5 March Madness Lessons For Investors

College basketball fans turn their attention to Atlanta this weekend for the Men’s Final Four. Louisville,  Wichita State, Syracuse and Michigan are the last teams standing from the field of 68. March Madness is unique in the world of sports—a mad, three week scramble which celebrates teamwork, leadership and the desire to be the very best.  

Here are five things investors can learn from March Madness:

1. Whether it's March Madness or picking stocks, the pundits are usually wrong. 

Heading into week two of this year's tournament, twelve of the AP preseason top 25 teams are history. Leading up to March Madness the airwaves fill with so-called "bracketologists" eager to impart their basketball wisdom. This year, thanks to "cinderella's" like Florida Gulf Coast, there's not a single perfect bracket among the 6.5 million submitted to ESPN.

The same can be said of celebrity stock pickers and their lousy track records. One could easily swap human bullhorns Jim Cramer (CNBC) and Dick Vitale (ESPN) for March Madness. As much as I would love to hear about “diaper dandy” IPO’s from Vitale here’s guessing the results are the same. 

As an advisor my role isn't to predict the future. Rather, my focus  is on guiding clients in meeting their life goals.  

2.  It pays to diversify. Plenty of folks pick March Madness long shots and occasionally they pay off.  For every feel good story like George Mason's improbale Final Four run in 2006 there's a stock disaster like Pets.com.  Both were "one and done" on the national stage.  It's smart to spread the wealth in the office pool or in building your portfolio.

3.  The best team rarely wins March Madness. Instead, the "team playing best" usually prevails. Whether its North Carolina State in 1983, Villanova in 1985, Kansas in 1988, tourney time is full of teams coming out of nowhere after an average season.  

The same can be said for building a portfolio. It's important to stick to your plan, build on your success and peak at the right time.  

4. You don't have to "cut down the nets" in order to reach your goals. College basketball is the rare sport which recognizes the top four teams at season's end. Making the Final Four is as a big deal. Duke coach Mike Kryzewski has led his team to 11 Final Fours; a fact as celebrated as his four national titles.  

The same can be said of investing, where the search for the perfect stock is never rewarded in as much as consistency; creating a plan and sticking to it through time.

5.  Sometimes you simply survive and advance. March Madness is about the moment.  Teams have little time (usually just a day) to prepare for an opponent; they need to be flexible as they adapt in order to live another day.

The same can be said of investing, where it pays to keep a level head. For example, those who remained in the market through the crash of 2008 saw their portfolios recover nearly all of their losses.  

Have you learned any lessons from March Madness? I would enjoy hearing from you and can be reached at 630-545-3653.