The NCAA selection committee will announce on Sunday night the field for the 2022 NCAA Men’s Basketball Tournament. Ready or not, “March Madness” begins later this week.
The tournament begins with 68 teams (including the four “play-in” games). A total of 63 games will determine the NCAA Men’s Basketball national champion.
Office pools and bracket challenges will be a constant topic of conversation. Via text, e-mail, or in-person. The most casual of college basketball fans need an even playing field. The process of seeding each tournament team began in 1979.
Seeding is to make sure the strongest teams did not end up meeting each other too early in the tournament. It comes as no surprise that the NCAA does not want to threaten television ratings and ad revenues.
A team with a high seed is the stronger team. Based upon qualitative and quantitative evaluation. That team often has more talent and better coaching than the lower-ranked teams.
Past performance has not guaranteed future success for all the high-seeded teams. Itis a good starting point for the average fan’s tournament bracket picks.
Look at the chart listed above that includes data compiled by CBS Sports and ESPN. I found this image in a recent article from NASDAQ Dorsey Wright.
As you can see below, the top-seeded teams win about 80% of the games they play. Meanwhile, the 13 – 16 seeds combine to win 11% of the games they play.
NCAA Seeding Statistics (1985-2021)
- Number-one-seeded teams have won the greatest percentage of games, at 80%.
- Top three-seeded teams have combined for a record of 1089 wins and 400 losses, a winning percentage of 73.19%.
- By contrast, the bottom three-seeded teams (14-16) have a combined win total of 36 games. That is 7.69% of their contests in 36 years.
- Top five-seeded teams have produced a winning percentage of 68.12%. While the bottom five have won 17.05% of their games.
- Top-seeded teams have won more games in tournament history (484) than the bottom three seeds have played (468).
- The National title has been won by a team with a #4 seed or higher in 33 out of the 36 years.
The NCAA Men’s Basketball Tournament brackets are a perfect analogy. Seeding (or ranking) is a common-sense process of selecting your 401(k) mutual funds.
Each mutual fund on your 401(k) retirement plan menu is ranked by investment performance. In technical analysis, the process of investment performance ranking involves relative strength.
Mutual fund relative strength ranking includes investment performance versus stock market benchmarks. Another part of the calculation is investment performance versus peer group mutual funds.
Relative strength ranking of 401(k) mutual funds can improve long-term investment performance.
This ranking can identify the strongest 401(k) funds to own in any given stock market environment. Relative strength ranking answers the 401(k) investor question of, “What do I buy?”
Do not continue to own an assortment of lower-seeded mutual funds in your company 401(k). An independent, third-party investment advisor can provide the current mutual fund ranking information.
Each year in the NCAA Men’s Basketball Tournament, there are Cinderella teams and upsets. But the long-term statistical odds favor the higher seeded teams.
You cannot continue to rely on upsets to fund your retirement. When you need to pick your company 401(k) retirement plan mutual funds, whose side would you rather be on?
Ric Lager
Lager & Company, Inc.
