March is an exciting time of year; a long anticipated March break vacation for some, an even longer anticipated break in the weather for all of us after this never-ending winter (with the first official day of Spring scheduled by Mother nature to be on Wednesday, March 20th at 5:58am), a celebration including green beer for those marking Saint Patrick’s day (and Grandma Beryl’s birthday!) and for others, March means only one thing: March Madness – the NCAA Men’s Division Basketball Championship – a single-elimination tournament played each spring in the United States, currently featuring 68 college basketball teams, to determine the national champion. March Madness apparently also means not drinking for the entire month, if you’re my friend Erin, but I don’t think that’s actually a thing (but like, good for you).
The tournament was created in 1939 by the National Association of Basketball Coaches (it was thanks to the idea of Ohio State University coach Harold Olsen) and has become one of the most famous annual sporting events in the US.
To make it even more exciting, all bets are on with what some of you will refer to as Bracketology - the process of predicting what the NCAA Selection Committee will use as its Ratings Percentage Index and to rank all teams from first through sixty-eighth. Bracketology is also more commonly known as the process of predicting the winners of each of the brackets – there are currently millions of brackets in play - with one more in play this year because I’ve vowed to actually get mine done on time (I’ve missed the deadline the past 2 years in a row)…
So, how did/would you choose your bracket winners? What’s it all based on?
I generally pick my winners based on ridiculous things; take for instance my methodology in 2016 which surprisingly worked out, which was based on the mascots (e.g. who would win in a fight, shark vs. alligator) but if I were to put some serious thought into it, I suppose I would start by looking at past school team performance and the potential of each player and their coaches. But then I relate it to the investment world and think, “Past performance does not guarantee future results”…
For many investors, it’s natural to look at historical investment performance returns when setting their expectations about the future. Others exercise what is known in the business as “performance chasing”. As soon as they hear a hot tip they pull their money out of their other investments and pour it into the new object of their affection. Two of my favourite sayings in our business are that “tips are for waiters, not for traders” and that “time in the market makes profits, not timing the market”.
It's natural to want to invest in a fund or an investment style that has been successful, but it’s also important to acknowledge that investment returns tend to go in cycles. The pattern of these returns is that a very good year is a hard act to follow and that bad years are often followed by recoveries. So with that logic in mind, I could assume that the Villanova Wildcats will not win again this year (they won last year) …
But there is something to be said about good management and while the students may not have a track record, there are some good coaches to watch out for – just like good money managers. With 11 national titles, UCLA has the record for the most NCAA Championships; the University of Kentucky is 2nd, with 8 national titles, and North Carolina just made it into 3rd place by winning their 6th national title last year. My fav team (Duke) currently ranks as 4th with 5 national titles (tied with Indiana).
Among head coaches, John Wooden is the all-time leader with 10 championships; he coached UCLA during their period of success in the 1960s and 1970s. Duke's Mike Krzyzewski (affectionately known as ‘Coach K’) is second all-time with 5 titles. On that theory, I could assume that UCLA or Duke have good odds of winning it this year.
For most of us, this is all fun and games – but when it comes to our investments – it’s real, it’s emotional and it matters. This is why when it comes to your investment decisions, it's important to be educated along the way by your advisor so that you understand the basis of your short-term, mid-term and long-term plan. Working with an investment professional who communicates with you often and takes the time to educate you along the way to make sense of things affords you the opportunity to build a plan that is unique to you, on track with your life milestones and within your investor profile – a plan you can feel confident about because you know the end goal is for you and those you care about to win in the end.
Now you are in-the-know with Word on the Street.
Enjoy the weekend.
Investment & Wealth Advisor
Chaaban Wealth Management Group