In the last few years, the NCAA implemented a slew of changes to big-time college sports. One of the biggest changes was to the transfer portal which allows student athletes more flexibility and choice to transfer to any school they feel is a better fit.
Historically, they had to sit out an entire year just to transfer. From a high-level perspective, the portal is a great thing and a huge benefit to student athletes.
However, like everything else in life, change can have unintended consequences.
Between August 2019 and July 2020, a record 1,583 football players entered the portal. Fast forward a few years and 8,699 players entered the portal between August 2022 through May 2023.
It is now essentially unrestricted free agency and the grass is greener mentality is alive and well. There are currently 363 NCAA D1 schools, and their players are changing schools at warp speed. Top players leave good schools to look for "greener" pastures.
While we will have to wait and see the ultimate impact the portal has on the schools and the players, there is a striking parallel with investing in today’s world.
The world of investing has been dealing with its own increasingly flexible version of the transfer portal for decades. But unlike having 363 choices, as an investor, there are literally hundreds of thousands of choices with more being added every day.
Currently, there are more than 58,000 publicly listed companies, over 137,000 mutual funds and about 8,750 ETFs today. Talk about choices!
In addition, there are thousands of choices for insurance related products with “investment components” such as annuities, whole life, and universal life insurance.
You can also invest in precious metals, rental real estate, commercial real estate, collectibles such as bourbon, wine, sports cards, classic cars, etc. You name it, you can now invest in or trade it. I’m not even counting the guy who wants you to invest in his restaurant or latest start up.
Why stop there? We can now “invest” in bold new endeavors like cryptocurrency and NFTs. In fact, there are currently more than 22,900 different crypto currencies.
Not only that, but these are delivered to us incessantly, 24 hours a day through hundreds of outlets and information sources. Each pitching their products and services or preying on consumer fears.
(Pause for dramatic effect)
Whew… it’s a lot.
In short, there are literally hundreds of thousands of choices and endless opportunities to make terrible investment decisions.
When you combine this with everyone wanting to avoid any thought of pain while seeking immediate satisfaction; you get one hell of a cocktail for a lot of unhappy, very unsuccessful investors filled with sound and fury signifying nothing.
More choices and freedom are a good thing… to a certain extent. However, too much freedom of choice has a dark side as well. The fact that having some options is good doesn’t necessarily mean that having MORE options is better.
In fact, studies show more choice contributes to bad decisions, anxiety, stress, dissatisfaction, and even clinical depression.
When we have no choice, life can feel unbearable. As our number of available choices increases, the autonomy, control, and liberation it brings are powerful and positive. But as the number keeps growing negative aspects begin to appear.
As the number of choices grows further, we become overloaded.
At this point choice no longer liberates, but instead debilitates.
As Barry Schwartz says in his book, The Paradox of Choice:
“Learning to choose is hard. Learning to choose well is harder. And learning to choose well in a world of unlimited possibilities is harder still, perhaps too hard.”
The paradox of choice states that while we might believe that having multiple options makes it easier to choose one that we are happy with, having too many options actually requires more effort to decide and can leave us feeling unsatisfied with our choice, or lead to not making a decision at all.
Without a goal-focused, long-term plan, rooted in patience and discipline, our portfolios, and our lives, constantly chase the next trendy headline in search of immediate gains and avoiding loss or pain.
“No Pain No Gain” is not limited just to sports, it applies to investing as well.
There are no gains without the potential short-term loss.
That does not exist.
Everything has a risk, a trade off, or a consequence.
While time will tell for the long-term effects of the NCAA Transfer Portal, less is more when it comes to investing. Whether it be the number of trades you place in your account, choices in your 401k, or simply where you focus your time and energy, history is clear that the more choices you have, the worse you do.
In a lightning-fast world of endlessly increasing choices, 24/7 news and free, limitless trading, when it comes to investing, we’ll take good old-fashioned patience and discipline every time.