Preparing for Battle

My first year in fantasy football, I was awful.  For the draft, I didn't research players and I didn't have a complete understanding of the point structure.  I just wanted to have fun with some friends, and I didn't think a $50 entry was much to lose (or gain).  So, I picked players that I knew regardless of how they ranked or stacked up against their peers.  Yahoo auto-picked a few players because I was slow to decide.  It wasn't until after the draft that I realized I showed up to a gun fight with a knife.  My team was horrible.  I was ridiculed, rightfully so, by the other owners in my league.  However, as painful as the experience was to commonly be referred to as the "doormat of the league", I really learned a lot that first season.

I began studying the players' stats over the course of the season looking for drop-off points in the performance level and trying to identify the "elite" players, the "serviceable" players, and "if this guy is on my team than I've done a lot of things wrong" players.  Around draft time, I would look at numbers from the prior two seasons, breaking the players out into their respective positions.  Essentially, I was taking the emotion out of my decision making of who was going to draft and not going to draft, and I was going to pick teams based on performance.  Nothing else.

I wanted to do the same with stocks.  However, I didn't know what to look for.  As a lifelong fan of football, I know what the game's stats mean.  I know what stats say if a player has had a good game or a bad game.  A good season or a bad season.  Whether they are getting better or getting worse.  But, I didn't know how to do that with stocks.  So, I decided to study first.  I picked three books to read:

• How to Make Money in Stocks by William J. O'Neil
• The Intelligent Investor by Benjamin Graham
• The Complete Idiot's Guide to Stock Investing by Sarah Fisher and Susan Shelly

The first book, How to Make Money in Stocks, was mind-blowing to me.  O'Neil provides amazing explanations on numbers using historical examples.  And, for me, perhaps most importantly, it was while reading his book that I saw how analogous the stock market is to fantasy football.  I love statistics and trends; I use them as the foundation to pick a fantasy football team.  And here, in this book, O'Neil talks about what metrics (i.e. stats) to look for in a stock (i.e. player), how if the market (i.e. season/career) is moving a certain way you can tell if it's time to sell (i.e. drop) or buy (i.e. claim off of waivers), how it's important to diversify your portfolio (i.e. roster) by having stocks (again, players) from different sectors (i.e. positions/teams).

Using the collected learnings from these three books, I created my own strategy.  One so that I wasn't picking "home team" companies, but rather picking companies that performed.  Also, and perhaps most importantly, just like in fantasy football, I had to include protective measures to allow me to break away from companies that aren't performing.  In fantasy football, you don't want to start an under-performing player week after week and you don't want to get caught starting a player on a bye.  The same is true in stocks.  It's important to know when to cut your losses and to drop that player/company and find a new one to add to your roster/portfolio.