Does Diversification Work in The NFL?

The U.S equity markets are making new all-time highs. Of course at one time the Dow Jones Industrial 30 had an all-time high of 200 then 1000 then 2000 then …….18,000…then????????

English: Brett Favre (#4) and Aaron Rodgers (#...
English: Brett Favre (#4) and Aaron Rodgers (#12) warming up before a game at Lambeau Field. (Photo credit: Wikipedia)


Some investors are considering moving their money out of the stock market. Because the markets are at all-time highs. The market has to go down because it is at an all-time high.


Since no one can predict the future, this is a huge mistake.


You must decide if you are a gambler/speculator or an investor. Gamblers believe they can out guess the market and avoid all losses. The gamblers have proven numerous times to be wrong, in the long run. One may get ‘lucky’ but no one can consistently market time.


In markets like these diversification is your buddy.


Proper diversification spreads risk across various asset classes with varying return characteristics or dissimilar price movement. Simply said: they don’t do the same thing at the same time.


The NFL season is quickly approaching. Teams are full of optimism about the future season. Every team says ‘This is our year’.


Being a Green Bay Packers fan I am very optimistic about this year. We appear to have all the ‘pieces’. The Packers appear to be well diversified.


The Packers are fortunate to have had two great quarterbacks in a row.


Can you imagine a team that put most of their money into one great player?


Even with these great players it takes a full team to win. Can you image Aaron Rodgers or Brett Favre without an offensive line or a good running game or receivers or….?  Can you imagine the result if your team had a great offense but a poor defense?


All consistent winning teams have a diversified collection of players. All working together as a unit.


Can you imagine a team that based its decisions on the emotions of the fans? Fans are great but they make emotional decisions with no plan. There would be chaos.


Without a good coach teams would make many emotional decisions during game time. Granted there are times this approach would work. But long term it is a recipe for disaster.


Those of you which are my clients own portfolios which are professionally diversified and rebalanced much like the large pension funds.


Over time these portfolios will help you successfully accomplish your investment goals.


There will always be someone touting a ‘new’ strategy that will protect or insulate you from the current risks.


These Wall Street bullies want you to believe they can predict the future and earn you stock market returns with Treasury bill risk. What you end up with is Treasury bill returns and stock market risk.


Find an investor coach/fiduciary adviser who will help you build a prudent diversified portfolio designed for you. And more importantly keep you disciplined during both up and down markets.


Process (diversification) and discipline will lead to a successful outcome.


To succeed in investing you must own equities….globally diversify…..rebalance.

Does The Number One Pick Guarantee Anything??

As I write this the 2015 NFL draft is in its second day. Here in Green Bay everyone is talking about the number one pick cornerback Damarius Randall. The ‘experts’ are saying why he is a good pick and some are saying why he is a bad pick. In the past, I watched these ‘experts’ for a while until I realized that they have no idea who is the best pick or player. Until the player performs on the field, they have no idea who will be a star.

Brett Favre warming up before a game.
Brett Favre warming up before a game. (Photo credit: Wikipedia)

There was a lot of hype on the overall number one pick QB Jameis Winston from Florida State taken by Tampa Bay. He is said to be a, can’t miss player. Well if you look at history since the draft began a long time ago only 13 overall number one picks have gone on to the Hall of Fame.

There is a lot of hype every year regarding the NFL draft. The experts keep predicting, the public keeps watching. Except for one thing the draft is nothing more than a guessing game.

Our own Brett Favre was drafted in 1989 by Atlanta in the second round as the 33rd player chosen. That means 32 players were seen by the ‘experts’ as better choices. Thankfully in February 1992 Atlanta traded him to Green Bay. Oops! OK I’m biased but Brett did pretty well in Green Bay and will be in the Hall of Fame someday.

Tom Brady will be in the Hall of Fame someday as well. He was drafted in 2000 in the 6th round. That means that the ‘experts’ believed there were over 160 players better than him. Another oops!

The Packers chose Tony Mandarich as a, can’t miss offensive tackle in 1989. He was chosen before the great running back Barry Sanders in the same draft. The ‘experts’ missed again.

Looking back many variables may have changed history. Would Brett Favre have been as great without Steve Mariucci coaching him? Or would Tom Brady be as great as he was/is without Bill Belichick? No one can answer this with any degree of certainty.

Great players have great coaches. In the right setting at the right time, greatness happens.

While talking with investors I am amazed at how often they rely on ‘experts’. To pick the right stocks.  Or help them get into and out of the equity markets at the right time. Or even do their own homework and do it themselves. Without proper coaching these investors are likely to realize disappointing results. It is possible that some will succeed but this will be the result of luck and not skill.

Coaching provides proper strategy and most importantly DISCIPLINE. There will be times when a good coach will have you doing something that they do not want to do. Like buying equities in a down turn. As part of the process, scheduled rebalancing requires selling the good performers and buying the poor performers.

Players/investors become emotional during times of crisis and hype. Without good coaching these ‘players’ will make emotional decisions that go against their overall strategy/plan.

If you are working with an adviser whether human or robo and they allow you to do whatever you want. The fees you are paying are too high no matter how cheap they appear.

Coaching matters over the long term.

Stop empowering the Wall Street bullies. Fire your broker/agent and hire an investor coach/fiduciary adviser.