World Cup: Half Time
The group stage of the FIFA World Cup in Russia is over, and we're into the second round. Soccer devotees across the globe (yes, including clandestine US fans) now eagerly await the knock-out games to come, and the eventual winner.
Former England striker Gary Lineker, once described the sport as a simple game, where "22 men chase a ball for 90 minutes and at the end, the Germans always win." But this time, the powerhouse German team found themselves at the bottom of their group, their weakest performance ever at a World Cup.
Probabilities vs predictions
Germany's shock exit has led to many questions about our ability to predict soccer matches. After all, we did say at the beginning of the tournament that the Germans were the single most likely team to lift the trophy, with an estimated probability of 24%, ahead of Brazil, Spain, England, France, and Belgium.
However, our model has so far got roughly two-thirds of its predictions right. And stating Germany was 24% likely to win is equivalent to stating that Germany was 76% likely not to win. In hindsight, perhaps we could have phrased that better. In soccer, like in life, you win some, you lose some.
What investors can learn
We do see an important lesson for investors, though: to be sure not to confuse probabilities for certainties – everything in investing (like in soccer) is only ever likely, probable, or possible, and never certain. Even the best looking investments can underperform.
Fortunately, through diversification, investors can minimize the risk of all their investments underperforming at the same time, and it is one of the key tenets of successful long-term investing.
For soccer fans, diversification (i.e. cheering for both teams) tends to be frowned upon. Although we suppose that's what keeps it fun. We look forward to rest of the tournament.
Germany may have crashed out - but the broader insights of our World Cup report still stand.
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