March Madness and Investing

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bracket600

Saturday afternoon I was walking though a shopping mall here in Las Vegas. On my way to a shop and I saw an old friend of mine that I haven’t seen for several years. He came up to me and we had a nice conversation and visited for a bit. I felt inclined to invite him over to my house for dinner Sunday night. To give you a little background, he’s a young energetic single man, and he accepted my invitation.

Sunday at 6pm my doorbell rang and the dogs barked at the door. I went and opened the door, sure enough it was him so I invite him in. As he walked through the door I noticed that he was just as mad as can be. But it was a positive mad not a the distructive kind. He walked with his hand raised with a small piece of paper in it. I ask him, “what’s wrong?”

He told me: “I put $11 down on Wichita State to win in the NCAA basketball tournament. They were 35-0, and haven’t lost all year. I thought it was a sure bet. All of the statistics, the analysts, and NCAA bracket pickers all picked Wichita State to win. And what happened? They lost. And to who? To Kentucky. I lost my money”

Just when he though that it was going to be a sure bet, a sure winner, it all went wrong. Wichita State was 35-0 and by no means or imagination out there could they lose. Because of this assumption my friend made his way to a casino and put some money on the game because it was going to be a sure bet. All he could talk about, and all he could bring up were his sorrows and woes about how this team who had not lost a game this season could lose a game to a much lower seed Kentucky.

The Investment Application:

Don’t go buy a stock just because it has been going up, and up, and up. Don’t go and do something that's outside of your financial plan just because everything seems to be a sure thing.

Many times when an opportunity investing in a particular stock or company appears as a sure thing or an instant win, things can go wrong fast. Stick to your financial plan and don't be tempted by the "almost-sure-thing."