This week, employees will be laser focused. The focus is not on their work. Instead, these employees need to fill out their brackets for this year’s NCAA college basketball tournament.
The American Gaming Association reported last week that over 40 million Americans will take the time to fill out 70 million brackets for this year’s NCAA basketball tournament. Those same people will wager approximately $9 billion on the tournament.
Consider these two facts for some perspective. About $3.9 billion was bet on the Super Bowl in February. About 66 million people voted for President Barack Obama in the 2012 election.
Not many people are college basketball experts. Picking the winners of 63 consecutive tournament basketball games in a row is a monumental task. For that reason, the bracket seeding process takes on a very important role.
The seeding process ranks basketball teams based on qualitative and quantitative rankings. In the NCAA’s proprietary seeding system, higher ranked teams play lower ranked teams in every tournament game. From 1985 through last year, the number 1 seeded teams have won 79.64% of their tournament games.
Once every few years a lower seeded team that wins a game over a higher seeded team. But it does not happen very often. The top five seeded tournament teams have won 68% of their games since 1985. The bottom five seeded teams have won only 17% of their tournament games since 1985.
Are you aware that a similar seeding process is available for the default menu of mutual funds in your company 401(k) retirement plan account?
Independent rankings available for all U.S. mutual funds on several different measurements Short-term performance, long-term performance, performance versus a peer group, and performance versus a popular stock index are just a few of the rankings available.
One of the most important considerations the NCAA tournament committee makes is head-to-head comparisons. When teams play each other during the season, the winner is awarded a higher seed in the tournament.
The same comparisons can be made on your company 401(k) retirement plan menu. Every mutual fund option available can be seeded against all the other options. The seedings will allow you to make better informed investment management decisions on your company 401(k) retirement plan options.
You probably own a mutual fund or two in your company 401(k) retirement plan account that is not a high seed. These mutual funds have gone up in value based on the good stock market environment over the last few years. But the investment performance is likely to be far behind the investment performance of the best mutual fund options on your company 401(k) retirement plan menu.
You currently own a number 12 seed mutual fund. The investment returns percentages would have been much higher if you owned a number 1 mutual fund seed.
Think about your company 401(k) retirement plan menu as a different kind of bracket challenge. Use the seeding tools available in order to improve your company 401(k) retirement plan investment performance.
Get your NCAA brackets done on time before the first games on Thursday of this week. Then use the same seeding tools to make better sense of your company 401(k) retirement plan menu. Focus on your ownership on the higher seeded mutual funds.
Ric Lager
Lager & Company, Inc.
