Where Fantasy Football Meets Retirement Planning

College Football game

From what I can find on the Internet, it’s estimated that 40 million people will play fantasy football this year. In contrast, 50 million Americans have 401(k) accounts. The numbers aren’t too far off.


I admit, I’m one of the fantasy folks. The other day, while tinkering with my lineup, the thought hit me that building a retirement nest egg is like building a winning fantasy team. Many of the rules for success are the same. (OK, maybe it’s a stretch analogy, but it’s too fun to pass up.)


So, with tongue slightly in cheek, here’s how to put together a winning investment team and fantasy football team in four easy steps:


#1: Avoid Turnovers – Flashy quarterbacks like Tony Romo and Matthew Stafford throw lots of touchdown passes. On paper, they look like star fantasy players. But you’re much better off drafting a “boring” QB such as Andy Dalton. Why? Romo and Stafford put up lots of touchdowns, but they also throw lots of interceptions – and these interceptions hurt their performance numbers. Meanwhile, Dalton racks up points consistently. He doesn’t hurt himself with turnovers.


Same with investing. Consistent gains without large drawdowns beat roller coaster gains and losses every time. If you have $100,000 and you’re up 50% one year and down 50% next year, the score is not tied. You’re down $25,000 and trailing by more than a field goal.


#2: You Just Need to be a Little Better – Each week in fantasy football, you square off against one opponent. It doesn’t matter if you win 35-34 or 135-134, as long as you’re just a little bit better than your opponent. In the draft, everyone’s looking for a player who can score 30 points a game. Instead, if you can average 10 points per player, you will win most games and make the playoffs.


With investing, so many people are hunting for 10-baggers. But you don’t need huge gains to be a winner. Take a look at the chart below showing the returns on a $100,000 investment. Investor A earns a steady 4% per year. Investor B goes up and down, but has three very strong years. Which investor is better off at the end of five years?


Investor A                              Investor B


Year 1                             4%                                         – 20%

Year 2                             4%                                        + 25%

Year 3                             4%                                         – 15%

Year 4                             4%                                        + 30%

Year 5                             4%                                        +   8%


Investor A’s cumulative total is $121,665 while investor B’s total is $119,340. Slow and steady wins the game.


#3: Don’t Play Last Year’s Game – Super Bowl winners don’t repeat. Fantasy football winners don’t repeat. NFL rushing leaders don’t repeat. Leading mutual fund gainers don’t repeat. Last year’s results don’t matter. It’s today, tomorrow and next week that matter. For example, if you’re about to retire, it’s income that matters, not rate of return.


#4: Pick a Strategy and Stick With It – Your #1 receiver has a bad game. What do you do? Do you stick with him, or bench him and start a rookie the next week? How you coach is even more important than what players you have.


I’ve seen investors change fund managers after one month or one quarter — and then sit on the sideline and watch the fund double the market’s performance over the next two years.


My experience is that second-guessing is counterproductive, and most often relegates you to the bottom of the league… where the trash talkers live.

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