If you’re like many people around this time of year, you’ve just finished up your fantasy football draft. If you’re not familiar with the game, fantasy football involves participants creating customized teams based on the stats of real-life NFL players. After assembling their dream team, participants then go toe-to-toe with other “team owners” in virtual games throughout the season.
Perhaps the most interesting aspect of fantasy football is the draft process. The key is to pick the players with the highest likelihood of scoring points during their real-life season – and there are many strategies you could potentially use. Whether you focus on grabbing star players, evaluating projected points, looking for under-valued opportunities, following injury reports and other news, or considering the timing of bye weeks (when players are taking breaks from games), it is a real challenge to sort through all of the data and synthesize it into an actionable plan.
Of course, there is no shortage of opinions either. People can be extremely vocal about their strategies and unbelievably passionate about their players, so it’s easy to second-guess yourself and your strategy. When everyone is talking about how good a particular player looks, you’re tempted to add that player to your team. But when everyone is talking bad about a player, you’re inclined to avoid him. People are naturally emotional, so it’s easy to fall prey to the opinions of the crowd. Avoiding that kind of noise is crucial for success.
In many ways, it is similar to investing!
To get to my point, like fantasy football, one of the biggest mistakes investors can make is getting caught up in the noise. That noise, or your emotions, can lead you to do the very opposite of what you should be doing. When the noise is positive, everyone talks about how the market is setting new records, or company A, B, or C is at an all-time high. This positive type of noise makes people want to buy whatever is being talked about. The negative noise tells you that you’re going to go broke, the market’s going to crash, or company A, B, or C is going to go under. The negative noise makes people want to sell things.
To be a successful investor, you need to be able to think counter-intuitively. You want to buy things that are currently out of favor and have suffered from the negative noise, or you need to think about potentially selling things that are potentially over-hyped by the positive noise. If you can do that, you’ll greatly increase your chances of being a very successful investor.
Of course, it’s easier said than done. Investing takes preparation, a sound strategy, flexibility, attentiveness, and time to reach your goals. Most people simply don’t have the time and focus it takes to be successful investors, which is where professionals come in (forgive the shameless plug!). The strategy and decisions are ultimately up to you, but having a trusted advisor to help you sort through the noise and manage your investments on a day-to-day basis can make a huge difference. Not only in the performance of your investment portfolio, but also in your peace of mind.
Whether you are preparing for your next fantasy football draft or, even more importantly, trying to invest for your future, be careful not to fall for the noise of the crowd. Stick with a well-planned strategy and you’re likely to come out a winner.