March Madness is one of the most exciting sporting events of the year. Over 70 million brackets are filled out every year, and if you’re reading this, you probably have filled one out yourself. More than likely, your bracket is entered into a pool with your friends, peers, or co-workers, and your goal is to win your bracket pool whether it be for money or for bragging rights. There are 68 teams in March Madness, and every year the tournament is filled with upsets and “Cinderella” teams advancing far in the tournament.
Believe it or not, the simple task of filling out a bracket is filled with risk/reward concepts. You may take the safer approach of picking higher-seeded teams to win, but the reward would be low, as other brackets in your pool will have most likely predicted these outcomes as well. On the other hand, you could take a high-risk/high-reward approach, by picking underdogs to upset higher-seeded teams. In this case, there is a higher probability that you predict the game incorrectly, but if your pick were correct, your bracket would leapfrog the competition in terms of ranking in the pool. For example, in this years’ March Madness tournament, #12 seeded Oregon defeated #5 seeded Wisconsin, and #13 seeded UC Irvine defeated #4 seeded Kansas State. If you had predicted these outcomes correctly, your chances of winning your March Madness pool would increase by a significant amount.
What if I told you that investing your money is similar to filling out a March Madness bracket? If you picked many underdogs to upset stronger teams in your bracket, you may be more inclined to taking larger risks with your money for the chance of increased returns, such as investing in stocks. On the other hand, if you played it safe and mostly picked higher seeded teams, you may be more prone to investing in bonds, which have less of a risk associated with them. I know that by now, you’re more than curious to see just how risky of an investor you are. Before clicking away from this article to check your bracket, however, click here instead for a quick, simple survey to determine your risk score. After determining your risk score, check and see how it compares to the picks you made in your bracket!