Fantasy Football Cash: Strategies For Smart Investments

Fantasy football is a popular pastime, with 29 million Americans signing up each year to compete against friends and spend a small amount of money. But can you make money from it?

While there are some similarities between fantasy football and investing, it's a risky business. You could make a little money through smaller bets on online sports betting platforms, but your odds aren't great. Even if you occasionally make money, it's unlikely you'll earn enough to turn it into a side hustle.

However, if you're determined to try, there are a few things to keep in mind. First, start small—use the same amount of money you'd spend on fantasy football. Second, focus on your financial forms and learn how to analyse different types of assets and liabilities. Third, go with what you know—choose a company you're familiar with as a customer or because you work in that industry. Finally, check your pride at the door—trash talk may be welcome in fantasy football, but in investing, it's better to be humble. Overconfidence can lead to more frequent trading, which tends to result in worse outcomes.

Treat your fantasy team like an actively managed stock mutual fund

Treating your fantasy team like an actively managed stock mutual fund involves a lot of planning, studying, and thinking through upcoming events. It's about reacting to every fluctuation and constantly looking for undervalued assets that can give you an edge.

At the beginning of the fantasy football season, you choose 15 Premier League players, sticking to an allocated budget and following defined rules. You screen the player universe and check who's expensive and who seems like a good value. Some players may be pricey, but if you think they're high quality and likely to produce strong returns, they could be worth the investment. There are also loads of cheap players, but most of them will end up being value traps and disappoint. The secret to success is to find a couple of inexpensive players that the market has mispriced and hope they turn into diamonds as the season progresses.

This is similar to building an investment portfolio. You screen stocks, funds, and ETFs, and depending on your risk profile, the investments you choose could be diversified or concentrated. Your portfolio might include a mix of high-quality, expensive names with strong returns, and some value shares that you think are being overlooked and might outperform.

When it comes to active strategies, there is no one-size-fits-all approach. However, here are some proven techniques that can give you an edge:

• Momentum: Chasing top-performing players and dropping underperformers is similar to momentum trading. Buying high and hoping for higher, or selling low, can be risky, but it can also pay off big in stocks.
• Quality: Expensive "quality" players in fantasy football may experience temporary dips in form, but their class should be permanent. It's similar when betting on quality stocks; a temporary dip in performance due to fund flow or a rocky quarter doesn't mean the stock won't recover.
• Value: Finding mispriced opportunities that perform well is satisfying in both fantasy sports and investing. It's not always easy, but it can produce big returns.

Remember, selecting the best players or investments is just the beginning. The steps you take next are just as important. Here are some things to consider:

• Cutting your losses: If a footballer suffers a season-ending injury or has a serious falling out with their manager, it might be time to cut your losses. The same goes for investing; if a company makes a wrong strategic decision or faces outside events that undermine its profits, you might need to exit your position.
• Avoiding overtrading: In fantasy football, overtrading costs you points. In investing, it costs you money through transaction fees and the bid/offer spread. So, do your research before adding a player or stock to your lineup.
• Trading opportunistically: Picking an attacker as your captain, whose next match is against a weak defensive team, could result in a pile of points. Similarly, in the market, you might find opportunities to increase your investment when a good company's shares are knocked lower for no fundamental reason.

Just like in investing, where different types of mutual funds are available, you can also choose to take a more hands-off approach to your fantasy team. Instead of actively managing your team, you can auto-draft your roster or stick with the same lineup throughout the season. This is similar to an index stock mutual fund, which tracks a preselected group of stocks and tends to have lower fees. Interestingly, studies show that when left alone over many years, these index funds can sometimes outperform actively managed funds. So, while an active approach can be rewarding, it's important to remember that it also requires a significant time investment and carries its own risks.

Diversify your roster

Diversifying your roster is a key strategy in fantasy football, and it can be a useful approach in investing, too.

In fantasy football, diversifying your roster means having a good choice in each position, rather than just one star surrounded by mediocre players. This means that if your star player gets injured, you have other players to fall back on.

Similarly, in investing, diversification means having a variety of assets and sectors in your portfolio. This helps to spread risk and protect against losses. For example, if you have a mix of stocks and bonds, you can sleep well at night because even if stocks are tanking, bonds might be performing well.

There are several ways to diversify your investments. You can choose from a range of asset classes, such as stocks, bonds, commodities, real estate, and hedge funds. Each of these asset classes has different investment characteristics, such as liquidity, risk, and return.

You can also diversify within asset classes by investing in different sectors. For example, within stocks, you can invest in sectors such as materials, financials, energy, consumer discretionary, consumer staples, utilities, technology, healthcare, and industrials.

Additionally, you can diversify by investing in different companies within each sector. This helps to reduce the risk of losing all your money if a single investment goes south.

Just as in fantasy football, where monitoring and rebalancing your team is essential, in investing, it's important to regularly monitor and rebalance your portfolio to ensure it remains diversified and aligned with your investment strategy.

Avoid overtrading

Overtrading costs you points in fantasy football and money in the investing world. In the latter, it costs you money through the bid/offer (selling/buying price) spread and, often, in transaction fees. Therefore, it is important to do some research before adding a player or stock to your lineup.

It is also important to note that there is no singular "best" strategy for doing well in fantasy football or investing. However, an active approach can work well if you are willing to put in the time for planning, studying the stats, and thinking through upcoming events.

• Do your research: Before adding a player or stock to your lineup, take the time to research and analyse their performance. Look for players or stocks that are mispriced or undervalued and have the potential to deliver strong returns.
• Plan and study the stats: Stay informed about upcoming events, player injuries, or other factors that could impact performance. This will help you make more informed decisions and avoid impulsive trades.
• Understand value: Evaluate the value of players or stocks based on their potential returns and how they fit into your overall strategy. Don't get caught up in the hype or make trades solely based on recent performance.
• Be patient and selective: Avoid the temptation to constantly shuffle your lineup or portfolio. Instead, focus on making thoughtful trades that align with your strategy and improve your team or investment portfolio.
• Consider opportunity cost: Remember that each trade has an opportunity cost. Evaluate the potential benefits and drawbacks of each trade, considering how it will impact your overall strategy and performance.
• Set a strategy and stick to it: Develop a clear investment plan and strategy that outlines your criteria for adding or removing players or stocks from your lineup. This will help you avoid impulsive decisions and stay disciplined in your approach.

Trade opportunistically

Trading Opportunistically

Trading opportunistically is a key strategy in fantasy football, and one that can pay dividends if executed effectively. This strategy involves identifying and exploiting favourable matchups to maximise your points haul.

For example, you may decide to select an attacker as your captain (who scores double points) if they are playing against a team with a poor defensive record. This simple decision can potentially bring in a large number of points.

Similarly, in the world of investing, you may come across similar opportunities. For instance, you may find a good company whose shares have been knocked down for no fundamental reason. This is when you may want to seize the opportunity and increase your investment.

To effectively trade opportunistically, it is important to be proactive and put in the time and effort for planning, studying the relevant statistics, and thinking through upcoming events. This will help you identify the best opportunities and make informed decisions.

Additionally, it is crucial to utilise the tools available to you, such as a fantasy trade analyser, which can provide valuable insights and help you evaluate the potential benefits of a trade based on different league formats and the input of experts.

By adopting a trading opportunistically strategy, you can make the most of favourable situations and improve your overall performance in fantasy football and investing.

Cut your losses

As with any investment, sometimes you need to cut your losses. This is true in fantasy football as well. If a footballer is injured and can no longer play for the season, or has fallen out with the manager and is kept off the field, it's probably time to let them go. Similarly, if a company you've invested in makes a poor strategic decision or an outside event undermines its profits, you might consider selling your stocks.

It's not always easy to do this, as people tend to get attached to their star players and stocks. To help with this, it's a good idea to have an investment plan that outlines how far you're willing to let your assets slide before you cut them loose. This will help to take some of the emotion out of the decision and ensure you don't hold on for too long and risk greater losses.

In fantasy football, overtrading can cost you points. In the investing world, it costs you money – through transaction fees and the bid/offer spread. So, before you add or remove a player or stock from your lineup, do a little research to make sure it's the right decision.

Frequently asked questions