football, the cost would be a draft pick, auction value, or roster spot. In investing, it’s the current stock price. Some investments can absolutely tank. Your player could play one week and then have a season-ending injury. You could invest in a company that has a scandal and its shares could drop 90% in a day (Luckin Coffee this year.) It’s hard to essentially lose an entire investment, but the reality is that injuries and scandals happen and you just have to do the best to prepare for them.
Find Hall-of-Fame Growth Stocks
In dynasty league fantasy football leagues (to simplify it, you can keep players for as long as you like,) rookies cost a premium, but have the greatest upside. Some rookies start out great and fizzle out (Jeremy Hill, Trent Richardson). Some take 4-5 years to fulfill their promise (Mark Ingram). Others never work out (Charles Rogers, JaMarcus Russell). Once every few years, you might have a player come through who goes on to become one of the greatest players to ever play the game (LaDainian Tomlinson). If you get that player, your return on investment will be HUGE. In fact, that once-in-a-lifetime player will likely dwarf any mistakes you made.
Growth stocks in the stock market are no different. Some might do great for awhile and then level out. Some might look like horrible picks for 5 years before becoming one of your biggest winners. At times, you might invest in a Luckin Coffee and lose almost all your money. But once in awhile, you will find a company that outperforms every other stock by massive proportions. These few HUGE winners will drive most of your returns. If you invested $1,000 in Amazon, Netflix, and Apple in 2005, your returns would be astronomical.
- Amazon-$85,607.27
- Netflix-$235,074.05
- Apple-$97,397.36
$3,000 would be worth over $415,000 after 15 years. You don’t need many big winners to have a massive return on your investment. Which means when searching for growth stocks, you don’t have to be overly concerned about having some misses. You are looking for the 2-3 companies that will make every other investment irrelevant. Players like LaDainian Tomlinson, Emmitt Smith, Marshall Faulk would carry your fantasy team for years. Imagine if you’d traded one of them after 2-3 good years. Give growth stocks time to grow and watch a few of them become Hall-of-Fame investments.
If You Can, Never Sell
If only I’d brought this philosophy to fantasy football, never sell. Some of my greatest misses came when I dropped a player too soon and watched someone else reap the benefits. Considering all the adding, dropping, and trading done in fantasy football. I wonder how much better one could do if you simply followed the above philosophy. I know for a fact, I would have experienced less anxiety. I was always struggling about when to drop or trade certain players. Buy low, sell high. Right? Unfortunately, I never knew when to trade my players perfectly. Everyone tried to trade players after great seasons, but would you really want to do that if you owned the next LaDainian Tomlinson? Wouldn’t it be better to hold on and see what happens? Yes, eventually every players value goes to zero (not the same as the stock market, of course), but trying to sell high is always a guessing game. I’d done better to make my picks and give them time to flourish.
When I buy stocks, I’m buying companies. I buy them to hold them hopefully for 15-20 years or longer. I’ve only been investing in individual stocks for 9 months, but I’m proud to say I’ve never sold once. Some are up and some are down. Those that are down I think have the potential to rebound and those that are up might very well lose some value (but could easily go on to set new highs.) I’m not going to sell because a company had one bad quarter. That’s like dropping Tom Brady in his prime after 1 bad game. It happens, but great companies and great players bounce back.
Could Less Really Be More?
It is so counterintuitive to our brains. How could I do less work and put in less effort and reap better results? Like many things in life, learning to do things better and focusing on the essentials is often much more productive than working harder and longer. All the weekly activity I put into the fantasy football season was little more than worthless noise. Time spent did not equal championships won. Trading in and out of positions in the stock market can be likened to the same thing. You might be right some times, but more often than not you’ll be left wondering whether you made a huge mistake. Did you miss the gains of Netflix, Amazon, or Apple because you decided to take a 50% profit instead of waiting for the 10,000% gain? Selling too often can do just that, hurting your returns in the long-term. It also can be very expensive emotionally and cost you precious time that you could be doing something else.
Growing up, fantasy football was one of my greatest passions. I spent way too much time analyzing stats and watching the performances of my chosen players. Eventually, I got out because I could no longer handle the anxiety and emotional toll it was taking on me. If I approached investing the same way, I’d never be able to do it. I’d sell too early and buy too late. I’d fret over every detail and never get a break from the madness. If I hadn’t learned these lessons the hard way playing fantasy football, I’d likely be much worse off as an investor. I’m thankful to know that my childhood playing fantasy football helped me avoid major investing mistakes and to develop a better investing mindset. By the way, I never did trade LaDainian Tomlinson. That’s one fantasy football investment I never got wrong.