Does watching NCAA basketball and rooting for the underdogs sound familiar? Have you ever been told that picking underdog stocks is the way to achieve financial success, only to end up feeling the pain of disappointment? If you’ve ever experienced the thrill of rooting for the unexpected in sports, only to be let down, you might be feeling the same frustration in your investment decisions. But what if there’s a better way to make well-researched choices that lead to long-term success?
In this episode:
- Understand the significant impact of NIL money on college sports and how it’s reshaping the landscape of collegiate athletics.
- Explore the intriguing dynamics of college basketball’s one-and-done strategy and its implications on the sport’s future.
- Consider diversifying your portfolio with fixed-income assets, especially if you have a lower risk tolerance or need stability for short-term financial goals.
- Find out how the hosts’ NCAA brackets are doing and their outlook on the Philadelphia Phillies’ season.
College Basketball’s One-and-Done Strategy
The one-and-done strategy in college basketball, relying on recruits with plans to enter the NBA after a single year, presents challenges for team dynamics and performance. Jon, Cody, and Sean draw parallels between this strategy and stock-picking a portfolio for short-term success. Just as teams with older, experienced players often have an advantage in high-stakes games like the NCAA tournament, so do balanced and diversified portfolios.
Relevant Resources:
*Morton Brown is neither a law firm nor a certified public accounting firm. No presentation, post, or portion of any podcast content should be construed as legal or accounting advice.
Connect with Your Hosts:
Transcript
Welcome to coachable wealth, where we blend the worlds of sports and finance to bring you strategies as you navigate your wealth building journey. John, Cody and Shawn are here to help you elevate your financial advisor relationship to meet your long term goals. Now, let's get to it. I know it's been nonstop basketball since Thursday at noon. Yeah, I definitely watched a good amount on Saturday.
So Saturday was not the best weather day here in northeast Pennsylvania. It was pretty much pouring rain all day. So I did watch a good amount on Saturday and then yesterday on Sunday I watched a couple later games which was, which was good. Same here. Spent a lot of time this weekend watching some basketball.
Always a good time of the year. A lot of upsets in the first round. I would say I was pleasantly surprised by some of them. But second round, it got pretty interesting. I think for the most part, most of the higher seeds won in the second round.
Yeah, I think every single higher seed won besides Clemson beating Baylor. Yeah, Kansas was a lower seed than Gonzaga, but Kansas is missing their best player. So I know Gonzaga was supposed to win that game. Yeah. One of the rare times that a higher seed, I think went in as an underdog.
Yeah, Kansas is my favorite team, so. And normally I pick them every single year to win. So this year I was hoping that everybody would be able to get healthy and make a run in the tournament. But missing your best player obviously completely stutters that. I feel like Clemson, they're.
I honestly, I don't think I've watched them play all, all season long, but I feel like they're, they're just like stuck behind UnC Duke. You just never hear about Clemson came out of nowhere. I don't think I watched them at all this year either. I thought James Madison would have hung with Duke a little more yesterday. I was surprised.
I mean, they were down 20 to 30 almost the whole game. Yeah, that was, that was a destruction. Yeah. Yeah. Yeah.
I didn't watch the Houston game last night just because it was on pretty late here in the east coast, but obviously that went into overtime. So they had a little bit of a scare there. Who's the highest seed left? Isn't there a double digit seed somewhere? Nc State.
Oh yeah. Okay. Because they're at eleven, they beat Oakland so they had to play Marquette. Now that'll be tough. Marquette didn't look too impressing over Colorado, I will say that.
Yeah. Some of these sweet 16 matchups look pretty darn good, though, looking at the, the bracket here, I think that Duke Houston game should be that should be a great game. Wait, Duke Houston? Yeah. Oh, wow.
They already played each other. Yeah. The Sweet 16. I did not realize Duke was a four seed. I thought they were like a two or three.
Yeah, no, that'll be a good game. I'm looking forward to Purdue and Gonzaga. I think Zach Eaty's pretty good player for Purdue. Yeah, he definitely is. Yeah.
Yeah. There's a decent amount of good games now coming up. Going into the Sweet 16. We didn't start this podcast at the beginning of the tournament, but who did you guys have as your champion and your final four? I'll go first.
I was sitting at 99.8% until baylor lost yesterday. I had Baylor winning the whole thing. I somehow had a perfect first round in one bracket, which is the first time I've ever done that. Pure luck. I think I've watched maybe 2 hours of college basketball all season, but.
So you picked all 32 games, right? Yeah, I had. I had grand canyon, Oakland. And what was the other one? The JMU.
I had JMU and just, just pure luck. I only filled out two brackets and the first one was like teams. I seriously thought the second one was art. I'm going to throw some shots in the dark here. Once the second round happened, I dropped to, like, you know, 60%.
Yeah. Losing. Yeah. Losing the champions. Tough.
Yale over Auburn was another good upside. The first round. Yep. So, yeah, I have Houston as the champion, and then I have uconn, arizona, creighton and Houston in the final four. Yeah, I have three of the four, my Final Four picks still remaining.
I have Yukon, North Carolina and Creighton. And then I had Kentucky, but they obviously got knocked out the other day. And I have UNC winning the whole thing versus Creighton. Oh, that would be pretty decent upset. Well, UNC is obviously a one seed, but Creighton's a three seed.
I don't think many people have UNC winning in a row. UNC is one of those teams, though, unlike Kentucky. I mean, Kentucky's been doing a lot of the one and done recruiting. I mean, basically they get the star players in there, they come in for one year, then they leave. I think UNC, I saw.
I think they might be the oldest team in the NCAA. I saw. Really. Do they have any freshmen? I don't think so.
They might have won, but I think they hit the transfer portal pretty good. Yeah. The last year. And they have guys who've been in their roster for, I don't know, two or three years or longer. It will be interesting to see and I know we spoke a little bit internally about this last week with Kentucky losing the first round.
So what are they, one in four in the last five tournaments or something like that? Always like a top three seed. And then their coach, John Calipari, came out and said that he may have to start looking at doing some things differently, especially when you start looking at their record recently into the NCAA tournament about not going after some of the freshmen that are just, you know, going into the season, they're going to be one and done because a lot of these teams here recently are teams that aren't one and done. They have a, they have a lot of seniors, juniors or as you were saying, John, potential transfers from other schools that were around for a long time. I know just looking at the bracket here quickly, like Purdue is one of those schools.
I know they have a lot of returning starters. Gonzaga, I know they lost a lot of, of seniors last year, but they kind of just built that foundational program up where the kid, the guys just stay and it just seems to have lasting positive impacts in the, in the tournament. Yeah, I think Houston's the same way. Yeah. Think of like Villanova and Jay Wright.
That was kind of his bread and butter. I mean, he would recruit like great athletes, but he kind of had that foundation built and they just stayed for the three or four years and by the time some of those recruiting classes got to year three and four, they were competing for national championships. Yep, I know that's what Kansas said. They were going to start doing a little different after the COVID year and then they won the championship in 2022 because before that they didn't win since the early two thousands because they had so many players that were doing one and done. Like Joel Embiid, Andrew Wiggins.
Like they had all the top talents, but they were just doing one and dones and they were always going into the tournament as a one and two seed, but then getting knocked out pretty early. Yeah, I think Duke's another one of those schools who got kind of in the one and done trap. I mean, they're similar. Kentucky there. Yeah, they're getting first round draft picks to the NBA, but they haven't.
I mean, they been making it some runs in the, in the tournament but not really competing for national championships of late. Do you think we'll stop seeing some one and dones now that players in college are making some real money? I think so, because now a lot of the high school players can go to, what is it, the G League? They don't have to go so they can go to the G League and then go directly to the NBA. They don't have to go to college.
So it'll be interesting to see how many do that compared to going to college, staying a little longer, but, you know, making a couple hundred thousand or not millions while in college with the nil money. Right. Sean, from like a coaching preparation aspect, isn't that, isn't it hard? I mean, you get a new athlete in there for one year, integrated him into your program and coach him up just in one season? Yeah, I think it's hard from a coaching standpoint that it's a new system.
You know, he's going to have his own way or his own way. He was taught things, and for any player to be extremely successful, just like in anything else you do in life, you need to just be completely coachable and fully, you know, adapt this new system and you, whatever it is, a new style of play. And then from the other standpoint, it's like a teammate kind of thing. You know, how do you, how are you a really strong teammate if you've been on four teams and, you know, three years? That's always extremely hard.
And I think a lot of people overlook that and think, oh, well, just basically, college sports are almost like professional sports now. Whether, you know, pros or college, you know, the best of the best, like, doesn't really matter who they play with. And I think that may be right for a couple games. When you get into the tournament and, you know, there's 10 million people watching your game and you're coming down to the wire against, you know, if you're a number one seed and you got a second round, you got a, you know, double digit seed in a close game, that's, that stuff does matter. Yep.
So I think there's a couple different things that make it difficult. I'm not a big fan of the way the transfer portal set up now, but that's a conversation for another day. Yeah, yeah. The transfers are always, it's, I mean, it's gonna get more crazy every single year going forward. I mean, we saw it in football this, this past season, just with the amount of transfers that we're going from one top program to another top program because potentially there's an opening at the other program where they're getting more money.
And I'm sure the same thing happens in college basketball, too. So if you would have told me five years ago that the quarterback of the Ohio state Buckeyes would leave Ohio state to go play for Syracuse, yeah, I would say you're nuts. And it's, now granted, there could be things going on. I always feel that, yeah, 17 or 18 year old, that's a big decision to make, especially if your coaches, you know, coaches leave or, you know, there's an overhaul on the staff, things like that. I think you should get one free transfer because of that.
Those reasons that when you're 17 or 18, it's hard to make that big of a decision. Get one free one, and then that's it. Yep. I think you're just seeing guys chasing money now at, you know, age 1819. I think it's going to affect sports at some point.
Well, that's kind of what Nick Saban said a little while back when he, he retired. He said, I don't know if it was every Sunday during the summer, he would have recruiting, like, brunches at his house with his wife. And he said back in the day, the players want to talk football. And since the, the money started in the transfer portal, these big time recruits are coming into his house and saying, how much money can you give me? It was no longer about the X's and o's.
It was all about the dollar figures. And he's like, up, it's my time to leave the game. Time to retire. I wonder that, like you talked about John Caliper, you know, I'm sure he's a great coach, but at what point does it not become about what does John Calipari know about basketball? How good of a salesman is he?
Yeah. Can he go, can he go raise money for these kids? He kind of, he kind of, like, gave a salesman pitch during his press conference before the tournament even started. And he was throwing out all the stats about how 70% of the recruits that he gave a scholarship going into college made it into the NBA, 75% of made a second contract in the NBA. And out of all the recruits that he's recruited to Kentucky, they've earned over $4 billion in the NBA.
So, great. So they go to the NBA. But then you look at how Kentucky's actually been performing recently in the tournament. They're like, one, it's either one in three or one in four in the last four or five years. Year.
And that's when he said after they lost to Oakland, that maybe he does have to start looking at it completely different if he actually wants to have a good basketball program. I'm sure the players love hearing that. But at some point, his boss, his employer, meeting the school of Kentucky, is going to say, like, hey, man, what's going on? Why can't you win a tournament game? You've got all these great stats, but why does that not translate to winning championships?
Did you see Deon Sanders comments about his son entering the NFL draft? No. So basically Deon said that, hey, son's probably going to go the NFL draft next year. Yeah. But there's specific franchises or teams that they would opt out of if he, if that's where he was drafted.
So they're basically dictating where he's going to go play for. And he basically said, my son made x amount in college. He can afford to kind of dictate where he wants to go because of the nil money that he received. So say for an example, you know, he's the number five overall pick in 2025, if that picks is the Giants, and he doesn't want to go to the Giants, he'll just tell them during the draft process, hey, if you draft me, I'm not going to sign. Pretty much he falls to a team that wants to go play for him.
Pretty much. That's crazy, I guess. Eli Manning. Eli. Yeah.
Eli Manning did that, correct? Yep. Elway told him he was going to go play baseball. I think. Really?
I didn't know that. You start walking a dangerous line with sports when you start doing that. The only more recent one I could think of is Kyler Murray. He was a top draft pick in both baseball and football. I think he got picked, like, number six overall in baseball.
Was he the number one overall pick in football, too? Yeah. And I think he had to make the decision of which one he wanted to go with. Obviously, he went with, with football. You see any of the betting figures that kind of go into March Madness?
I think the last number I saw, like, draftkings is going to be in the billions. Yeah. The amount of money that's being bet on these games and that's just like legal betting through their sports books. Not all the, you know, side brackets that, you know, we set up with our friends or we do with our family and friends. I mean, it's a cheap, you know, $10 entry or whatever, but I could, I assume there's a huge amount in that throughout the country, too.
Right? I know we spoke about picking up sets is a lot of fun. And obviously, there were a ton of upsets in the first round. And then when you look at the, you know, second round over the weekend on Saturday and Sunday, there was really only one, one upset with Clemson. Beating, beating, beating Baylor.
I'd say, you know, we all have clients who probably, you know, come to us and say, hey, find me the next Nvidia that's trading for $2 a share right now. I think everybody, everybody, you know, if everybody could do that, people like, you know, us wouldn't. Wouldn't need jobs. Picking the underdogs is great. It's exciting, it's fun.
You want to go pick your own stocks? I think there's a place for that. Maybe if you have a, like a small count that you like to go play with and, you know, do those things if it makes you happy, like, do that research. But in the end, like you said, Cody, no seed lower than an eight has ever won the national championship game. Yeah.
So going back over the last 40 years, the lowest seed to win was an eight seed, which won one time, seven seed one time, six seed one time. So three times over the last 40 years, there was a seed higher than a six seed one. The rest are between one and four seeds, with over half of them coming from the number one seed. Relating that to finance it, building a strong portfolio of good funds or good companies is important. Over time, it's going to do what it's supposed to do.
Whereas, yeah, you may get some luck picking a cowboy stock out there, if you want to call it that, but if you keep doing that, over time, you have a pretty high chance of getting burnt. Yeah. Specifically, this March madness, there were multiple double digit seeds upsetting, you know, the lower seed in the first round, but then pretty much all of them lost over the weekend. Like, there's only one double digit seed going into the sweet 16th, and that's NC state, and that's because they played another double digit seed in Oakland. Every other double digit seed lost.
So while it's fun, you know, and it may work in the shorter term, like, it worked the first couple days in March madness, but when you're looking longer term out, it doesn't always work. Yeah. And I think you can say it's fine when it's a small amount of money, but when you get deeper into the bracket or more serious in your financial life, you probably want to really consider why you're doing that. And if there's a method to your madness, or are you just watching the news and saying, oh, that sounds great, you know, let me just go buy some of this. Right?
Because when, as you get more serious or further along in your life and the numbers become bigger, the consequences are more serious, meaning retirement, you have a family, homes, mortgages, all these things, you want to really have a strong foundation as to why you have the investments you have similar to the market. You don't want to be in the final four just throwing darts at who's going to get there. Yeah, I also think we're kind of doing something very similar to what the college basketball programs are doing, the players, the coaches. I mean, we're kind of preparing individuals for long term success. We're diving into kind of what Sean said, the portfolio aspect, looking into their mortgages, expenses, all of those items.
We're preparing in a similar way as what they're doing to head into the March madness here. I think it gets more important as the clients near retirement age. I mean, specifically, just if you have a household who has 75% of their assets and say they're 401 ks and they rely, they need to rely on those assets for retirement income, maybe they have a little bit of Social Security out there, but if they have to take all their dollars from that one bucket, I mean, there's going to be some pretty significant tax consequences. But we can kind of back into different asset location, maybe put some assets in a Roth bucket, taxable bucket that helps tremendously in retirement and tax efficiency. Yeah.
If you think about a one and done the majority of those programs, all, not all, but maybe 60% of the points that were scored that year are not going to be there the next year. So they completely redo it. So if you think about that on the investing side, we're not going to completely over change a investment portfolio from one year to the next year. We're thinking about the longer term. Sure, there's going to be some tweaks.
Whether you do some rebalancing, if you had a run up in stocks, rebounds, sell a little bit, or maybe one fund, we're switching to another fund because we like the outlook better going forward. Sure, there'll be a little bit of tweaks, and I think that's where you've seen recently in March Madness is a lot of the programs are looking to have their players for a longer time instead of the one and dones because there hasn't been a ton of success with that. I saw a great chart the other day. I think I was watching financial news and it was kind of a parody, but it said it was performance on one axis and it was activity level on the other axis. And the more activity you had, the less your performance.
And it was a parity. It's like you never give the funds or your positions a chance to do what they're supposed to do. If you sit on them for a couple weeks or a couple months, and then you want to change them right away. And also that becomes extremely expensive, depending on, number one, are you doing in that taxable account or an IRA? If it's a taxable account, you could be giving yourself one.
A lot of short term or long term gains, depending what you're moving around. And then also you need to be aware of any trading fees that you have or platform fees that, you know, you start doing that, those things add up and just eat at your returns. Yep. As advisors, too, it's tough when you have a year like 2022, everything's down, stocks, bonds, and then obviously we had a very good year last year in 2023 where everything bounced back. I think one thing to point out that a lot of clients still don't understand is fixed income.
So, I mean, in fixed income, 2022 was one of the worst years ever. Last year, even though the Fed still rose interest rates throughout the year, fixed income was up. Depending on what fixed income asset you had, the fixed income was up between five and 6% last year, even though the Fed never cut interest rates. So I think that's still a huge opportunity going forward. And when the Fed does cut interest rates, you could potentially be locking in the yield right now and also get a principal increase in fixed income.
I saw an article, I think it was in the Wall Street Journal probably a week or two ago. They're talking about fixed income next couple month outlook, or maybe your outlook for interest rates. And they were kind of talking about like millennials, Gen Z people in like their thirties and forties who've been so successful with just dollar cost averaging into maybe the S and P 500 or large cap growth funds, they've been getting double digit returns over the last decade or so. Yeah, for people in their thirties and forties, do you think fixed income has a play into their portfolio with their long term horizons? If it's inside a 401K or an IRA where you are still adding into it and you're still not going to touch it for 30, 40 years down the line?
Sure, you can make the argument to have a small percentage in fixed income rebalance. Maybe your current portfolio have a little bit in fixed income, but I still think it makes sense to be very aggressive. If you're talking about a brokerage account where you may be using some of those funds to make an addition onto your home, buy a new car, that you may have to pull out a percentage in the next couple months, that's where I think you need to build in an allocation of fixed income. So you have that stability. The stability was tough in 2022 because the Fed went from zero to 4%.
But then we have years like last year when they still went, when they went from 4% to 5.25. So they still raised interest rates over 1%, but fixed income was still up five to 7%, depending on your holdings last year. I agree. I mean, you look at a 30 year old in a 401K plan, they're statistically going to see what, three, if not four complete market cycles before they retire. So I think a lot of it has to depend on the person and what kind of stomach they have for volatility.
There are some people who just cannot handle it mentally. And I think then you have to maybe have to have a little bit different of approach because you don't want your finances keeping you up at night. But I think you're right, Cody. In the long term, for those of us in our thirties and forties, those market cycles inside of our 401K just create market opportunities. Yep.
So we were talking about things that we wanted the Eagles to do and the free agent signed, we signed Barclay, which is awesome, especially as a Lehigh Valley native. Seeing him come to the EaGles is awesome. We signed a pretty good safety. We got a linebacker. So it looks like the Eagles are making, making some moves where we wanted them to.
Not to forget Cody, a good, solid backup quarterback, too. Kenny Pickett. I don't know. I don't know what, why that decision was made. Maybe we'll find out on draft night.
But I think one of the major reasons why they did that is his salary cap hit is really low for 2024 and 2025. So I think it's only like 2 million per year where if you're, if you're signing a free agent quarterback, you're, I mean, they're getting paid close to $10 million. Like we just saw Marcus Mariota, who was the backup for the Eagles last year, got $10 million to go somewhere else. So if you can have a decent quarterback for one 10th of that, that's where I think it makes sense to, you know, make a trade like that, to be a fly on the wall for those conversations. Yeah, I know those GM's rooms would be awesome.
I'll say. This is Harry Roseman season. This is what he, he's best at, and he's kind of proved it again this offseason. Yeah. One other exciting thing, opening day.
Opening day for baseball. So I know John and I are excited about the Phillies. Sean, who do you who do you follow? Do you follow the Phillies in baseball? Big Phillies fan?
Yeah. Okay. All right, perfect. So we're all on the same side for, for baseball to. So hopefully the Phillies for once will start off on a good foot to start the year and not be ten games below 500, you know, through April in May.
So they're pretty healthy besides Taiwan Walker, but it looks like everyone else knocking wood is healthy going into the season. Yeah, I'm not going to make any predictions because my NCAA tournament prediction didn't even make the tournament. I'm just going to hold off on my thoughts on the movie Indiana State. Aren't they in the nit? Yeah, and I didn't even watch the nit.
I was so mad they didn't make it. I saw Buster only on ESPN. Had the Yankees Phillies in the World Series with the Phillies winning it all. Oh, really? Yep.
The Yankees. Yeah. I didn't even know they were supposed to be that good this year, especially since Garrett Cole's gonna be out for. Yeah. Yeah.
I guess the, the Soto trade. Oh, yeah. Yeah. Pitching wise, I'm not sure that's a tough division. You got.
The Rays and the Orioles in there had great seasons last year. Yep. And the Red Sox are always solid and they fell off a little bit here recently, but they're always pretty, pretty good. Yeah, I know Dennis is pumped up about Baltimore, so. Yeah, it's crazy how talented they are.
And their top prospect could be playing in the MLB right now, but I guess they're going to send them to minor leagues for a little bit because of that. If they send them there for like one or two months, they get an extra year of control over them. Isn't their entire team like mid twenties or younger? Like obviously minus a few players, but I think they're all pretty young. Besides Craig Kimbrough.
Yeah, they can have him. He was. It was a disaster for the Phillies at the end of last year. They are stacked though. They got so much talent and now they have a new owner too.
So I'm sure they'll probably be making some trades towards the trade deadline in the summer. Good time. And then now hopefully the weather is starting to get nice here in Pennsylvania too. Let's hope. Yep, the march to Red October starts.
There we go. We hope you enjoyed this episode of Coachable wealth, brought to you by Morton Brown Family wealth, an SEC registered investment advisor. This podcast is designed for educational and informational purposes and not intended as investment advice. More information can be found at www.mortonbrownfw.com.