March Madness is upon us, and everyone’s excited for the upsets, buzzer beaters, and Cinderella stories. As a fan, it’s an emotional time of year, and believe it or not, March Madness can teach us a thing or two about retirement.
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The Bass Lines:
Your March Madness Bracket Will Get Busted.
- [2:00] – Each March Madness, I fill out an NCAA tournament bracket. Each year I’m convinced it will perform well, and each year, it gets busted by the end of the first weekend. In retirement, it’s important to have a plan in place, but you also need to be ready for those “life happens” moments. Even the best laid financial plans need to adapt over time.
Be Ready For The Upsets.
- [3:50] – Everybody loves a good upset. Nobody will ever forget the University of Maryland, Baltimore County’s historic upset of the University of Virginia. If you missed that game, you MUST watch the highlights here. However, it’s less fun to watch an upset when your team is the one that’s losing. It’s always a shame to see a great team’s season suddenly come screeching to a halt. We see proverbial upsets happen all the time in the financial world. A market crash can ruin a portfolio. Conversely, if you’re a short seller, you’re probably excited about the market dip. It all depends on your perspective. Tax law changes will help some while hurting others. Remember, you can’t let anybody tell you that any particular outcome in the financial world is inherently good or bad.
- [6:24] – How many times have those of you living in Durham and Chapel Hill picked your team to win it all? It’s hard to objectively pick a March Madness bracket when your team is in the tournament. The same could be said of your company stock. It’s hard to separate logic and emotions when it comes to investing. Of course you want to believe your employer will perform well in the market. However, your attachment to your employer could cloud your judgement.
The Danger Of Risky Picks.
- [8:22] – As you pick your bracket, you’re probably going to try to pick a few of the upsets. Maybe you think the 14-seed will be the three-seed, or maybe you think you can accurately pick the seven and eight seed matchup. However, picking the upsets can be risky. When it comes to investing, it’s fine to make a few risky decisions. However, if you’re about to retire, you need to remove some of the risk from your portfolio. You can’t go all in on risky investments when you’re just years away from retirement. You need to make sure the amount of risk in your portfolio is appropriate for your age.
You can't let anybody tell you that any particular outcome in the financial world is inherently good or bad. It all depends on what team you're on, and you have to find the things that fit you and your team. - John StillmanTweet This