Bracket Predictions and Investing: Lessons for Success

March in Indiana means basketball. I grew up in a small town in Illinois where football was king. Moving to Indiana and marrying a rabid Purdue basketball fan introduced me to the men’s NCAA basketball tournament and March Madness. My husband and I would complete our printed bracket sheets and then avidly watch the games, rooting on “our teams.” My strategy was to always advance the Big Ten team. When I think about the March Madness experience, I find parallels in investing.

◗ Look at the big picture and don’t focus on perfection: The odds of filling out the perfect bracket are 1 in 9.2 quintillion. There will always be an upset somewhere; it isn’t possible to predict where it will happen. According to the NCAA, “top seeds have by far the most wins with 500, along with the most titles with 25. Furthermore, seeds 1 through 6 are the only ones with winning records. Though No. 7 seeds have a winning record against 10 seeds—their first-round foe—they lose to 10 seeds at a higher rate than they beat No. 2 or 15 seeds in the second round.”

It’s also impossible to accurately predict or time the market. Instead of focusing on perfection, focus on designing a portfolio that meets your long-term goals. All investments carry risks; the key is to invest in segments of the market where you are rewarded for the extra risk. Successful portfolios pay attention to asset allocation, cost management and tax efficiency.

◗ Be aware of your emotions: The thrill of March Madness is in the unpredictability of each game’s outcome. Even when you don’t have a favorite team in the tourney, the media will create background stories that target an emotional connection. Watching every twist and turn in the market can lead to irrational investment decisions driven by fear or greed. Successful investors detach themselves from daily market fluctuations and stick to a disciplined, long-term strategy.

◗ Overcome home-team bias: We all want our favorite team to advance, but sometimes that blinds us to other opportunities. I got burned last year with my prediction that Purdue would make it to the finals. Just a reminder, they were a No. 1 seed that lost in the first round. Many investors’ portfolios are very U.S.-centric, and those investors lose out on exposure to the rest of the world.

◗ Acknowledge the role of luck: We all like to think we have an edge and are smarter than others, but the truth is, sometimes we just get lucky. Improved portfolio outcomes can be achieved by a disciplined approach that looks at your investment goals, time horizon and ability to handle volatility.

◗ Diversification and discipline: Just as filling out multiple brackets can mitigate the risk of a busted bracket, diversifying investments across asset classes and sectors can reduce portfolio volatility. Setting clear goals and adhering to a disciplined investment plan, regardless of short-term market fluctuations, is key to long-term success.

While there are parallels between March Madness bracket predictions and investing, it’s important to recognize their differences. March Madness is an emotionally charged entertainment spectacle. For most individuals, the only thing on the line is bragging rights or a small monetary gain. It takes place over three weeks in March. If this year did not produce a good outcome, there is always next year. Long-term investing is important to future financial security. That type of investing requires a disciplined, methodical approach focused on long- term growth.

March Madness offers valuable insights into decision-making, risk management and the importance of taking a disciplined approach. By applying these lessons to investment strategies, investors can increase their chances of achieving financial success in an ever-changing market landscape.