Lesson Learned during March Madness

A couple of weeks ago, while watching my son's soccer practice, a couple of the other dads and I were talking about the excitement of the start of the college basketball tournament, which was set to begin in a couple days. Someone came up with an idea that we should all do a bracket pool for fun and bragging rights. So that evening, one of the friends went home and created a bracket pool on Yahoo Sports and sent it to all of us. And our wives. Within a day or 2, several of us had made our picks and submitted them. Even a few of the wives got involved.

After this past weekend, we are down to the Final Four teams. Reflecting on this annual tradition, I thought there was some investment wisdom to draw from this experience:

1. Nobody knows I think you could ask nearly any college basketball expert to select a bracket, and they won't get it right. Proof: Last year Quicken Loans and Warren Buffett threw down the Billion dollar challenge for a perfect bracket. How many people won? You guessed it-ZERO. According to ESPN, only about 1.5% of their participants accurately picked the Final Four teams. And that's with three 1 seeds getting in. Last year's Final Four were seeded 1,1,7, and 8. With only 2 #1 seeds making it, only 612 out of roughly 11.5 million brackets accurately. And I'm not certain that watching basketball all season and knowing the teams gives you much of an advantage.

2. Don't listen to the "Experts" claiming to have an inside track Several of my friends had selected Iowa State as this years "sleeper" pick. Why? One of the talking heads on TV said that they were to team he expected to be the big surprise to go deep into the tournament. (Not a major long-shot, as they were a 3 seed). What happened? They got beat in the 1st round. The "expert" led you in the wrong direction.

3. The Basics still work One of the wives who participated beat me. And beat several others in the group. She picked all 4 #1 seeds to make the Final Four. In fact she picked the higher seed team to win in all of the 60 games played thus far, which was accurate in 43 games. I got 39 out of 60. And I only have 1 team left in the hunt, compared to her 3. Lesson taken, don't overthink things.

4. It ain't over til it's over On day 1, I was in last place in our group, having only accurately picked half of the day's games. But I still had all of my Final Four teams at that time. Day 2, I might have moved up 1 spot, but was still the bottom of the pack, still had all of my Final Four teams. By the end of the first weekend, I had lost one of my Final Four teams, but climbed out to 2nd or 3rd place, and I was pretty convinced I was going to win our group. And by the time we had narrowed the field to 8 teams, and I'd picked 6 of them, I was in 2nd place and was certain I was going to win. And then...now I'm in 5th place with only 1 team remaining in the Final Four.

5. Old Reliables This year's Final Four is Kentucky, Duke, Michigan State, and Wisconsin. Ever heard of them? In the last 20 years, collectively they have 22 Final Four appearances. Lowly Wisconsin only has 3. I think next year I'm just going to pick Kentucky, Duke, Michigan State, and I'll switch North Carolina for Wisconsin. I'm thinking the odds will be in my favor.

These five lessons are relatively relatable to investing.

Nobody knows what tomorrow will bring with the markets either. The "experts" and loud mouths on television and in the newspaper may give their opinions loudly, but loud does not mean right. Basics like asset allocation, diversification, discipline, fundamentals all still work. Good years can be wiped out by bad ones. And selecting tried and true investments and investment managers can often be a somewhat reliable indicator of what can work for your portfolio.

Despite the disaster that is what's left of my tournament bracket, in another week, I'll be able to scrap it and try again next year. Unfortunately, we do not have that luxury with our investment portfolio. The impact of a taking an 8 seed to win it all can have on your finances cannot be erased and forgotten with regard to your portfolio.