The Bracket Mistake Everyone Makes (and Investors Make, Too!)

It’s that time of year again!  …March Madness. 

Selection Sunday kicked things off, then 63 games of single elimination, and a whole lot of broken brackets!

Most people haven’t watched all these teams, but there’s no shortage of people who fill a bracket out anyway. Why? Seeding.

It’s the NCAA’s way of stacking the odds, and for the most part, it works. A #1 ranked team beating a #16 isn’t just likely… It’s virtually a foregone conclusion before the tournament even starts!

In fact, it didn’t even happen until 2018… and it’s still only happened twice ever.  

Think about it – that’s only two wins out of more than 150 attempts… so yes, upsets happen, buuuuut, not that often. 

If we look at things from a 30,000-foot view, the data gets pretty clear: #1 seeds win about 80% of their games, and the top 3 seeds win around 73% of the time.

Meanwhile, the bottom seeds barely win at all, and maybe the most telling stat… top 3 seeds have won 36 of the last 39 championships.

Still… every year, people chase the Cinderella stories. They spend all their time trying to pick the perfect upset and almost none picking the more probable winners.

Think about it, though… that’s backwards!

In bracket scoring, getting the champion right matters way more than hitting a random early-round upset, doesn’t it?

…and ironically enough, this is exactly what we see happening to investors with their hard-earned retirement portfolios, too. People focus on the long shots and ignore what actually moves the outcome.

Now, sure, there will be occasional upsets. There always are… but do you really want to own stocks, funds, and ETFs that are ranked (or “seeded”) in the basement?!

Building your whole bracket around lower-seeded teams is like investing a retirement portfolio in lottery tickets. It might feel exciting, but it’s not how you make work optional someday.

Bottom line, the odds always have, and continue to favor the top seeds, and investing works the same way… by constantly “seeding” ideas based on strength and momentum throughout each week, month, and year – or as I like to say “staying invested in the playoff teams and avoiding the rest.” I know… wrong sport, but I digress.

The studies tell us that the strongest trends tend to keep trending. Can lower-ranked ideas surprise us? Of course… and honestly, one of the worst things that can happen to someone’s psyche is to pick a loser that wins by total chance.

We don’t build portfolios on surprises! We build them on probabilities.  

So this year (in your March Madness bracket, anyway), go ahead and pick a Cinderella or two… just don’t lose sight of what actually wins in the end.

Because when it comes to your hard-earned life savings, it’s not worth “diversifying” into chance! 

If you’d like to get a second opinion on your:

• Financial plan
• Retirement portfolio
• Business Transition & Exit Plan, or
• If you’d like more information about 1031 Exchanges into other tax-efficient vehicles…

…please reach out to us at www.LibertasWealth.com to schedule an introduction call! 

Adam Koos, CFP®, CMT, CFTe, CEPA, is a CERTIFIED FINANCIAL PLANNERTM, one of approximately 3,000 active Chartered Market Technicians (CMT) worldwide, as well as a Certified Financial Technician (CFTe®) through the International Federation of Technical Analysts (IFTA), and a Certified Exit Planning Advisor (CEPA) via the Exit Planning Institute.  In July, 2014, he was named by Columbus Business First as one of their 20 People to Know in Finance for 2014, was a recipient of the Forty Under 40 award in November of 2011, was ranked by Investopedia in July of 2017 as one of the Top-100 Most Influential Financial Advisers in the U.S. for 2017, his company is a 7-time winner of Columbus CEO Magazine’s “Best of Business” Awards for “Best Private Wealth Management Firm” (2010-2014, 2019, and 2024), a winner of Columbus Business First’s “Fast 50,” representing the fastest growing companies in central Ohio (2025), and is still the only financial planning and investment management firm in central Ohio to ever win the coveted Better Business Bureau Torch Award for Ethics and Trust (2011).  Adam serves his clients as the president and portfolio manager at Libertas Wealth Management Group, Inc., a NAPFA-affiliated, Fee-Only Fiduciary and Registered Investment Advisory (RIA) firm, located in Columbus, Ohio.