Five ways to be an investment all-rounder
With billions of fans worldwide, Cricket is one of the world’s most popular modern day sports. Far removed from a simple bat and ball game, the plethora of statistical data and analysis surrounding this intellectual sport are often broken down and dissected by die-hard fans. It’s not uncommon for cricket enthusiasts to talk for hours about something as mundane as the pitch!
While following the World Cup over the last month with a fierce intensity, like so many of my fellow devotees, I have observed that the complex and dynamic nature of this exciting sport is not unlike investment and financial planning. And so, there is much we can learn and apply from this great game.
Here are some remarkable parallels…
Determine your risk appetite
Before you start your investment journey you need to decide what levels of risk you are willing to take for the kind of returns you expect. Are you adventurous, cautious, moderate, or defensive? What is your game? T20, ODI or a test match? If you’re not sure where to start, use our profiler to help you determine your risk appetite!
Balance your teams and portfolios
Managing your investment portfolio is like managing a cricket team. You need a balanced team with strong openers, a stable middle order, an aggressive lower order backed up by economical bowlers, wicket-takers and all-rounders that balance irregularities. Not to mention good fielders to take those crucial catches and stem the flow of runs. You need a portfolio that is aggressive in places, defensive in others, cautious elsewhere. It needs to adapt to the ever-changing market conditions which, like the cricket pitch, is different each time and unpredictable.
Diversify, diversify, diversify
Star players and big hitters can single handedly win matches on their day. But how often is it ‘their day’? More often than not they don’t perform as expected. Similarly your portfolio might have that ‘star’ asset. But you would do well not to bank on a single asset class, region or sector. Keep a well-diversified portfolio. Sometimes it’s the scrappers that win the matches, adapting to tough conditions just like those left field assets which get you through patchy and volatile phases in the market.
In cricket whether batting first or chasing, leaving the big hitting to the so-called ‘slog overs’ is not a very good idea. This is especially true in the modern game where you see a lot of big scores. Investing is similar. It’s better to start early. And you don’t always have to go for the fours and sixes. You can start with ones and twos and build up to a big score.
Hold on to your emotions
It’s not over till it’s over. Cricket is a game where a few critical moments can swing the momentum in favour of either team so the players need to stay patient and stay in the game till the end. Rash decisions made in a fit of panic can cost you the game. This phenomenon is known as the knowing-doing gap. To really reap the returns, you need to stay invested through the highs and lows and not jump ship at the first sign of trouble.
So what did we learn?
After watching the nail-biting finish to the world cup yesterday, I can say with even more conviction that both finalists had an approach to the game that encompassed all of the above. It is not an accident that they were in the finals, they both deserved to win (and almost did when the game was tied in that crucial moment!) In their journey to the finals, despite some hiccups, both stand out teams gave us the formula for success - a rock-solid strategy that may not guarantee a win but exponentially increases the chances. And whether in cricket, investing or in life, that’s all we need, a winning chance!
Zurich Pace Lab
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