Fantasy football is a $1 billion-plus annual business, so we can take it seriously. But is there really anything to learn about investing from the online game?
In fact, the skills required to succeed on the virtual turf might be more like those used by investing professionals than pro athletes. And even though there are no teams named "401(k) Plan Pack" (fantasy culture prefers more combative monikers like "The Flacco Cavemen" or "The Hurt Locker") the idea that fantasy football is like investing has been kicked around for years.
The game, played over the Internet, requires players to pick athletes whose performances are tracked throughout the season. Fantasy football also incorporates similar principles that Warren Buffett (who, it should be noted, favors bridge) might approve: diversification, building value over time, finding consistent performers and avoiding the "hot player" in favor of the one who is priced at the best value.
"If you watch the ups and downs too much in fantasy football it will drive you crazy, and it's true for investing as well," says Matt Schulz, who manages the fantasy team Dracula Power (named by his 7-year-old son) and whose day job is editor-in-chief of InvestingAnswers, a wealth advisory service.
"I have (Denver quarterback) Peyton Manning as one of my picks, and I am not going to dump him if he has a bad week or two because he has been so good for so long," he says. "You have to have trust that the fantasy football choices you make initially will work in the end, and you just have to watch that things are not going too badly. It's like all those studies that show long-term investing is what really works best." (The 37-year-old Manning opened the season Thursday night with a spectacular seven-touchdown performance to get Dracula Power off to a strong start.).
Serious fantasy football players are like NFL general managers who spend hours scouring records on player performance records and relative value before they make a draft pick for their teams. Famed stock pickers use the same kind of discipline in scouring balance sheets for overlooked strengths or weaknesses in the companies they target. And there is some crossover among the two worlds:
In years past, some legendary Wall Streeters had a fantasy league with a $1 million purse. The high-roller league included Stanley Druckenmiller and Paul Tudor Jones, successful billionaire hedge fund managers who make even more than the Patriots' Tom Brady and also have actively pursued investments in professional sports teams.
"Believe it or not, putting together a top-notch portfolio is a lot like building a terrific fantasy football team," said CNBC's Mad Money host and stock picker Jim Cramer on Wednesday as he wore a referee's black-and-white jersey when he listed his favorite stock picks (it's draft season, after all). He likened a conservative play, Starbucks, as the stock market equivalent to Green Bay Packers quarterback Aaron Rodgers, calling the stock pick his "best in class" for its consistent results.
Fantasy football players are like fund managers because both work with limited investing resources as they decide what to buy and hold amid huge waves of incoming information.
"It's a lot like investing a portfolio. The money is not infinite. You have a set amount to work with, and you have to allocate capital in a way that's prudent but with some upside potential with a chance for some home runs," says Robert Luna, chief executive officer and chief investment officer of SureVest Capital Management.
He says vigilance is a key to success, whether you're constantly hitting refresh on Bloomberg or ESPN. Fantasy players sort through some 1,600 players on 32 teams, which is not quite as many as the 2,800 or so stocks listed on the New York Stock Exchange alone.
Luna also likens pre-game analysis to watching big shifts in the economy that affect the whole market. "You have to watch the landscape because the environment is always changing in football, which is pretty similar to looking at the investment landscape. Are rates rising or declining?" he says. "You put a team on the field that looks different when rates are rising rates than the one you want when they are coming down."