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Published: Dec 16, 2019 14 min read

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Illustration by Jade Schulz

It was week 6 on ESPN’s popular Fantasy Focus Football podcast. Listeners had already been told about recent injuries and the Kansas City Chiefs' wide receivers. Next up? The stock market.

“Poring over projections, spotting trends — all the things you do to set your fantasy lineup every week — did you know investors do the same thing for their portfolio every day?” asked the host, reading an ad sponsored by brokerage TD Ameritrade.

In case anyone missed the point, the ad continued: “You might have the skills to trade.”

Fantasy sports have long been a favorite past-time on Wall Street. An endless string of blog posts and chatroom threads avidly point out the similarities between following fantasy stats and following the markets, likening the right mix of position players to a well-diversified portfolio and underrated players to value stocks. CNBC stock-picking guru Jim Cramer even started his own fantasy football show this season.

But in recent years, fantasy sports have grown into a multi-billion dollar industry, with nearly 60 million players, according to the Fantasy Sports & Gaming Association. The majority of players are young men in their 20s and 30s with college degrees and higher-than-average salaries. Now the financial services industry is starting to ask, why shouldn’t Wall Street be a favorite past-time for fantasy sports fans?

The problem, according to many professional investors, is that making the leap from playing a game, often with your friends, to the world of markets, where you might have your financial future at stake, is a lot harder than it seems. It’s not just a matter of the market being vastly more complicated, although it is. The competition, which includes thousands of professionals, is also stiffer.

“These are the smartest people in the world, and they can’t, after taxes and fees, beat the market,” says Alex Palumbo, a financial planner at Ritholtz Wealth Management. That means the chances of success for fantasy players just starting out are slim. In fact, Palumbo, who serves as commissioner of his office’s fantasy league, called the TD Ameritrade ad “a little dangerous” after a reporter shared it with him. “It’s like that E*Trade commercial that says it’s so easy a baby could do it,” he says.

A spokeswoman for TD Ameritrade did not address specific criticism of the podcast ad, but pointed out that the brokerage's website includes numerous educational materials for new traders. Indeed, one of the items the ads promote is paperMoney, a tool to help novices practice stock trading without risking actual money.

With education in mind: huddle up, fantasy footballers. Here’s what you need to know before you wade into the world of stock trading — and the right way to get started.

The Market Is More Complicated

Football is a complicated game, with intricate rules and wildcards like injuries and the weather. But it is still a game. In the stock market, there are thousands of companies in dozens of industries — and each industry, with different regulations and business fundamentals, has its own rule book of sorts. “It’s like playing 20 or 30 different fantasy sports at once,” says Matthew McLennan, who heads the global value team at First Eagle Investment Management.

Take a look at what it takes to research just one stock — General Electric. A typical place to start would be General Electric’s annual report, or 10-K. It’s a compendium of all the pertinent facts and figures about a company, much like a team’s page on Rotoworld or Fantasypros.com. GE’s latest is 172 pages of dense material that lays out everything from the industrial giant’s debt reduction plans, to recent growth in airplane engine sales, to all the risks that threaten successful returns. There’s turbulence in the global economy, price volatility in required raw materials, the chance of a product failing, and more.

Then even the best-prepared investors can get surprised. Of course, both stock picking and fantasy sports require you to make a bet about how an “asset” — a player or a company — will perform in the future, says Isaac Petersen, who runs a hobby website about making data-driven fantasy selections. In fantasy football, that means, for example, predicting in the August draft whether a high-risk, high-reward player like Baltimore Ravens quarterback Lamar Jackson will pay off. (For the uninitiated, he definitely did.) Smart forecasting and risk-taking can still be derailed by factors like weather, injuries or a coach’s bad call.

But in the markets, there’s still a lot more that can go wrong, in part because consumer sentiment can play a big role in a company’s market value. Look at what happened to Peloton earlier this month. After a strong year of steadily climbing sales, the trendy fitness company misfired with a holiday commercial the Internet ridiculed as sexist and dystopian. Peloton’s stock dropped nearly 10% in a single day. “Imagine if the mood of the crowd was an element in whether you win the fantasy football game,” McLennan says.

The Market Is More Competitive

Competition in the stock market is also fiercer. With fantasy football, who you’re playing does make a difference in your chance of success, says Michael Schupak, a certified financial planner in Jersey City who’s been playing fantasy football for more than 20 years. If your league mates are hardcore football junkies who spend hours a day on research, the opportunities to find an edge will be slim. But, “if you’re playing in a 12-person league, there’s not millions of people deciding when a player should be drafted or who should be picked up on waivers,” he says.

That’s what you’ll be up against in the stock market--millions of investors, including professional portfolio managers. There are more than 300,000 individual investment advisors working at roughly 13,400 firms, according to the latest SEC numbers. Many of those advisors are Chartered Financial Analysts, a designation that requires passing three notoriously difficult exams. Test takers spend 300 hours studying for each one and only about half pass, according to the CFA Institute.

If the numbers alone weren’t enough, you’re also not on an even playing field with all those pros. In theory, of course, you have access to the same publicly reported information. But there’s no way you—as a do-it-yourself investor—can compete with the resources investment firms put into making their decisions. They’ll have teams dedicated to staying current on global currencies and policies, researchers to study historical performance, and industry-specific analysts who track the smallest of moves.

New investment analysts at T. Rowe Price spend the first several months on the job just studying their industry, says Tom Watson, director of U.S. equity research, where he oversees 50 analysts. Each one’s full-time job is to dig deep into a single industry--transportation, retail, or software, for example--and report what they learn back to portfolio managers.

About one-third of their time is spent traveling to collect information to add nuance to financial reports. They visit with CEOs and CFOs, attend conferences to talk with customers, and meet with competitors. It takes time to master, which is why analysts typically stay in the same field for a minimum of five years, Watson says.

The Stock Market Is More Random

Even if you’re a perennial playoff qualifier in your fantasy league and you’ve got a solid accounting background, your skills won’t necessarily help you make money in the markets. That’s because research suggests investing is even more unpredictable than fantasy sports.

In a study measuring the role of luck versus skill, a team at the Massachusetts Institute of Technology’s Sport Lab found fantasy sports reward a player’s ability more reliably than the stock market.

Using data from a 10-year period and nearly 45,000 mutual funds, the team counted each time a mutual fund beat the market as a win. For fantasy sports, they compared players’ performance in the first half of the season to the second half. In a game driven by skill, win-loss records should vary based on who's playing. Players with poor skills regularly lose, while players with strong skills should consistently win, says Anette "Peko" Hosoi, associate dean of engineering at MIT.

The team looked at 11 different activities, plotting them on a 0-to-10, luck-to-skill spectrum. Coin flipping, a game of pure chance, sits at zero. Mutual fund performance lands at three, while fantasy football places just above the halfway mark.

There are, however, two important caveats: The researchers only looked at results for daily fantasy games, and the mutual fund results may have been skewed by the market upheaval in 2008. Still, the research backs up similar studies on the financial markets, which suggest mutual fund managers' performance is a mix of luck and skill. And if investing in stocks is more random than fantasy sports, that means it’s also more dangerous to put your money into it.

Still Determined? Here's How to Get Started:

All that complexity, competition and chance in the market takes its toll: a recent review of mutual fund returns by Barron’s found that over the past decade just one in five mutual funds managed to beat the market. Individual investors, meanwhile, have trouble checking their emotions. Studies show they tend to sell, in a panic, when stock prices are at a low, and buy, in excitement, when they’re rising.

That’s why financial experts repeatedly stress keeping your retirement savings primarily in index funds, which hold all the stocks and bonds within a particular financial market index and track its average performance. That’s the only thing proven to work over the long haul, says Palumbo, of Ritholz Wealth Management.

That said, if you’re still intrigued by the idea of moving from the “fantasy gridiron to the trading floor,” as TD Ameritrade says, follow these guidelines:

Start Small: Start out with no more money than you’d spend on fantasy football, Schupak recommends. Most leagues require a $50 or $100 buy-in, and the FSGA reports players spend an average $650 a year on fantasy sports. “It’s not a lot of money, but that’s kind of the point,” he says.

Focus on Your Form: Financial forms, that is. Learn how to analyze the different types of assets and liabilities on a balance sheet. Morningstar’s Investor Classroom offers a good beginner’s guide, as does Benjamin Graham’s classic book, “The Intelligent Investor” — a favorite pick of legendary investor Warren Buffett.

Go With What You Know: For your first investment, choose a company you’re familiar with, either as a customer or because you work in that industry, says Lewis Altfest, chief investment officer at Altfest Personal Wealth Management. That will give you better context as you dig into earnings figures, financial filings, and SEC reports.

Check Your Pride at the Door: Trash talk may be welcome in fantasy football, but in investing, you’re better off being humble. Overconfidence can lead investors to trade more regularly, and studies have found the more you trade, the worse your results. “If you want to buy something,” Palumbo says, “buy it and hold it for the long term.”

If you enjoy playing fantasy sports even when you lose, then maybe you’ll enjoy playing the market despite losses—just don’t delude yourself that losses won’t come. Steven Kerstein, who works in investor relations consulting by day and in risk management at a daily fantasy sports company on weekends, opened his first brokerage account when he was still in college. Investing, like fantasy sports, was exciting.

He lost about $5,000, learning through trial and error. Still, Kerstein, who lives in Chicago, sees plenty of overlap between daily fantasy sports and the stock market. But would he say that people who are successful in one will have an easy entry into the other? Definitely not.

If you take the $1,000 you win over a 16-week fantasy football competition and plop it in the market, you could lose it in two or three days, he says.

“The market has a knack for humbling people.”