Fantasy football: 3 investing lessons from this year’s exciting league

This year’s Premier League season is in full swing again. To make the competition even more exciting, you may also be trying your hand at fantasy football.

Whether you’re a rookie manager playing for the first time, or a seasoned veteran returning for another year of emotional highs and lows, you’re joining a growing community of football enthusiasts attempting to build the ultimate squad.

In fact, FPL Reports reveals that there were 11,447,257 players in the 2022/23 season, increasing from around 9 million in 2021/22.

Beyond the thrills of goals, assists, and clean sheets, some intriguing investing lessons are hidden within the fantasy Premier League. Continue reading to discover how fantasy football could help improve your investing strategy.

1. Diversification is key

When you’re first choosing your fantasy squad, it may be tempting to stack your team with players from some of the previous reigning champions. For instance, you may think that success breeds success and decide to fill your squad with players from the winners of last year’s Premier League season, Manchester City.

However, this may be unwise, as Pep Guardiola, Manchester City’s manager, will likely rotate players throughout the season, meaning you could miss out on precious points.

Instead, diversifying your exposure to different clubs could make your team more resilient as the season progresses.

Similarly, it may be prudent to diversify your investment portfolio. If you were to put all your money into just a few investment funds or sectors, you’d be entirely dependent on the success of that limited number of securities to help grow your wealth.

For example, if you invested all your money in the technology sector, and it subsequently experienced a downturn, there’s a chance the value of your investments could decline substantially.

The asset quilt below shows the performance of eight diverse funds between 2012 and August 2023.

Source: JP Morgan

As you can see, it would be tricky to predict which funds would outperform others in any individual year. This demonstrates the power of spreading your risk across several regions and sectors, allowing you to balance weaker performances with returns from elsewhere.

Of course, diversification doesn’t guarantee investment returns or eliminate the risk of losing money in a declining market. Still, it could help to reduce investment risk, giving you a better chance of growth over the long term.

2. Don’t let personal biases distort your strategy

If you have a favourite football team, it may be tempting to allow your personal feelings and opinions to take over when you’re building your squad.

For example, if you’re a Liverpool supporter, you may decide to fill your team with their players as a show of support. Or you may pass on a top-tier player simply because they play for a rival team. While this allegiance is somewhat admirable, it may not be wise, as it could affect your team’s overall performance and cohesion, losing you precious points as a result.

There are also similar personal biases in the world of investing, namely confirmation bias. This is when you make decisions based on pre-established assumptions rather than factual evidence.

A helpful way to understand confirmation bias is to think about the newspapers you read. You may be more likely to read a publication that aligns with your political views, and you may seek out information – perhaps subconsciously – that confirms your beliefs.

If you allow confirmation bias to interfere with your decisions and distort your investment strategy, you could potentially lose money.

Say, for example, you have a pre-established belief that a particular industry or sector will perform well. You may gravitate towards information that confirms this and ignore evidence that indicates they won’t perform as well as you think.

To prevent this bias from affecting your investments (and your fantasy Premier League team, for that matter), you may want to closely examine your beliefs and search for ways you might be wrong, rather than ways you’re right.

Carefully weighing the facts could help you make an informed decision.

3. Sometimes, taking no action is better

As a fantasy football manager, you may also fall victim to another common pitfall: over-tinkering with your squad. As the season progresses, you may feel the need to swap out players from the bench repeatedly or even buy and sell new ones from the transfer market.

While you may initially think this is a wise strategy, no action is sometimes a better move, especially since you could incur point deductions for excessive transfers.

This could also apply to an investor who regularly tweaks and updates their portfolio. When it comes to investing, it’s often better to take a hands-off approach.

It’s normal to worry about the performance of your investments, especially during periods of economic uncertainty. However, this worry can often spiral out of control, and you may feel that you need to alter your portfolio in response.

Yet, historically, market trends usually show that creating, and sticking with, a portfolio of investments that suits your risk appetite and long-term goals typically makes better sense. As such, recognising when not to act is essential for potential long-term growth.

Research from Schroders gives a fitting example of how emotion-led investing could harm the overall growth of your portfolio.

If you had invested £1,000 in the FTSE 250 stock market index at the start of 1986, and held this investment for 35 years, you’d have received average returns of 11.4% each year. However, if you had responded to events in the news throughout the period and sold your investment, your returns could have been lower.

In fact, if you missed just 10 of the best days of the FTSE 250 during that 35-year period, your average annual returns would have dropped to 9.5%. Had you missed the best 30 days, your returns would have fallen even further to 7%.

As you can see, investors who held their nerve during this period and employed inaction may have benefited more in the long run than those who sold in response to market volatility or significant events in the news.

Get in touch

While we can’t help you improve your fantasy Premier League team, we can certainly help you manage your investment portfolio.

Please call 01992 500261 or fill in our online contact form to organise a meeting, and we’ll be in touch.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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