As a man who has recently gotten married, started a new job, and is preparing to start a family, it has become a priority to get a handle on my finances and start investing properly. Not only does it seem important, but it seems like a good way to turn a little bit of money into more money. I mean, how hard can it be to pick stocks? Buy low, sell high, right? That's a pretty easy principle.
I’ve been putting money into the market since just after it crashed in 2008. Prior to that, I had a 401k, which I basically ignored, and some CD’s, which made money at a painfully slow pace (1.5%). As those CDs matured, I decided, it was time to get into the stock game. I started out by buying stock in companies I like or believe in, trusting my gut instinct that a business will be successful in the long run. I also bought stock in a few companies recommended by my financial advisor. And overall, because the whole market went up after the crash, I did pretty well. I won big on a few picks (Valassis, Ford, Playboy) and went bust on more than a few (GM, Blockbuster, various penny stocks, like Spongetech, which I bought after seeing a commercial during a 2am airing of SportsCenter).
Riding the resurgence of the stock market had given me artificial confidence. During a time when you can’t help but make money in the market, I was making money in the market. And so I kept on buying stocks. And still am. Then last weekend I mentioned buying some stock to my financial advisor, who asked me something about the market cap or valuation or whatever and I realize, "I don't have a clue what he's talking about." It's at that point that it dawned on me: I have no business investing my own money.
Any gains I make by buying and selling stocks is purely luck. I had been relying on my non-existent knowledge of an increasingly complex marketplace to turn my meager wages into wealth. I had essentially been gambling with my savings, because to a degree that’s what investing is. You’re making a bet that something you buy now will be worth more in the future. If that happens, the bet pays off and you win. What I had been doing is playing craps without really understanding the rules. I was throwing my money on various numbers, rolling the dice and somehow winning more than losing.
In the midst of coming to terms with this, I also had a conversation with a friend who is three fantasy football leagues with me. Leagues that at times consume our lives. During this conversation I suggested that if we spent as much time researching companies and studying the market as we did thinking about building our fantasy football teams, we'd be rich. Sure, we would have a lot to learn, but if we treated it like a sport, maybe it would be fun.
Then I had a better idea.
Instead of investing in the market, maybe I should invest in fantasy football. When you play fantasy football, you’re “investing.” You’re betting that your knowledge of football, over the course of 17 weeks, will be superior to that of 11 other people. Your draft strategy, understanding of match-ups, and waiver wire work should ultimately put you in a position to be league champion, and thus take home the money. Why shouldn’t I be able to make money by “investing” in my fantasy football teams? I know way more about football than I do about finance.
And thus Football vs. Finance was born.
Before the start of the NFL season, I will invest $1000 in the stock market, and $1000 in fantasy football teams. I’ll spend a year with the investment, giving equal time to fantasy drafts and team management as to learning about the market, picking and moving stocks. And we’ll see, what’s a better investment strategy for building my family’s future wealth...football or finance?
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