In Praise of a Boring Bracket - Old Peak Finance

In Praise of a Boring Bracket

March 21, 2017

bracket

In Praise of a Boring Bracket

March 21, 2017

70 million people filled out a bracket for the NCAA men's college basketball tournament this year, valiantly trying to predict the winners of all 67 games, including the national championship.

The teams are seeded, so you could simply pick the favorite for each game … which, obviously, would be no fun. Instead, most people adopt a strategy based on some combination of “research”, gut instinct, listening to “experts”, most interesting mascot, favorite conference … well, the list is endless.

Sounds a bit like investing.

There’s little harm, of course, if your approach to forecasting March Madness is less than scientific. Unfortunately, when it comes to your financial future, there’s a lot more at stake.

Like choosing a healthy dose of Cinderella teams in your bracket, it's fun to pick individual stocks and bonds. It can be comforting to base your decisions on the loudest expert in the room (read CNBC), or on stocks you think you know well, or on what has gone up recently.

But, like the tournament, you are most likely to have investing success if you pick the favorites. Based on a century of data, academic research concludes:

  1. Stocks beat bonds
  2. Small stocks beat big stocks
  3. "Value” stocks beat "growth" stocks
  4. Low-fee funds beat high-fee funds

I know. Pretty boring.

But it's a lot more likely to have a happy ending than picking the team with the most fearsome mascot.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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