It's September which means Fall is right around the corner, officially beginning on the 23rd. Last week was the kick-off of regular season play for the National Football League, so the Fantasy Football season is also in full swing. According to the Fantasy Sports & Gaming Association’s research, more than 59 million people played fantasy sports in the USA and Canada in 2017.
Fantasy Football is a very popular and entertaining hobby. The concept is simple, build a fantasy team of actual NFL players that score fantasy points each week based on their real-world performance. If your score is higher than your opponent’s that week, you are the winner. These match-ups continue throughout the season, playoffs, and ultimately, a champion of the world (or just bragging rights among your friends or coworkers).
The key to victory is drafting a well-rounded team that can perform consistently throughout the season. This means fielding a roster of a quarterback, a few running backs, a few wide receivers, a tight end, a kicker, and a defense, with some minor variations based on your league’s rules. You won't be successful if you are too concentrated or spend all of your early draft picks in one position.
This is precisely the type of work that is done when crafting a quality, diversified asset allocation. Based on the goals of your financial plan and your ability to tolerate risk within the markets, you will need to strike the right mix of equities, fixed income, and alternatives within your portfolio. In fact, research has shown that approximately 92% of a portfolio’s long-term return variation is explained by its asset allocation.1 Investors that become too concentrated in hot sectors like technology or real estate may be taking on excessive risk and suffer larger losses when the market cycle inevitably changes. The best players from last season may be leaders again this season or they may not, there's no guarantee and that's why the games are played every week. This is true, even in the investment world. That's why the phrase, “past performance is no guarantee of future results,” is the disclaimer at the end of every finance commercial. More important than having a ‘pro bowl’ small cap manager or a ‘hall of fame’ emerging markets fund will be fielding a full roster of consistent performers playing as a team to help you fulfill your financial goals, no matter the conditions.
If you are looking for some coaching in these disciplines, you can find more resources here, or call us at (888) 225-3777 to schedule a complimentary consultation to speak with an advisor from our team about your personal financial goals.
1 Gary Brinson, Brian Singer & Gilbert Beebower, “Determinants of Portfolio Performance II: An Update”, Financial Analysts Journal May/June 1991
Contact Tony Rome for more information on this topic.