Sometimes, your favorite things just beautifully intersect. And sometimes, that’s investing and fantasy sports. Think about it: the process of selecting players for your fantasy team is similar to the process of choosing the assets for your portfolio. And in both pursuits, the picks you make will determine how successful you are. Now, there’s no single way to invest or play, but I’ve tried a few different strategies and styles, and I’ve got some tips on how you can become better at both games.
Your handy guide to fantasy football and investing.
How to get started.
First, let me clear the air about one thing: where I live (in the UK), footballs are kicked, not carried, and fantasy football involves players from the Premier League. And, yeah, I know: for a lot of you, the game is about touchdowns and the National Football League. Luckily, these insights work for both sports. They might even work for hockey, but, well, no one knows for sure.
At the beginning of the fantasy football season, you choose 15 Premier League players – sticking to an allocated budget and following a few defined rules (for example, you can draft a maximum of three players from any one team, a trick that will help you diversify your squad). You screen the player universe and check out who’s expensive and who seems like a good value. Some players may be pricey, but if you think they’re high quality and likely to produce strong returns, they could make the cut anyway. There are loads of cheap players out there, but (just like with cheap stocks) most will end up being value traps and leave you disappointed. The secret to success is to find a couple of inexpensive players that the market has mispriced – and hopethey’ll turn into diamonds as the season progresses.
It’s a similar process when you’re building an investment portfolio. You screen the stocks, funds, and ETFs. Depending on your risk profile, the investments you choose could be diversified or concentrated – maybe there’s a mix of high-quality, expensive names with strong returns, and some value shares that you think are being overlooked and might outperform.
How to win using active strategies.
There’s no single, best strategy to doing well in fantasy football – and that makes it a lot like investing. But an active approach can work well, if you’re willing to put the time in for planning, studying the stats and upcoming fixtures (events), and making rational decisions.
The same, of course, can be true for investing. Here are some of the proven, active approaches that you can adopt to give you an edge on the field.:
Momentum. Chasing top-performing players (driven by a fear of missing out) and dropping underperformers – that’s a lot like momentum trading. And, sure, buying high and hoping for higher, or selling low and assuming a further fall can be a dangerous game plan. But in stocks, momentum plays can score big –or, at least, they have this year. At the end of the day, a stock can’t quadruple without making a few new highs along the way.
Quality. In fantasy football, expensive “quality” players can experience a temporary drop in form, but class should be permanent. It’s similar when you’re betting on quality stocks. You might see a temporary dip in performance, maybe because of fund flow or a rocky quarter, but most quality stocks will recover. So, if this is your approach, remember: there’s no need to panic and hit the “sell” button if your reasons for picking the stock still hold true.
Value. Finding mispriced opportunities that perform well is satisfying – in fantasy sports and in investing. It’s not always easy to do, but it produces big returns when done right. This season, the player who’s proved to be the best value – delivering the most points for the money spent – is Chelsea’s Cole Palmer. Choosing a player like that before the season starts is like investing in AI-play Super Micro before it tripled.
When looking at your fantasy league stats, the best-performing footballers will all be midfielders and forwards – that makes sense as they’re likely to score the most goals. But the top players don’t necessarily stay on top: the most expensive player at the beginning of this season was Erling Haaland, the attacker on the best team in the league, Manchester City – and he currently ranks seventh by points scored.
He’s expensive, but worth it because he delivers, like a good quality stock. Think of him like an Nvidia on the football pitch. The semiconductor giant’s shares have been trading at a high valuation, but its share price has continued to rally hard as its profit reaches higher and higher. Nvidia’s been delivering.
Next season, Haaland will again be one of the most expensive players and he’ll be a hugely popular pick. Nvidia and Microsoft probably will be too.
How to choose the right next step.
Selecting the best players (and the best investments) is a great start. But the steps you might take next are just as important. Here are some of them.
Cutting your losses. If a footballer suffers a serious injury that stops them from playing for the season or has a serious falling out with the manager that might keep him off the field, it’s probably time to cut your losses. In the same way, if a company you’ve invested in makes a wrong strategic decision, or sees its profits undermined by some outside event, you might consider hitting the exits. It’s not always easy: we’re human beings and tend to get attached to our star players and star stocks. That’s why it helps to have an investment plan that lays out how far you’ll let your assets slide before you cut them loose.
Avoiding overtrading. In fantasy football, overtrading costs you points. In the investing world, it costs you money – through the bid/offer (selling/buying price) spread and, often, in transaction fees. That’s why it helps to do a little research before you add a player or stock to your lineup.
Trading opportunistically. There’s some obvious appeal in picking an attacker as your captain (captains score double points) whose next match is against the team with the worst defensive record in the league. With that setup, he’s likely to score a few goals –and bestow you with a pile of points. In the market, you may find similar opportunities: sometimes a good company’s shares have been knocked lower for no fundamental reason. And that’s when you may want to pounce and increase your investment.
Here’s your final score.
In fantasy football, most players score at least some points every week, so you’re almost guaranteed to show a positive return at all times. And that’s different from investing: stock markets can move lower than they were a day ago, a week ago – even a year ago.
Fifteen players might form a solid Premier League team, but a portfolio with just 15 stocks is likely to produce volatile results. In the real world, your stakes are higher. So you’ll want to field a bigger team, with investments across different asset classes, countries, and sectors. Luckily, ETFs and funds make it easy to draft an all-star lineup.
