Ah, fantasy football, the source of many moments of pure elation and utter frustration (RIP to anyone that drafted Le’veon Bell this season). Most see it as just a game that allows you to talk smack to your friends and gives you a reason to watch games you really wouldn’t care about otherwise. In reality though, fantasy football can be a fantastic way to work on honing your skills needed for stock investing. Here’s a few reasons why:
You know the phrase “past behavior is the best indicator of future behavior”? There’s some truth to that statement. There’s a reason no one is scrambling to draft Eli Manning with their number one pick. To be successful in fantasy football you have to keep track of the trends of all the players on your team. Is one of your players on a hot streak? Plug him in your line-up and watch him do his thing. In a bit of slump? Make him ride the pine until he can get his act together. The same can be true for stocks. For example, you may notice that a certain company performs well during certain times of the year and doesn’t perform so well during other times. You can use this to your advantage when choosing how to invest. Overall, past performance is usually a very useful metric when trying to figure out how performance will be in the future.
2.) Outside Factors
Your star quarterback is still dealing with a nagging shoulder injury, two offensive linemen are out with injuries, and he’s going to be playing against the best defense in the league. Sure, he’s be a great quarterback but you might want to look at other options this week. Much like in fantasy football, outside factors can play a big role in the success of a stock. Did a competitor gain a competitive advantage on them? Did a natural disaster hit an area where they do a lot of business? Did the CEO controversially tweet about taking the company private, call a hero that helped save stranded boys in a flooded cave a pedophile, and then go on the Joe Rogan Podcast and smoke a blunt (I love ya Elon but c’mon man)? Those reasons among others might come into play for the stock price.
A star running back goes down with an injury and will be out for 2 weeks. Do you drop him and free up a roster spot or stash him until he returns? Obviously you would stash him! You wouldn’t throw away a great asset like that just because he’ll temporarily be out. Patience is key in investing as well. Whether it be waiting for a more appropriate entry price point or waiting for the price to recover after a temporary downturn, patience pays off. I’ve always been a fan of the saying “good things come to those that wait; great things come to those that get off their ass and do anything to make it happen”…but this time you really can sit on your ass and wait.
If a talented wide receiver is on a team with a high-powered offense that tends to pass a lot that’ll probably mean that receiver is going to do pretty well. Similarly, knowing the background of a company is necessary when making a decision whether to invest in it. Is it a stable company with a good track record? Good Leadership? Respected name in its industry? These are just a few things you should know about when making the call to invest.
5.) Analyzing Numbers
While you may be looking at rushing yards, passing yards, and number of touchdowns instead of things like P/E ratio, D/E ratio, and dividend yield, the importance of understanding what these numbers mean is a crucial part of being successful in stocks. Just a warning though, you probably won’t have quite as much fun analyzing those numbers as you do the ones in fantasy football.
So as you can see, there truly are many parallels between investing and fantasy football. The best part is you subconsciously pick up on the skills while you have fun. The next time someone tries to give you crap for being too into fantasy football just tell them you’re perfecting your stock analysis skills.