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OPHTHALMOLOGY BUSINESS 104 February 2015 by Roger S. Balser seeding also gives average sports fans a starting point from which to make their picks. No matter how diehard a bas- ketball fan you are, you don't have time to follow 68 teams throughout the season. Further, you have no idea who those 68 teams are at the beginning of the season. The process Selecting the teams you believe will advance in your bracket is biased. For instance, being born and raised in Northern Ohio, I give prefer- ence to those teams in the Big Ten Conference merely because those are the teams with which I am most familiar. I can say with confidence that this is no way to make prudent investment decisions. I am not the most astute college basketball fan in the world, but I would consider myself to be somewhat knowledge- able in that arena. While the Big Ten is arguably the best overall confer- ence in college basketball, having a "hometown" bias does not always improve one's odds during "March Madness," nor does it necessarily help one's investment returns in the financial markets. The most sound investment decisions that I have ever made have been based com- pletely on objective (as opposed to subjective) information. History of games won With this in mind I'll share a few observations from analyzing the NCAA brackets for the past 28 years to ascertain how often those highly ranked teams win. We know that picking a number 16 seed to beat a number 1 seed is not statistically a good bet in most pools. In fact, never in history has a 16 seed beat a 1 seed. While past performance certain- ly does not guarantee future success, the data show that seeding is a help- ful predictor of success. Top-seeded teams don't always survive the test to the Final Four, but historically these teams win more than 78% of the games they play. A #16 seed has never won a game, and the #13–16 seeds combine to win just slightly more than 10% of the games they play. Selecting teams to win the NCAA tournament is the same as picking investments for your port- folio. The intent is to identify the investments with the greatest likeli- hood of outperforming the overall market. The most objective tool I have found to do this is relative strength. Incorporating relative strength into your portfolio analysis will force you to invest in the right areas of the market (like the energy sector from 2000 to the middle of 2008). But possibly, and more importantly, relative strength will force you to get out of investments that aren't working (like the equities market in early 2008). So don't scoff at the people who fill out brackets based entirely on seeds. They're playing the percent- ages, whether or not they realize it. This goes a long way to explaining why the winner of the office pool is usually the person who knows little or nothing about basketball. No matter what method you choose to complete your bracket, enjoy the tournament. It truly is the Mardi Gras of American sporting events year after year. EW T he Spring daffodils poking their heads up is a clear sign the college basketball season is beginning to wind down and the celebrated NCAA Division I Men's Basketball Tournament, often nicknamed "March Madness," is right around the corner. People all over the country will be scrambling to fill out their brackets and cheer on their favorite teams. For the uninitiated, the tour- nament begins with 68 teams and operates in a knockout format, concluding with just 1 team left standing after 3 emotion-filled weeks and 67 exciting games. It's also the foundation for recreational office pools and bracket tournaments shared among friends and family. As these fun-loving participants fret over their brackets and debate which of their favorite teams has the talent to make it to the finals, included in everyone's selection process is each team's des- ignated "seed," which shows where the team is ranked in the region and overall. The NCAA began seeding teams in 1979 as a way to ensure that the strongest teams didn't meet each other early in the tournament. The How are your investments seeded? Seed Winning percentage 1 78.3% 2 70.1% 3 63.7% 4 59.1% 5 52.6% 6 54.9% 7 46.4% 8 43.7% 9 36.3% 10 39.0% 11 34.3% 12 32.7% 13 20.5% 14 14.3% 15 6.3% 16 0% Winning percentage by seed for NCAA Men's College Basketball Tournament: 1985–2014 Mr. Balser is the managing partner and chief invest- ment officer of Balser Wealth Management LLC, with more than 25 years of experience. He can be con- tacted at 440-934-3114 or roger@balserwealth.com. About the author

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