With the NCAA basketball tournament in full swing, anyone who is interested in "March Madness" has filled out their brackets. Some are happy with their picks, though many are disappointed their favorite team is out of the running.

While it helps to pick the ultimate winner, the best strategy is to be sure you select enough teams that will survive through the early rounds. In many ways, picking teams for the March Madness tournament bracket is similar to developing your stock portfolio.

In Pictures: Learn To Invest In 10 Steps

It's All About the Odds
If you arrive at the last couple of rounds (the Sweet 16, the Elite Eight and the Final Four) with more teams than anyone else, you have a good chance of winning your pool. When you're picking stocks that have a chance to beat the market average, the same logic applies. As your winning picks progress through each level, you collect more points. The more stocks you pick that do well the more your portfolio will reward you. If you arrive at the final rounds with more teams (or stocks) still playing you will likely win.

While it is wonderful to pick the winner, the probabilities work against you. Like putting all your money in one stock, you leave yourself open to disappointment should the game or stock not work out as you hoped.

A portfolio of good stocks based on the factors that you deem important is more likely to deliver the profits you expect. While one or a couple of your stock picks might disappoint you, the remainder will deliver good results. As long as you are beating the average, you are ahead. (Learn about how March Madness can affect players' careers; read The March Madness Effect.)

Here are a few good strategies that apply to your tournament selections as well as to stock picks.

  1. Don't pick with your heart.
    Picking a team just because it is your alma mater does not mean it will win. There needs to be more fundamental or technical reasons to pick a stock or a team. The counter to this is if you like a stock for solid reasons, then it might be a good choice. Maybe your shopping trips have shown you that a certain retailer has lots of traffic and people are carrying their bags more than others. This is a good sign your favorite retailer might be doing better than the rest of the crowd.

  2. Coaching experience matters.
    Quality coaches can make a difference. The same holds for corporate management. If management has the experience and proven skills to navigate the company, this can be a good pick. Quality management is one of Warren Buffett's most important rules in picking winning stocks. (Learn more about Buffett's techniques in Warren Buffett: How He Does It.)

  3. Be careful picking upsets.
    While they can be exciting, they are dangerous if they do not win. Buying a high-risk stock with an unproven track record might be exciting until it fails to deliver the profits you expect. That doesn't mean you shouldn't have one or two potential high flyers in your portfolio; you just don't want to stake your entire fortune on them.

  4. Do your homework.
    There is a wealth of data on the teams and the probability of them making it to the next round. The same applies to stocks. Good research gives you a leg up on everyone else.

Financial Slam Dunk
Winning your pool is exciting. If you follow a few good rules, you have a better chance of coming out on top. Like picking stocks for your portfolio, if you follow well-founded rules your chances of owning a winning portfolio will increase. Good luck in the tournament and in growing your portfolio.

Catch up on the past week's top financial news in Water Cooler Finance.

Related Articles
  1. Investing News

    What Does the Fire Monkey Mean for Your Portfolio?

    The Chinese new year this year corresponds to the monkey, a quick-witted, playful, tricky figure that means well but has a penchant for causing trouble.
  2. Investing Basics

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  3. Products and Investments

    A Guide to DIY Portfolio Management

    These are some of the pillars needed to build a DIY portfolio.
  4. Investing Basics

    Choosing the Right Financial Advisor

    The right financial advisor for one person may not be right for another.
  5. Savings

    Banks: Brick-and-Mortar or eBank?

    Brick-and-mortar banks and ebanks usually offer the same services, but there are differences between the two.
  6. Your Clients

    New Year's Resolutions: How to Help Clients Adhere

    Clients setting new resolutions is one thing, but it can be hard to achieve financial goals for some people. Here's how advisors can help.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Your Practice

    Retirement Planning for the Wealthy: Top Tips

    A recent study shows a few key areas of financial planning that advisors are overlooking for wealthy individuals. Here's how to better help them.
  9. Financial Advisor Technology

    5 Robo-Advisor Predictions for 2016

    One of the fastest-growing sectors within the financial services industry, robo-advising will see many changes this year. Here's what we're likely to see.
  10. Retirement

    How Women In Transition Should Mind Their Finances

    A whopping 70% of female clients leave for a new advisor after the death of their husband or a divorce.
  1. Do financial advisors charge VATs?

    The Personal Finance Society (PFS) and with Her Majesty's Revenue and Customs (HMRC) have outlined when a value-added tax ... Read Full Answer >>
  2. Do Sallie Mae loans go directly to your school?

    Sallie Mae is the biggest provider of financial aid and student loans in the United States. The company operates as a private ... Read Full Answer >>
  3. What are working capital costs?

    Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into ... Read Full Answer >>
  4. Do financial advisors get paid by mutual funds?

    Financial advisors are reimbursed by mutual funds in exchange for the investment and financial advice they provide. A financial ... Read Full Answer >>
  5. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>
  6. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center