Thomas: 3 investing lessons from your busted bracket

Editor’s note: The opinions expressed in this commentary are the author’s alone.

It’s here — the one month of the year where a single college basketball tournament costs employers a collective $1.2 billion for every hour of lost productivity.

Andrew Thomas

And it’s fantastic!

I’m a big believer that we can find investing lessons in nearly every aspect of our lives, which is why I’m writing this. Regardless of what your tournament bracket looks like right now, as the surviving teams march on toward the Final Four, there are several lessons on investing that we can take away from all the madness.

1. Analysts are as clueless as everyone else

No one can possibly have enough time to watch every regular season college basketball game — unless they get paid to. Expert forecasts are a trusted source for anyone filling out a bracket. But if the pros are always getting it wrong, how can the casual fan have any hope? That’s the point.

The financial media has made millions on the ancient art of fortune telling. Market analysts have made careers out of making random predictions that are usually very wrong.

Larry Swedroe of The BAM Alliance (a group of 140 registered investment advisor firms) says it perfectly.

“There are only three types of market forecasters: those who don’t know where the market is going, those who don’t know that they don’t know; and those who know that they don’t know, but get paid a lot of money to pretend they do.”

I would argue the same is true for most sports analysts. Whether it’s your bracket or your 401(k), don’t make decisions based on someone else’s short-sighted random predictions.

2. You will NOT beat the market

In 2014, the story of the tournament was Kentucky, which had just finished the regular season undefeated. The team would have had a chance at history if they had won the whole thing … but they didn’t. Wisconsin spoiled the party.

Leading up to the opening round, the question sports radio hosts and analysts kept bring up was “Are you taking Kentucky or the field?” (Is Kentucky so good that they have better odds of winning the tournament than all other teams combined?)

Obviously, in hindsight that sounds ridiculous, but it was a serious question at the time. The team was that good. Betting on the hot team to win it all might seem to make a lot of sense, but in a tournament known for unpredictability, the odds are always stacked against any single team.

As an investor, the odds are stacked against you too. The stock market is as unpredictable as it gets in the short-term. Rather than gambling by trying to chase the myth of “beating the market” and losing more often than you win, why not just bet on history? Sticking to a disciplined, long-term strategy and ignoring the ups and downs of the market has been proven time and again to be the best path to investment success.

3. The simple things separate winners from losers

Losses can often be broken down afterwards and blamed on some of the most fundamental aspects of the game, like free throws. I call them fundamental, but the truth is that the pressure of a national spotlight and a “win or go home” situation can make something as basic as making your free throws a pretty daunting task. Not to mention the student section with a well-fed male student wearing nothing but a speedo and a cape dancing right in the line of site of the opposing team’s shooter (sorry for that mental image).

The point is, that distractions in a game can mean the difference between a loss and a win on your bracket. I guess that means you should pick the team with the most distracting student section? … I give up.

When it comes to investing, especially for a long-term goal like retirement, it’s those who can tune out the noise and avoid the temptation to jump into and out of the market when things get crazy who end up most successful in the end.

Step one in making better investing decisions is to admit you have no control over the market. Keep it simple by being boring with your investments and don’t overcomplicate things by wasting your time and energy worrying about the market. Saving for retirement is about retirement, not what the market is doing right now or next month.

Lucky for you, whether or not you’re able to smash your alarm clock one day and stop working doesn’t depend on your ability to consistently pick a winning bracket. You have far more than one month until that Championship game. The strategies that hardly ever work for your tournament bracket certainly aren’t going to help you with your 401k.

And if you’re still in the running for the elusive perfect bracket, best of luck to you, but odds are you’d be far better off betting your entire nest egg than you will get struck by lightning several times over … but in all seriousness, please don’t do that.

Oh, and ROCK CHALK!

Andrew Thomas is a registered paraplanner and investment advisor at blooom. Andrew has spent more than 5 years offering personalized investment advice to retirement plan participants and helping middle class investors navigate the complex world of personal finance.