Articles
March Madness
04.01.2024
As I lead Rather & Kittrell’s employee March Madness Bracket Challenge going into the Sweet Sixteen, I can’t help but remark that I have no business being on top. Unlike several of my colleagues, I don’t follow basketball. My picks are not educated guesses; they are entirely random choices. I chose UConn to win because their mascot is the Huskies, and I used to have a Siberian Husky. Despite the research, time, and confidence that some of my coworkers put into their picks, I am at #1. For now…
Filling out a bracket is like trying to buy individual winning stocks. It can be challenging to pick a winner, and sometimes it comes down to dumb luck. If you bet on the tournament champion, it can lead to big profits, especially if it’s an underdog. But regardless of your knowledge of the team, confidence in their ability to play, or their odds of winning, it’s still unlikely to choose the one winner. Committing heavily to one team (or one stock) leaves you susceptible to huge losses.
There are many professionals whose jobs are dedicated to deeply researching and picking stocks to beat the market. However, research performed by the S&P Dow Jones Indices has shown that 85% of actively managed US equity funds failed to outperform their benchmark over five years. When you look at ten years, that number increases to 91% of active managers who failed to outperform their benchmark.1 Statistically, actively managed funds are more expensive than passively managed index funds. That’s like paying an “expert” to complete your bracket for you, just to have a computer-generated bracket beat you 9 times out of 10.
While your busted bracket this year will not affect your odds of winning next year, that’s not the case with your portfolio. Returns are cumulative, and a big loss one year is compounded forever. The best way to hedge your portfolio and protect against losses is to adequately diversify your holdings. Save the betting and speculative investments for your play money.
I’ll leave you with some fun facts that I found while writing this article:
– There has never been a verifiable perfect bracket completed in the history of the NCAA tournament.2
– The odds of completing a perfect bracket are 1 in 9.2 quintillion (9,200,000,000,000,000,000).2
– The first NCAA Division I men’s basketball tournament was played in 1939. It only had eight teams then, and Oregon was the champion.3
– There have only been three 16-seed teams that have won against a 1-seed team in the tournament’s history.3
– UCLA has the most NCAA men’s basketball national championships with 11, including seven titles between 1967 and 1973. 3
– Duke’s Mike Krzyzewski (“Coach K”) has the most NCAA tournament wins by a single coach (101).3
– The last time all four 1-seeds reached the Elite Eight was in 2016, and before that, it was in 2009.4
– The only time all four 1-seeds reached the Final Four was in 2008.4
Go Huskies! (And GO VOLS!) 😊
SOURCES
1 S&P Dow Jones Indices LLC, CRSP. SPIVA® U.S. Scorecard. Data as of Dec. 31, 2023.