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Fantasy Football and Investing Take Research, Risk to Win

Oct. 27, 2015
Personal Finance
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By Kathryn Hauer

Learn more about Kathryn on NerdWallet’s Ask an Advisor


Playing fantasy football is similar to investing in the stock market. Think of players as individual securities and your team as the portfolio. When building your team or your portfolio, you make selections based on what you expect to bring the highest return.

According to Richard Satran of U.S. News, fantasy football also incorporates important investing principles, including “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.”

With stocks and players, you should start with a predetermined level of resources to invest and focus on maximizing your gain. Your success on either playing field depends on these factors:


Each player, like a stock traded on the New York Stock Exchange or Nasdaq Stock Market, has a cost and a potential return. The cost of each should be positively correlated to the expected return. Metrics such as price-to-equity (P/E) ratios and debt levels help you measure stock values. Statistics such as points per game and average rushing yards per carry help you judge a player.

Just like you wouldn’t draft an all-around lousy player who never sees the field in the first round, you wouldn’t overpay for a crummy stock. You also wouldn’t trade a really good player (or stock) for a bad one.

But even if you do all the research to validate a player or stock as a great pick that should give you an above-average return, there’s no guarantee that a player won’t tear his ACL or a scandal won’t bankrupt a company. If that happens, you are left with little or nothing to show for all the research you did.

Bottom line: You can do your due diligence, but you can’t control the outcome.


A decent running back on a pass-first offense is as risky and undesirable as a mediocre company in a notoriously difficult industry. But how do you know what performance to expect from a stock or player?

Financial analysts subscribe to several techniques: technical analysis that uses recent price trends and movements to predict future movements; fundamental analysis that looks at the financial statements of companies and tries to find undervalued stocks; and quantitative analysis that relies on complex statistics such as Monte Carlo simulations.

Fantasy football “analysts” also have many ways to determine a player’s value. They review matchups by team and position to find favorable scenarios; they evaluate coaches, staff and schemes to anticipate future performance based on their characteristics and tendencies; and they look closely at the player’s past performance.

Both categories of analyst are likely to stay glued to ESPN or CNBC, reacting to experts’ thoughts, opinions and speculations. The jury is still out, however, on whether these experts actually add value.

Bottom line: Use all available resources to evaluate your picks.


The truth about stocks and pro athletes is that there is no way to know what is going to happen. You can only give it your best shot by researching and using knowledge gained from experience.

Much like strategies in the stock market, fantasy owners can hedge against their current positions to minimize loss. They also can speculate on an unknown player with potential who could have a big game and generate a lot of points.

Bottom line: No one can predict the future, but you can still do your research.


In creating a general equities portfolio, diversification is good, and the same is true for pulling together a fantasy team.

Investors usually choose a mix of fixed-income securities such as highly rated bonds, blue-chip stocks that pay dividends, growth stocks that will appreciate and give capital gains, sector exchange-traded funds and government bonds (such as T-bills for liquidity and security). A more sophisticated investor might trade on a foreign exchange for arbitrage and to hedge against inflation.

So on your fantasy team, go for a good blend of young players with potential mixed with veterans in their prime. The majority of your players should be similar to high-quality bonds and blue-chip stocks – think Drew Brees or Jason Witten – that have proven their merit over time. They probably won’t have any monstrous gains or games; barring some crazy circumstances, however, they should be very productive, providing consistent profit. Then add in some growth “stocks” – such as Todd Gurley or Melvin Gordon – that will appreciate over time, especially if you are in a dynasty league.

But don’t feel your roster of stocks or players is set in stone. Diversification can be enhanced through trading. To succeed, stay active in the market, know your trading partners and continually revisit the perceived value of the players.

Bottom line: Choose from different categories to reduce risk and increase gains.

Spreading the wealth

In creating a portfolio of stocks or players, you diversify to avoid putting all of your eggs in one basket. For example, the Steelers’ Ben Roethlisberger, Antonio Brown and Le’Veon Bell are great players, but having that many players from one team can be dangerous in the same way that investing too much of your portfolio in one company can be. If that team or company screws up, suffers from injuries, misses earnings expectations or faces other obstacles, you are dangerously exposed and could see significant losses.

Bottom line: Don’t bet too heavily on one team or company.

If you want to be a champion

New York Times reporter Jonathan Bales writes that, “stock traders and fantasy owners seek to leverage knowledge into value acquisition.” So analyze the data, listen to the pros and pull from all the available tools to make your next move.​

To be a champion fantasy football team owner as well as a successful investor, you must do your research, come up with a balanced approach and take a few calculated risks.

Image via iStock.