Now that NAMO 2.0 is well entrenched and the Election 2019 Frenzy has got over, India is going to pursue its second most passionate subject after politics for the next 45 days. The 12th ICC Cricket World Cup gets underway on 30th May 2019 and culminates with the Grand Finale on 14th July. The total prize money at $10 Million with the winner taking $ 4 Million remains the same as in the 2015 edition.
England have never won the Cricket World Cup but they may never get a better chance with bookmakers rating them favourites to win this year’s tournament on home soil. India and Australia are rated the next best bets with Bangladesh and Afghanistan rated as rank outsiders to reach the play offs or win the Cup.
Investing lessons from cricket are aplenty and a cricket crazy nation like ours can learn a lot from this gentleman’s game.
In 2011 after India won the Cricket World Cup, Thousands of eyes got wet (including mine) when Virat said “He has carried Indian cricket for 23 years, and now it was our turn”. Sachin was not able to contribute much in the final but he was the backbone of the line up. In life and particularly in Financial life we all should have inspirations who take us to the next level.
Investing lessons are not the enigmas or mysteries that only financial wizards can crack. In fact many real life experiences from various disciplines can be applied to investing as well. Some lessons can be learnt from sports, media, politics, mythology and other fields as well.
We can learn a lot from sports and draw analogies to be used in our life journey.
There are several parallels that can be drawn between cricketand investing. Although a one-to-one comparison doesn’t work, we can use some examples to understand the intricacies of investing, through cricket. For instance long-term investing can be compared to test matches whileday trading can be compared with the strategies used by sprinters.
For me, Kapil Dev, our 1st World Cup winning Captain has always been an inspiration and his famous quote is equally applicable in our financial journey.
He also believed in the fact that Playing cricket is not only about money, but also about pride.
Similarly, you invest not only to make money but also to be able to pursue your passion, to achieve your goals and to live a comfortable life.
Chase your Dream
Before you start your investment journey, remember the favourite quote of Sachin Tendulkar after winning the World Cup in 2011.
Persistence and conviction in your ability to achieve your dream are the keys to success.
Is talent the only key to success?
When we hear the word investment we are impatient to see the returns. We tend to jump to the money and wealth aspects of the investment whereas Success in investment, on the other hand, comes from many other factors— your patience, discipline, temperament, strategy, review, the role of an advisor etc. And, this is what determines your returns.
Cricket also follows the same rules as investment, your attitude is more important than your talent. Vinod Kambli is a prime example of exceptional talent having gone waste and left with unused potential.
So, let’s learn from cricket about how you get all these factors into play when you play your game of investment!
The importance of Knowledge and Training
In cricket as in investment, continuous training (Knowledge and practice) is the key to success and basic pre requisite. There are no short cuts in both, just talent is not enough. Sachin, Virat, Kumble, Dhoni and anyone you can name, spend countless hours honing their skill, removing their weaknesses, studying the opposition, practising and simulating each possible alternative and training hard before they enter the ground to play the match. Similarly in investing, you need to finalise the goals, decide on the right strategy based on your risk profile and current situation, finalise the asset allocation and do much more even before you start investing.
Match Format (Investment Horizon)
One of the first questions that we ask any new Investor is regarding his investment horizon; the strategy for a long-term investor is totally different from that of a short term or ultra short-term investor.
Similarly whether you are playing a test match or ODI or T 20 will determine not only your team composition but also your strategy.
Pujara despite being one of the finest batsmen doesn’t figure in the shorter version of the game; similarly the best small cap or equity fund may not be suitable for a short-term investor.
Goal Decides the Strategy
Your Return expectation and requirement will decide the strategy. If you are satisfied with a 10% return, your investment strategy will be different from an investment strategy for a requirement of 18% return. The risk taken in each case will be totally different.
Similarly in cricket, your required run rate will decide the batting order. Do you need a Pinch hitter or someone who can bat through the innings and hold one end up, depends on the match situation and distance from the goal.
The Pitch and Weather (Economic & Global Conditions)
The pitch and weather conditions give you an indication of the overall behavior of the ball – the bounce, speed, how it comes on to the bat, etc. In some cases this becomes very important and can determine the outcome of the match itself. Examining the ground/pitch is critical for both teams because there are several matches which are won during the toss stage itself.
Similarly in investments, the domestic economic climate, global economic conditions, Macros, industry trends, etc. have an influence on the market and your investment as a whole.
Having said that it does not mean that toss itself can significantly influence the match, because similar to investing in quality companies for peak performance, factors such as good fielding, fielding placement, Captaincy, quality of bowling, partnerships, etc. are important to win the match.
Just like winning the toss does not guarantee success, it just improves the odds, similarly only favourable macros don’t guarantee success, you still need to invest in the right stock to maximize profits.
Portfolio Management (The 11 member squad)
Though he may be the best, only Virat kohli or for that matter 11 Virat Kohlisalone will not be able to help you win the World Cup. You need a well balanced and well diversified team, Good Openers, Solid Middle Order, Quality Pace and spin attack, Pinch hitter,a Dhoni behind the wickets who can also play the role of a finisher and provide strategic inputs too.
Isn’t this comparable to a diversified portfolio of investments. However, in investments one has to go one step further to diversify across asset classes such as equities, debt, gold, real estate, etc.
Don’t step out into the field without protective gear
Like in investment,not taking adequate precautions can make players vulnerable to injuries on the field and miss the balance part of the tournament or the match. Similarly, if your financial planning and investment strategy is not balanced and does not have an element of protection, it exposes you to several risks.
Before you start investing for wealth creation, secure yourself against the risks to finances, life and health. In your financial hierarchy of needs, an emergency corpus, a health cover and term cover is most important, before you start investing for your goals.
Play for the long term
Every new batsman on the crease, despite the situation, takes his time before going after the bowlers. Giving in to the adrenaline rush or buckling under pressure, has often been the undoing of several batsmen. This is akin to investors who, in their bid to make a quick buck, or due to panic, exit during a market downturn and suffer losses. The best knocks require grit and patience to tide over turbulent phases. A good batsman will have his eye on the target and plan his innings accordingly. Equity investors should also invest basedon their goals and not be disturbed by short term volatility.
Sneaking ones and twos regularly with an occasional boundary can help build a decent score, especially on a tricky, batsman unfriendly pitch. Similarly, systematically investing small sums can help navigate choppy markets and build wealth. Don’t put off investing till you have a ‘large’ surplus. You can start small and increase your investment when the situation allows. SIPs in mutual funds are a smart way of achieving financial goals through small and regular investments.
Yuvraj, my favourite cricketer and one of the most positive players who overcame a life threatening issue, always played for the long term.
Being overly defensive doesn’t pay
Not taking chances at all and relying on singles alone won’t help build a good score. Similarly, investing just in debt products is unlikely to help meet your financial goals.
Investing in equity is the best way to earn decent, inflation-adjusted returns. Don’t shy away from equity, especially if you want to meet long-term goals such as children’s education, retirement, etc.
Since the ground conditions, match situation and environment changes continuously, you must have a dynamic strategy. You must keep your portfolio updated to match with the current environment. This is where portfolio re-balancing and asset allocation plays a key role.
Do you know how players make their game better? They review their game regularly. They sit down with their coach and analyse their strengths and weaknesses and how they can take their game to the next level. They see what they did wrong; they make sure they do it right at every next chance they get.
You must similarly review your portfolio regularly and rebalance by weeding out the investments, which do not give acceptable returns. You must sit with your coach, your advisor, and review your investments and strategy at regular intervals so as to maximize your gains.
Role of a Coach
The cricket legends, the masters, the icons of cricket, all have a coach and cant dream of practising and playing without him. Selection of the coach is as important as the selection of the team. The players regularly take feedback and consult their coach on each aspect of their game, on how to remove the weaknesses, check the reasons for failure, the mistake they are making and the corrective action they need to take to improve their game.
An Advisor plays a similar role in your investment journey. He guides you, holds your hand through the volatility, reviews your portfolio and makes the necessary corrections in the strategy so that you can have a smooth investment journey and achieve your goals.
Focus :Cricket and investment
When you are playing the game or during your investment journey, you must focus on improving rather than get distracted by the comments of others. Once you have built your conviction and decided your strategy, don’t get disturbed by volatility. Success in cricket as in investments comes from patience and by being totally focused on the job at hand.
Don’t invest to show off but invest for your goal, to achieve what you have set out to achieve.
One of my favourite quotes from Cricket is the one by Ricky Ponting:
Similarly in investing, you have to look for gaps in your asset allocation and your portfolio and match it with the opportunity provided by the market from time to time to maximize your gains.
In the end, always remember that
Selection of the right investment option is very important, but more important is to see and review how your investments are actually performing and whether they can help you achieve your goal or not and take corrective action.
If you follow the best practices of cricket in investing, over long-term you too can become a successful investorabd achieve your financial goals.
Lets have a great World Cup and I join a Billion people in praying that India lifts its 3rd World Cup trophy on 14th July.
I invite all cricket enthusiasts to share comments, examples, feedback or views on this subject.
Stay Blessed Forever
Disclaimer: The examples, illustrations and comparisons between cricket and investing is only for easier understanding. Readers are requested not to take such comparisons at face value, but just take it as a story or anecdote for the purpose of understanding the basic principles of investing.All information provided in this blog is for educational purposes only and does not constitute any professional advice or service. Readers are requested to consult a financial advisor before investing as investments are subject to Market Risks.
About The author
Sandeep is an alum of IIM Lucknow with a Post Graduate Degree (MBA class of 1988). His also an alum of Shri Ram College of Commerce, Delhi University (B.Com. Hons. Class of 1985.)
Sandeep’s investing experience and study of the Financial Markets spans over 30 years. He is based in Chandigarh and has been advising more than 500 clients across the globe on Financial Planning and Wealth Management.
He has promoted “Sahayak Gurukul” which is an attempt to share thoughts and knowledge on aspects related to Personal Finance and Wealth Management. Sahayak Gurukul provides financial insights into the markets, economy and Investments. Whether you are new to the personal finance domain or a professional looking to make your money work for you, the Sahayak Gurukul blogs and workshops are curated to demystify investing, simplify complex personal finance topics and help investors make better decisions about their money.
Alongside, Sandeep conducts regular Investor Awareness Programs and workshops for Training of Mutual Fund Distributors, and workshops and seminars on Financial Planning for Corporate groups, Teachers, Doctors and Other professionals.
Through his interactions and workshops, Sandeep works towards breaking the myths and illusions about money and finance.
He also writes a well read blog;
He has also conducted presentations, workshops and guest lectures at Management institutes for students on Financial Planning and Wealth Creation.
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