What blindly filling out my March Madness bracket taught me about investing

Diversify your holdings...
I know nothing about college basketball, and only marginally more about the stock market. That fact alone tells me I don’t want to be hitching the entire wagon of my stock portfolio or bracket to any particular equity or team. Sure there’s a slim chance you’ll look like a genius -- just don’t count on it.

...But make sure your portfolio has a solid core to build on
Despite the fact that I’ve signed up for approximately 972 separate NCCA pools this week, the final stretches of all my brackets look remarkably similar. Sure I may have brief flirtations with Holy Cross, Virginia Commonwealth University, Marquette and Old Dominion in the early rounds, but at the end of the day it’s still coming back to my blue chippers in the end -- Georgetown, North Carolina, Ohio St., Texas, UCLA, Kansas, and maybe a little Florida action in there for good measure. So similarly, while I allow myself to play around on short-term penny stocks for quick gains, in 30 years’ time I know I’m more likely to still be gazing lovingly into the eyes of those Royal Bank shares than I am to be thanking my lucky stars I put it all into Spider Resources Inc. when I was 25.

Act on facts. Not emotion.
We all, at times, go through phases where we’re sweet on a particular company. We read the breathless press release about how some startup has reinvented the wheel. You gawk at that impressive 400% earnings growth. You want to take those voluptuous sales estimates out for dinner. You want to bring their amazing product home to meet your mother. But really, just as in sports, some stats can easily be played around with to conceal the truth of the matter -- that tech startup you like, or that Brazilian centre you’re thinking of drafting in the third round of your fantasy draft, is a stiff. Stay away. I don’t care how many rebounds he racked up in a crappy European league, and it doesn’t impress me that the company tripled their EPS from 2 cents to 6. If it doesn’t have steady earnings and a nice dividend or the ability to consistently run a pick on an incoming point guard, I’m not interested. (Editor’s Note: OK. So maybe I know a little more about basketball than I’m letting on)

Invest for the long term
Don’t sweat it when it’s four minutes into the first half of round one, and the team you’ve picked to win it all is down by 8. There’s still time. Relax. Have faith that the team you blindly picked out of a hat will come through. You might even consider going double-or-nothing (or buying a few more shares) when your jackass friend starts to insult your intelligence at half-time. You did your homework, right?

A good company does not necessarily make for a good stock
I’m told Florida is, hands down, the most talented team in this tournament. But that doesn’t necessarily mean they’re the best. If they can’t play as a cohesive unit on the court, all the talent in the world won’t let them advance. So similarly, just because you’re in love with a particular company, and you think they have a great market share and competent management, doesn’t mean they’re a good stock. Maybe they were a great buy in 2002 when you first noticed them. But if their P/E is already 35 or something, I think you’ve missed the boat. Wait for a correction. Or take that team next year when they’ve learned their lesson in overconfidence.

When in doubt, go with companies that have steady earnings
I like my college basketball hotbeds the way I like my quarterly earnings reports: dependable and bland. And what’s the blandest state of the union? The answer is obvious...

Kansas will clearly win it all. Go Jayhawks!