6 Investing Lessons from Cricket that I learnt

Cricket occupies the national psyche like no other game. The T20 World Cup has recently ended. But the fact is we are yet to get over the what we witnessed – nail biting chases and last ball wins that were beyond imagination.

The saying in cricket is –

No match is over till the last ball is bowled.

How true. That’s cricket for you. Ever so unpredictable.

Now, what I was wondering is if there are a few lessons from this wonderful game of cricket that can be applied to investing as well.

Yes, that’s right. Cricket and Investing!

I have found crucial investing lessons that cricket has to offer. Let’s see if you can identify with them too.

Here we go!

Investing Lessons from Cricket

Lesson #1 Know which game you are playing

Cricket is played in various forms – T20, 1 day or a 5-day test match. Player selection, on-field strategies and tactics change based on which game you are on.

In investing too, you have time horizons – short term (upto 3 years), medium term (3 to 5 years) and long term (over 5 years). It is important to understand your time horizon, decide what strategy would you like to deploy in terms of the kind of risk you want to take and accordingly choose your players, err, I mean, your investment products.

Lesson #2 Build your team

Now that you know which game you are playing, it is time to choose your players.

In cricket, a “pinch-hitter” is a perfect fit for a T20 and a 1 day game. The “Wall” has to be a part of a 5 day Test Match. A well rounded team has to be created with bowlers, batsmen, wicket-keeper and all rounders.

In investments too, you need asset allocation and diversification – a mix of debt and equity. You would need a Bank FD or a liquid fund for a short term goal, may be a balanced mutual fund for medium term and a bigger dose of equity via stocks or mutual funds for the long term.

Lesson #3 Be the captain of your game

The job of the captain is to get the best out of the players. He has to assess the situation, decide a strategy and either set the order in which players would bat or their positions across the field.

He can only do so when he knows his players well. He has to completely understand their strengths and their suitability to any given situation. But once on the field, he has to let them do their job.

Talking of investing, you have to be the captain of your portfolio too. Understand and know your investments well. What is the structure of an investment? What is the risk profile? What time horizon is it suitable for?

With this knowledge, you can channelise your money into the most relevant investments that will help you reach your financial goals, faster.

Lesson #4 Avoid pressure

If you are on the batting side you do not want a single ball to go idle. You get the 1s and 2s and keep the score moving. They are as important in adding up to a big score.

In terms of investing, you have to keep saving early, regularly – even small amounts. Don’t wait for that next  promotion or a particular event in life to take your first step. The future is uncertain. Start now. Even the smallest amount invested the earliest in life has the potential to change your financial future.

Coming back to cricket, if you are on the bowling side, your focus would be on keeping it tight and not let the runs to go through.

In term of investing, once you have determined your goals and the investment mix or asset allocation, you have to ensure that you follow it through.  A regular review and rebalancing of your investments and maintain the investment mix is crucial.

Don’t let short term market swings impact your decisions. Also ensure that don’t let expensive investment products create a leak in your potential returns and make your investment plan suffer.

Lesson #5 For a big score, go for the big shots

If you are targeting a big score in cricket, you cannot do it without hitting the boundaries. The 4s and 6s have as much a role to play in winning the match as the 1s and 2s. While the latter give you a solid foundation, a big score can only happen with 4s and 6s.

Yes, big shots do mean taking risks – but it does not mean being reckless. Your carefully selected players can always accomplish a big score for you taking reasonable risks and hitting loose balls.

In investing too, wealth creation and meeting financial goals will not come by easy if you rely only on short term and fixed income instruments. You have to play your big shots too – specially when you have time on your side. This translates to investing in equity through direct stocks or equity mutual funds.

Yes, equities are risky. But the risk is more pronounced in the short term, not so much in the long term. Your long term portfolio can have a significantly different result with the inclusion of equity. Remember a big score needs big shots.

Lesson #6 Patience is rewarded

In cricket, it is important to stay in the game. Recklessness can cost you precious wickets. If you lose wickets too fast, you would lose the game even before its over. You have to be on the pitch so that you can look out for the loose balls and hit them hard. In the meanwhile, keep playing those 1s and 2s.

Ditto for bowling. You have to focus on bowling the right length at the speed or the spin.

In investing too, patience is the biggest virtue. In the beginning, your portfolio can appear to be hardly moving. This could leave you with doubt if you have chosen the right investments.

This could set you on the path of chasing quick returns. Heard of “double your money in 6 months“? Beware!

The end result of abandoning patience could be a a permanent loss in the value of your investments.

 

These investing lessons from cricket would enable you to close your investing match, that is, fulfil your financial goals and reach your financial freedom, with ease and élan.

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Between you and me – What other investing lessons from cricket have you identified? Wouldn’t you like to share? All of us are eager to read them in the comments.