By Billy Lanter 

March is one of my favorite times of the year. It marks the official start of Spring, the end of daylight savings and one of sports’ greatest events: March Madness!  

Every March, millions of people fill out a bracket (or two….or three), looking for the next Cinderella story while also trying to avoid the inevitable bracket buster upset. Of course, part of the fun lies in knowing that by the end of that first weekend, many brackets will be toast.  

March Madness is unpredictable to all, emotional for fans and humbling for analysts. Sounds a lot like investing in capital markets. 

We regularly see too many people either betting too heavily on the “top seed” stocks or alternatively, putting too much weight in their Cinderella story company. So, how can you prevent your portfolio from being busted if a major upset occurs? 

Top Seeds & Concentration Risk 

Almost every year, a top seed in the NCAA tournament has an “off” night and gets knocked out early. For those who took that team to the Final Four… bracket busted. 

In the investing world, we call this concentration risk. Building a portfolio around one or two dominant stocks, or more often, one leading sector of the market, is fun when times are good but not so fun when things go wrong. Maybe it’s been unstoppable for years, but upsets can and do happen. Great companies stumble, and overexposure only magnifies the damage. Conviction for a sound investment is a good thing, but measured risk is even better. 

Cinderella Stocks 

The most fun tournaments often produce an underdog that captures headlines and hearts across the country. It’s exciting, it makes you want to believe and it draws in people who aren’t fans but want to watch the magic continue.  

Markets have their own Cinderella stories. In today’s world, these investments are often fueled by hype and internet buzz. GameStop and similar “meme stocks” come to mind, luring in people who have no investment knowledge but are hoping to ride the wave. Momentum and increased fandom can carry a team, or a stock, farther than logic would otherwise suggest. But remember, reality always shows up, and fundamentals do matter. Chasing these investments is often a losing strategy for long-term success. 

While a busted bracket may only cost $5 in the office pool, a busted portfolio can cost years of financial progress. That’s why at American Trust Wealth, we focus less on short-term predictions and more on a prudent process that keeps long-term goals alive. As part of that process, our American Trust Fiduciary Monitoring Index takes the guesswork out of investment selection, with a proven track record of helping identify and retain top performers.

Not sure if your portfolio is built for the next wave of “bracket busting” news? Contact our team today for a free consultation.