This post originally appeared on InvestingAnswers.
My wife used to make fun of my fondness for fantasy sports — until the day that changed her mind.
Before I had a kid, I played in every type of league you can imagine. I even played in a NASCAR league, despite the fact that I am neither a fan of nor knowledgeable about NASCAR. Many of these leagues were just for fun, but some had money involved — not a ton, maybe $20 or $25 for each league.
In March 2000, my wife and I moved to the San Francisco Bay area. We didn’t know anyone there, so I decided to see if I could find a local fantasy baseball league to join, just to meet people. After perusing websites and message boards, I found one. It had a $50 buy-in, the largest I’d ever paid, but I did it.
Fast forward to late summer, and I was in the title chase. My team was clicking. My moves kept working. All was well. So I went to my wife.
“I think I’ve got a chance to win this thing,” I said.
“How much would you win?” she asked.
That changed everything. This wasn’t fiddling around over a few bucks. This was real money. And living in a pricey place like San Francisco, we looked for every chance to save or generate cash.
As the season drew to a close, we watched games, scoured box scores and endured more stress than either of us would probably care to admit. But in the end, it worked out. I took home a little more than $600. I brought home the bragging rights and the cash, and my fondness for fantasy sports was rarely questioned again.
It can be similar with investing. One who obsesses over the market and all the minutiae that come with it can appear to be wasting her time — especially if she always gets returns that are only equal to or less than what the market returns as a whole.
But when you get a big win, things change. You get more confident. You think about how to get another big win. And then, inevitably, you lose. After all, in life and in sports, you can’t win them all.
I’ve never had another big win like that, and I probably never will. My fantasy obsession has waned in the wake of the birth of my son. But those experiences can carry over into other aspects of life — including investing.
Let me explain.
Here are six indispensable truths about investing that I learned from playing fantasy sports.
1. Micromanaging Will Kill You.
Every fantasy sports owner has faced this: Your superstar quarterback or slugger is off his game, and you’re not sure what to do. Do you bench them, trade them or even cut them? It can be agonizing, but usually you’re best served by just waiting out their slump. For example, last year, slugger Albert Pujols — arguably the best player in baseball — was wretched in his first month with his new team, the Los Angeles Angels of Anaheim. He barely hit over .200 for the month. But, as great players do, he turned it around — ending the season with a .285 average, 30 homers and more than 100 RBI.
Same goes for a stock. If the company’s fundamentals are good and you’re still confident that you’ve found yourself a great company for the long term, hold on tight. Chances are that the dip or the slump will work itself out over time — and you’ll be glad you stuck around.
There’s Coke (NYSE: KO), for example. In March 2009, as the world wrestled with the global economic crisis, the stock price fell below $20. By late 2010, it had shot back up to $32 and eventually topped $40 in late 2012.
2. Your Biases Can Cloud Your Judgment.
I’m a graduate of the University of Texas at Austin. Sure, I love my Longhorns, and I’m even a football season ticket holder. But if I kept Texas-ex Colt McCoy as the starting QB on my fantasy football team, I’d be a fool. There are just so many other better choices.