Many a similarity exists between Cricket and Investing. The most important amongst them being strategy and a long-term view. In a quick-paced format likeTwenty20, strategy is key along with careful planning and patience. Here are 11 ways you could get the best from your investments just like the twenty 20 matches, and play a strong innings.
1. Physical fitness = Investor awareness
Just as a player’s performance depends on his fitness, an investor’s awareness is what Helps him decide which investments to make. An informed investor won’t follow the Herd or be swayed by hearsay. It pays to do your research before making any decisions. And when in doubt, always consult a professional on what course of action to take.
2. Team selection = Asset allocation
Like a cricket team is made up of diverse players like fast and spin bowlers, batsmen, wicket Keepers, etc. your portfolio too needs the right mix of asset classes from equity, debt, cash and Gold to name a few. A fast bowler is similar to an equity fund. An all-rounder, like a balanced fund. But the important thing is to get the right mix of players to build a strong team. It’s the same with your investments. So while making an investment, make sure you have the right mix of asset classes to ensure that your portfolio won’t be affected by a sudden fall in any one asset class.
3. Game plan = Risk appetite
Every batsman thinks before taking a single or slugging a six and every ball that’s bowled is carefully timed and dispatched to gain maximum advantage. Just as a player assesses his risk before playing, you too need to make the right preparations before investing. Determine your risk profile to decide how much to allocate in each asset class and whether the time is suitable to play hard or play safe.
4. Winning the Toss = A good start
The toss plays a significant role and ensures a good start. In investing, an early start is a good start because your money gets more time to grow and benefit from compounding. So seize the moment and start right away to give your money the benefit of time. You will realize that it could be your winning decision in the long term.
5. Role of a coach = Professional management
A coach brings a wealth of knowledge, experience and expertise to the field. Fund Managers play a similar role in investing. Using in-depth research and proprietary tools, they analyze every single stock or debt instrument before investing to help drive the performance of the scheme. Professional management is the hallmark of every mutual fund investment.
6. Taking singles = Systematic investing
Every run adds up. And that holds true for your investments as well through systematic investing. Monthly investments are like taking singles, they ensure your scoreboard keeps ticking. While intermediate lump sum investments could be compared to the occasional boundary, the discipline of systematic investing could result in a great score over time.
7. Power play = Maximizing returns
In every match there are those overs where the batsmen aim to maximize runs in power play by smashing fours and sixes. Similarly in investing, there are times when an investor could look to maximize the growth of his investment. It could be as simple as entering the markets through an equity fund in a bear phase to cash in for the long term. Think of it as hitting a four or even a six by making your investment at the right time
8. Wickets falling = Time for review
There are times when even the best batsmen get out and the best bowlers go wicket-less. A similar situation could occur with your investments. At such times, relook at your portfolio and seek professional help before making any changes to ensure long-term growth.
9. Under pressure = Stay invested
Even the best batsman knows when to play safe and when to strike. Similarly in investing, while most investors panic when the markets are volatile, you need to hold on to your investments until you reach your goal. But the best strategy is time. So as long as your long-term goals haven’t changed, stay invested and don’t let the cheers of the crowd change your mind investment.
10. Score and statistics = Goal review
For a team batting second, what matters is run rate, required rate, projections and more. Your investment portfolio too, should be treated similarly and kept a close watch on. Periodic checks and reviews of each fund’s performance against standard benchmarks and peers determine how it has fared over time.
11. Player rankings = Individual performance
Every player is rated on the basis of his skill to secure a position in the global rankings. Likewise in investing, funds are ranked on the basis of their performance track record and history. It pays to do your homework and study the right kind of funds before making any investment.