Hello all from Kansas City, the (near) hometown of the University of Kansas Jayhawks. It’s time for March Madness and, if you’re like me, you’ll be analyzing the teams and matchups up until the open tip.
Of course, as we’re filling out our NCAA Tournament brackets and, trying to win our friendly pools, we’re looking anywhere and everywhere for good advice. Heck, some folks even turn to that noted “Dumb and Dumber” sage, Lloyd Christmas.
Lloyd, you may recall, asks his would-be-paramour Mary Swanson what the chances are of the two of them winding up together with Mary replying that they were one in a million. Then, an ecstatic – and somehow optimistic – Lloyd yells:
“So, you’re telling me there’s a chance?!? Yeah!”
As you know, the long odds didn’t pay off for Lloyd as the poor guy led with his heart, not his head, and wound up empty handed. And it’s safe to say that such a longshot won’t pay off in picking brackets either.
Yet, as we’re filling out our sheets, how many of us will pick our favorite team or our alma mater, even if the odds aren’t strong? Hey, I went to Illinois and, as much as I love the fourth-seeded Fighting Illini, I’m not certain they’ll cut down the nets in New Orleans on April 4th.
To that end, when you sit down to set your brackets this week, consider these facts:
- On average, there are about 12 upsets in the Big Dance each season
- The 16- and 15-seeds are longshots to win a game with a historic victory rate of 6.3% and 0.7%, respectively.
- Only three teams seeded below #4 have won the title and none have accomplished the feat being seeded lower than eighth.
- Among leagues, the Big Ten and Atlantic Coast Conference tend to fare well.
Such advice is also a reminder of how we should think about investing. Remove emotion from the equation and use our heads instead, sticking to the fundamentals instead of what we wish would happen.
One investment area where many of us struggle is in deciding to take a loss when the odds of a rebound aren’t strong. After all, like defeats in life, losses can be educational and, as an added portfolio benefit, can help our tax position by offsetting portfolio gains.
In fact, such advice is backed by some very wise investors.
Trading whiz Ed Seykota says “If you can’t take a small loss, sooner or later you will take the mother of all losses” and the late – and legendary – Gerald Loeb often stated that “Accepting losses is the most important single investment device to ensure the safety of capital.
In that same vein, sometimes we get a bit greedy and are reluctant to sell our big winners, even if valuations don’t seem rational. Bernard Baruch, one of the country’s wealthiest individuals in his lifetime, often said it best when he stated that “Nobody ever lost money taking a profit.”
Of course, it is always a good practice to have a trusted financial advisor guide you through your tough choices, to help remove the emotion from your investment decisions. Top advisors also stress the importance of market education and diversification through alternative investments. Many of those such alternative investments are available to buy or sell on Realto’s proprietary platform.
Indeed, the point is worth repeating: whether we’re talking about investing or filling out our brackets, it’s best to let the head rule the heart, instead of vice versa. After all, as much as we’d like to see Georgia State make a deep run, it isn’t likely to happen.
Jeff Kinney – President, Realto