The entire nation keenly follows the Indian cricketers both on and off the pitch, isn't it? We are curious to know what the players are up to in their lives, their other hobbies and interests, brands they are associated with, etc. But have you ever explored the possibility of learning something from this sport?
If not, then just pause and be ready to learn some of the lifelong lessons that we can learn from cricket, especially when it comes to managing your personal finances and investments.
1. The players in the team each have unique strengths. In other words, think of it as the importance of portfolio diversification
The lineup of a cricket team involves a mix of 11 different players, like some batters, bowlers and a wicketkeeper, doesn't it? Each player included in the team has unique strengths and qualities which form the basis of that player’s selection and role in the team. After all, just like batters need a good display from bowlers when defending the target, bowlers need the batters to score well on days when they are able to restrict the opposition to a low total. So, it's all about everyone contributing towards their role in different ways, with the same intention to win,
Similarly, when it comes to investing your hard-earned money, instead of putting all the eggs in one basket by investing in one investment instrument, go for diversification. Simply put, when you invest in just one financial instrument, you deprive your portfolio of having the balance to make the most of different market phases, economic ups and downs and even the intrinsic features of each instrument.
If you intend to gain high returns and that too in the short to medium term, investing in an instrument like PPF, whose moderate returns and a lock-in period of 15 years itself depicts its aim of long term savings, would result in failure to actually benefit from the intrinsic features of PPF, besides failing to achieve the set goal. As far as economic and market dynamics are concerned, when the market is soaring high, your diversified portfolio would benefit from the presence of investments in equity mutual funds, whereas when the market is bearish and your equity investments are bleeding red, having fixed income instruments like bank FD and debt mutual funds can stabilize your portfolio. For more information on diversification and how to go about it, click here.
2. The team huddle for planning teaches us that failing to plan = planning to fail
We all must have seen the teams forming a huddle before stepping into the field to chase or defend the score. That is a key step in planning and giving instructions to everyone regarding each one’s role and the team’s strategy. After all, sticking to your plans and playing accordingly is the key to success, isn't it?
Similarly, when it comes to investing your bucks, remember that failing to plan is equal to failing to plan. So devise a well-thought investment strategy and planning after factoring in your income, existing debt obligations like loans, risk appetite, investment horizon etc. In the absence of all this, you would in all likelihood end up investing in inappropriate instruments or beyond your risk appetite, which can take you away instead of closer to your goals!
3. Leaving the uncertain balls outside the off-stump teaches us to be selective
More often than not, especially in test cricket, batters tend to leave the balls about which they are uncertain, like those outside the off stump. Ever wondered why? It's because they are selective of their battles. They know when to attack, defend or leave the ball, instead of just going for hard-hitting every time. And having that balance in your mindset is what exactly helps to build an innings and win matches.
Similarly, just like the volatility of those outside off stump balls, that can either inswing, outswing or even offer no swing, the stock market is volatile as well. And just as you don’t throw your bat at every ball, you don’t have to frequently buy and sell stocks to build your wealth or go after high gains. Instead, all you need to do is be extremely selective about your investments and know when to buy, sell or stay put. Acting with patience and prudence in the stock market will go a long way in fetching good returns, whereas an erratic and impulsive decision-making strategy can make your portfolio bleed red and lead to losses.