Investment Lessons from the Game of Cricket

As we enjoy the game of cricket, there are many investment lessons that can be learned from the game.

This topic seems to catch the attention of almost all readers. As we enjoy the game of cricket, there are many investment lessons that can be learned from the game.

Start early.

In the game of cricket, the initial overs of the power play is the best time to make a thumping start. Many times, the runs scored in these overs decide the destiny of the match. Similarly, when it comes to investments, if you start early in life, the power of compounding over time makes your wealth grow exponentially. For one, being young with little financial responsibilities lets you save more towards your financial goals, and furthermore, it helps you reap the benefits of compounding.

Have a game plan.

After reading the pitch and weather conditions, the captain chalks out a game plan. If it’s a hard wicket, he looks to score more and fixes a stretch target for his batsmen to achieve. Similarly, before you start to invest, it is important to outline your financial goals and then plan your investments accordingly.

Diversify your bets.

A team needs to have a good mix of big hitters, fast bowlers, spinners, all-rounders, young players as well as experienced ones. It ensures variety and boosts the team’s ability to tackle every situation. Similarly, you need to choose an asset allocation that suits your risk appetite. Holding an appropriate mix of asset classes (equity, debt and gold) ensures that the portfolio is productive, robust and well-diversified to make a winning score. Equities help beat inflation & provide capital growth, while debt provides downside protection. Thus, each asset will work in a different way to enable you to achieve your goals.

Follow discipline.

Few early wickets and the tides quickly turn. At this juncture, if the players lose their cool, the game is lost. Similarly, while taking investment decisions, don’t let your emotions rule your investment behavior. While the market factors and volatility may provoke you, it is important to remain focused on your financial goals. Discipline and long term perspective helps one sail through the storms and generate extraordinary returns. As long as one is holding suitable and worthy investments, there is no need to worry.

Be consistent.

The top-scoring batsman and the highest wicket-taker get an orange and purple cap respectively. Similarly, there are mutual fund ratings that assign five stars to funds that consistently outperform others. Investing in such schemes provides the investors an opportunity to outperform markets over the long-term.

Take a pause & review periodically.

In a strategic break, captains get back to the drawing board, seek feedback, and mend strategies. Similarly, you need to periodically review your investment portfolio and take corrective actions if deemed necessary. If the goals post has changed, you might have to step-up your investments or increase exposure to equity. This approach serves well in the interest of one’s financial wellbeing.

Provide for your contingency.

One bad over can do the damage. So, a captain needs to have an alternate strategy in place to counter-attack and rebound. Likewise, life might throw a lemon at you in the form of job loss or a medical emergency. It can jeopardize your existing investment plan and put your family at high financial risk if you don’t have a Plan B in place. Hence, building an adequate emergency fund and getting insurance covers to keep us financially secure when caught unaware.

Disregard the noise.

When the batsmen are on the crease, there is too much distraction, be it the trumpet blare or the cheer girls. The players are trained to cut the noise and concentrate on the game plan for effective performance and desired results. Similarly, you need to cut the market noise and refrain from timing the market while doing investments. People may attempt to forecast the short-term movement of the stock market without realizing that it is unpredictable. However, one must learn to avoid paying attention to such news flows and remain focused on their investment strategy for the long term.

Hire a coach.

Hiring a coach often brings a fresh perspective and experience, which can act as a great differentiator. Similarly, hiring a certified financial advisor can help you identify your financial goals and your risk appetite. They can understand your financial needs and accordingly chalk out a financial plan most suitable for you. An efficient advisor handholds his/her clients and creates for them a robust financial plan with a holistic approach.

Be in communication.

The game of cricket is all about teamwork. Every player plays a pivotal role in the success or failure of the team in a match. If the different players do not effectively communicate with each other, it can weigh on the team’s performance. Likewise, while framing important life goals and investment plans, the family members must be envisioned so that the financial wellbeing of the family is achieved.

Pace up the investments. 

Winning teams know the key to success in cricket is to pace up the innings as the match unfolds, maintaining the required run rate always. Similarly, for your investments to grow, the earlier you start saving and investing regularly, systematically, and prudently, with more investment time horizon, you can compound wealth better. Moreover, if a conscious effort is made to save and invest more with time, the pace of wealth creation (compounding) can get accelerated. This potentially can help you accomplish the envisioned financial goals sooner.

Identify a strategy.

We all understand that the strategy in the game of cricket changes from one format to the other. A one size fits all approach cannot be adopted for an ODI, Test, T20, or IPL. Similarly, when outlining your financial goals, one needs to recognize the investment objective, the corpus to be built, one’s personal risk profile, and the time left to achieve the envisioned goals. This will then help devise a strategy and decide on the right asset class mix to be created to achieve financial freedom.

Enjoy the game & chase your dreams. Dreams do come true. – Sachin Tendulkar