March Madness

Every year, my family fills out March Madness brackets for bragging rights.

But my 18-year-old brother's goal is a perfect 63-0 bracket. It's a lofty goal, but most of us know better

His odds? Roughly 1 in 9.2 quintillion if each game was a coin flip.

But he knows ball, so maybe it's closer to 1 in 120 billion. Nobody has ever done it. Warren Buffett once offered a billion dollars to anyone who could.

The issue with this strategy is that to be perfect you have to pick a decent amount of upsets. Which probabilistically hurts your chances of winning the family pool.

For example, everyone knows there is usually a 12 seed that beats a 5 seed in the first round. But no one knows which one it will be. He picked the wrong ones.

So he went 2-for-4 on those matchups. People who picked the favorites went 3-for-4... He's currently in last place.

Investing Parallels

I see this a lot in investing. People are convinced they or a manager can outsmart the market. In my view, this is undue risk; an unforced error.

Many studies have shown that most funds don't even survive, let alone outperform their index over 10, 15 and 20 year periods. And knowing which ones will and then sticking with them for decades is even harder.

The lesson is the same whether you're filling out a bracket or managing a portfolio.

Over time, the boring, probability-driven approach wins.

Meanwhile, in the Tournament

This year, of the 36 million brackets submitted only one remains at 43-0. The all-time record is 49-0, in 2019.

Awesome bragging rights for sure. But being perfect through 47 games doesn't even mean you'll win your pool. Since most scoring systems weight later rounds more heavily.

Investment decisions later in life matter more too.

And fortunately as investors we don't have to outperform the market, our friends or neighbors. We can all use the market to reach our goals.

Until next time, stay the course.