Jeffrey Saut: The fantasy football portfolio

Jeffrey Saut: The fantasy football portfolio




by Jeffrey Saut, Chief Investment Strategist, Raymond James

I have written before how fantasy football is one of my favorite hobbies. For an analytical, data-obsessed sports fan like myself, it doesn’t really get any better than diving into statistics to try to draft a team of players that will beat my friends and win the trophy at the end of the season (and yes, we do have a real trophy). The origins of fantasy football can be traced all the way back to 1962, but the once fringe pastime has really exploded in popularity over the last 15 years as the internet has made it much easier to get stats, create leagues, and connect players together. The Fantasy Sports Trade Association estimates that 59.3 million people in the United States and Canada will play fantasy sports in 2017, and football is, by far, the most popular sport. The FSTA’s research also uncovered some interesting and somewhat surprising data points about the characteristics of those millions of players:

  • 66% male/34% female
  • Average age: 38.6
  • College degree or more: 66%
  • Have a household income of $75k+: 51%
  • Have full-time employment: 67%
  • Average annual spending per fantasy player (age 18+): $556

If you do the math, that means people are spending almost $33 billion of their hard-earned money on a game that actually has the word “fantasy” in the title, and if that’s not a sign that the economy is doing ok, I don’t know what it is.

Of course, I’m not just talking about fantasy football here because it’s been a slow week in the financial markets (although it has been). There are many parallels between creating a winning team and creating a winning investment portfolio, and some of the same skills translate to success in both disciplines:

  • Valuation plays a big part – part of the keys to success in both is identifying those situations where the “market” may be overvaluing or undervaluing specific players or stocks.
  • Past performance is not a guarantee of future returns, but it is true that the top players and stocks often stay strong for years.
  • Mistakes and unexpected hiccups will occur along the way – maybe one of your top draft picks gets injured or one of your top stocks releases disappointing earnings results. Flexibility and the ability to regularly reevaluate are crucial.
  • Takes maintenance over time to really find success – it’s said that fantasy football championships aren’t won at the draft because there are still plenty of decisions to be made throughout the season. Similarly, one’s investment goals aren’t met when first picking a portfolio. It requires modifications over time as situations change.
  • Developing a personal strategy that works for you is one of the keys to success. Do you take on more risk by drafting a guy (buying a stock) that may have a lot of upside but has a history of volatility (or no history in the case of a rookie or an IPO) or do you stick with the blue chip players (stocks) that may not have the high ceiling that they once did but should be more dependable on a regular basis and provide a steady return? The former strategy may be what it takes to beat out everyone and win a league (generate outsized returns), but the latter strategy may maximize one's chances at making the playoffs and at least having a chance to win it all (or maximizing the chance at achieving one's long-term goals).
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