The following is a guest post by Ben from YoungMoneyFinance.com. If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.
A lot of us shy away from the stock market. It’s almost like we’re afraid of it. Sure, we know that we should invest our money, but a lot of us get nervous when it comes to doing so in the stock market. Too many ups and downs, too unpredictable.
Most of us write off our inexperience and lack of knowledge and decide to stay out of the market. However, we do spend a lot of time and energy on our fantasy football teams, and if you think about it, playing fantasy football isn’t all that different from investing in the stock market.
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How Fantasy Football Is Just Like Investing In The Stock Market
Just like managing a good stock portfolio…
1) Depth and diversification are key. A good fantasy team is made up of a number of different players, each playing a different role. A good stock portfolio also has different stocks playing different roles. You’ll have your growth stocks (ones you expect to grow in value) and your value stocks (less price appreciation but lots of dividends). You’ve invested in different industries, just as you wouldn’t have a team full of RBs.
2) You have your core players and ones you can easily trade. Your fantasy team is made up of several core players (what up Peyton!) and then your TBD players. Some weeks you’ll pick up a new player and give them a start or two and depending on how they do, you’ll either drop or keep them. Your core players, though, are your winners.
They’ve proven themselves time and time again and you’d never trade them. A good portfolio will have your winners and then stocks that you’re testing out. Don’t be afraid to buy a couple of stocks and then trade them out when they don’t live up to your expectations.
3) Perceived value. We each learn how to notice and pick up undervalued players when we see one. It earns us ultimate bragging rights. Conversely, we’re quick to trade a player while he’s still ‘hot’ when we know he’s going nowhere but downhill. Stocks are the same way.I’m always on the lookout for quality stocks that have taken a hit by the market. Perhaps some big investor has been trash talking them, or the company made a dumb mistake. It doesn’t mean they’re not a good company – rather, just that they are a good buying opportunity for me!
4) Study before setting your lineup. We all do research on our players, view their match ups, and review their projections before deciding what mix of players to use. Before picking a stock, I sit down and do my homework. Who is a company playing against? Is it the likes of the Patriots (an Apple or a Google) or the likes of the Jaguars? How has the stock performed in the past under pressure and in a competitive environment?
5) Don’t follow the crowd. When everybody is hyping up a certain player or promising huge points this week, you know not to be a sucker and believe it all. You know to stick to your guns with the research you did in #4.
6) Come game time, all the research and preparation only gets you so far. Just like a football game, the stock market is an animal all on its own. No one can predict what will happen, and there will always be upsets and shockers. However, success often comes to those who prepare.
Are you playing fantasy football this year? How’s your team doing? What do you think….is fantasy football just like investing in the stock market? I’d love to hear your thoughts in the comment section below.
The following is a guest post by Ben who runs the blog, YoungMoneyFinance.com, and he is on a mission to help young professionals achieve financial freedom by being proactive instead of reactive with their money. f you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.