2018 NCAA Tournament: Treat your March Madness bracket like the stock market

2018 NCAA Tournament: Treat your March Madness bracket like the stock market

I don't know what is more unpredictable; the stock market or the NCAA Tournament. At least with the stock market there are icons like Warren Buffett and Ray Dalio who have at least had repeatable success over long periods of time.

With March Madness there are no celebrity pickers. No billionaire bracketologists. The bracket experts on TV make weatherman look infallible.

The odds of picking a perfect bracket are about as close to impossible as it gets. The odds of getting a perfect Final Four are also extremely difficult. It raises the question, "Is there any such thing as good bracket advice?" If the person who watches college basketball all yearlong has no better chance than a person picking by school colors, then is there really any science to this at all?

Let's start with stocks

The way to bring some sense of order to stocks is via an index fund like the S&P 500. Instead of 4,000 stocks, now there's a group of 500 high performing companies all with a certain level of revenue. It's easier to do well here, because you're dealing with all No. 1 and No. 2 seeds.

I wanted to do the same thing for college basketball. So I ran some numbers. Since the year 2000, here were the top performing college basketball stocks. Top performing meaning most wins, on average, in the NCAA Tournament.

  1. North Carolina - 3.13
  2. UCONN - 2.75
  3. Florida - 2.64
  4. Kansas - 2.5
  5. Kentucky - 2.46
  6. Duke - 2.38
  7. Michigan State - 2.28
  8. UCLA - 2.23

You can view the full spreadsheet right here.

Few things to point out:

  • UCONN's stats are annoying. They've missed the tournament five times in that span, it's almost like they decide if we can't win it all, we're just not gonna go. Don't want to hurt our average. I feel like Kansas, Michigan State, and Duke should be able to toss out their lowest performing years for every NIT berth Kentucky, UNC, UCONN has.
  • Florida is sneaky reliable.
  • As a Kansas fan, I'm all too familiar with this idea that we always choke in the tournament. So I was pretty surprised to see us ranking ahead of Kentucky, Duke, Michigan State. However, we've been on the No. 1 and No. 2 line more often so the number should probably be even higher.

Should I just pick all No. 1's?

My other thought for the S&P was maybe it's really simple, just go with all the No. 1 seeds. That way you at least get one correct, probably end up with two or more every year.

But then you get a year like 2006. George Mason made the Final Four. No No. 1 seeds. It was an absolute Bear market.

However, if you swore off No. 1 seeds after that year, you would have missed out on 2007 when two No. 1's made it, and 2008, the first time ever we had four No. 1's in the Final Four. That means the "pick all No. 1" strategy would have gotten you 6 out of 8 over the next two years after it did zero for you the year prior.

It actually plays out similar to the stock market. The market tends to roar back after the down years. This was from the book Unshakeable, a stat I used in Financial Advice from the Philadelphia Eagles.

Market hit its bottom on September 21, 2001. Next 12 months, the S&P went up 33.73 percent.

Market his its bottom on July 23, 2002. Next 12 months, S&P goes up 17.94 percent.

One more time, market hits bottom March 9, 2009. Next 12 months, S&P up an astounding 69.49 percent.

So it's that simple then, right? Just like Buffet and Dalio suggest: do nothing, don't panic, stay put, don't try to time it. Just keep your money in the S&P and over time it's going to work out.

But then you have a half-decade stretch like this one when only four No. 1 seeds made it out of a possible 20 spots. Picking No. 2's or even No. 4's would have been just as effective as No. 1's. Hell, picking all No. 8's would have been half as efficient. Picking all No. 11's for five years would have been more effective than all No. 3's!

2010 2011 2012 2013 2014
1. Duke 3. UCONN 1. Kentucky 1. Louisville 7. UCONN
2. West Virginia 4. Kentucky 4. Louisville 9. Wichita State 1. Florida
5. MSU 11. VCU 2. Ohio State 4. Syracuse 2. Wisconsin
5. Butler 8. Butler 2. Kansas 4. Michigan 8. Kentucky

And of course, just like 2006, the second you decide to give up on No. 1 seeds, there's 2015 showing up to make it all look so frustratingly simple again.

2015
1. Duke
7. MSU
1. Kentucky
1. Wisconsin

The No. 1 Overall Seed

Ever since 2005, the NCAA Tournament has announced a Number 1 overall seed. Kind of like the Apple or Amazon of the field. That team certainly has to be reliable. Right?

The answer is a frustrating: sort of.

Of the thirteen No. 1 overall seeds, these have been the results. Worth noting: this year the No. 1 Overall Seed is Virginia.

National Champions: 3

National Runner-up: 3

Lost in Final Four: 1

Lost in Elite 8: 2

Lost in Sweet 16: 2

Lost in Round of 32: 2

Average result, then, would be 3.77. For context of what that means, a 3 average translates into an Elite Eight every year, a 4 average would mean Final Four.

Going back to the list earlier, the No. 1 overall seed is the most reliable pick ranking above North Carolina's 3.13. Interestingly enough, North Carolina and the No. 1 overall seed are both tied at three National Titles apiece in the same time span. If the UNC fan always wins your office pool, hey, that's why.

But you still have to maintain your nerves. This No. 1 overall seed strategy isn't one hundred percent effective. You would have had to weather Kansas losing to Northern Iowa in 2010 and Wisconsin knocking out No. 1 overall Villanova last year in the second round.

So what to do this year?

Using the strategy of college basketball's "S&P 500," a mix of taking the No. 1 Overall Seed and the Top Performing Stocks, your Final Four in 2018 would be Virginia, North Carolina, Florida, Kansas. Virginia would win over Florida in the final game.

Other things to note: You'd pick Duke over Michigan State in the Sweet 16 because of the 2.38 over 2.28. Kentucky over Arizona in the Round of 32.

A potential Virginia vs. Kentucky matchup becomes interesting in the South Region. John Calipari has an impressive 3.71 average as the head coach at Kentucky, 26-6 over seven years. But the No. 1 Overall Seed just slides by at 3.77.

I think the trick to March Madness is realizing you'll win your office pool, at best, like once or twice every ten years. This blog post, on paper, seems like sound advice but it's sound advice over a ten year span and I don't think anyone (myself included) will pull this post up in 2028 to see how it performed.

Just like no one knows whether the stock market will go up or down on a given day, or given year, the same can be said about the NCAA Tournament. This strategy of No. 1 overall seed + some combination of Blue Chip stocks will set you up well over a decade, but not necessarily that much better off for these next three weeks. That's what makes it all so fun. It's kind of like how in 2017 the person who had a million dollars in Bitcoin did better than the person with a million dollars in Apple or Amazon.

So go, get weird with your bracket. Take Nevada to the Final Four. Roll with New Mexico State to the Elite Eight. Pick teams because of their mascot. Or do a mix, have your Final Four and Elite 8 be mostly safe picks but save space for that one Bitcoin investment. In a tournament of madness, your strategy is just as logical as anyone else's.

And until Thursday, all of our brackets look perfect.

Medium Rare Basketball

If you want some help building a (slightly) better bracket, head over to my sister site MediumRareBasketball.com. We're going to have so much content up this week; blog posts, podcast episodes, some funny videos. We even have a Medium Rare Basketball - Printable Bracket with a handwritten touch.

Come check it out, and remember to avoid these common bracket mistakes.

Kansas fans, I'm really excited about this next piece of news. Whatever happens in the NCAA Tournament, make sure to check out my new ebook "14: A Look at the Kansas Jayhawks Historic Big 12 Streak." It's a trip down memory lane filled with nostalgia and KU basketball history; all the way from Wayne Simien to Devonte` Graham.

The rest of the month I'll be exclusively on MediumRareBasketball.com, and April I'll be sending posts out in the "Secret Stash" only available to email subscribers. If you'd like to sign up please send an email to me at chris@mediumraresizzle.com or enter your email in the box below. Thanks for stopping by and enjoy March Madness!

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