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India is a cricket crazy nation and most people across age groups follow the game like a religion. While we could rattle off the rules of the game anytime, have we ever realised that there are many similarities between Cricket and Investing. Let’s look at a few lessons from Cricket that can help us understand investing better.
Lesson 1: A diverse team to win
Would a team with 11 specialist batsmen help to win a match or would a team with 11 specialist bowlers? In fact, none. A good team is diverse with expertise in batting, bowling and fielding. Similarly, our investments too need to be diverse with a good mix of asset classes like equity, debt, gold, real estate and cash. Such an asset allocation can help your portfolio perform more consistently. What better way to achieve this than with mutual funds which provide access to most these asset classes without much hassles.
Lesson 2: Choose players as per the game’s format
These days team selection depends on the format of the game, which means there is a different team for T20, one-dayers and test matches. In fact there are different captains for different formats as well. It is no longer a ‘one size fits all’ approach. In case of investing too, there is no ‘one size fits all’ approach. You must invest as per your goals with discrete portfolios for each goal. Accordingly, you may prefer debt funds for short-term goals and equity funds for your long-term goals.
Lesson 3: Never miss the singles
You must have seen many batsmen just nudging the ball to take some cheeky singles. They also hit a loose ball for a four or a six. A run a ball gives the team an average of 6 runs per over and the big shots, in addition, may give the team a winning total. That’s where discipline and patience helps to win matches. Investors can do this through regular and disciplined investing using Systematic Investment Plans or SIPs offered by mutual funds. SIPs can help you to “score regularly” by investing a pre-determined amount (starting from Rs.500) every month. They also hit the loose ball by helping to buy more units when the markets are low (like scoring boundaries) and less units when the markets are high (the 1s and the 2s). You end up averaging your purchases through ‘rupee cost averaging’ and could create wealth in the long run.
While there are many more similarities between Cricket and Investing, the above stand out very clearly. Apply these lessons to mutual fund investing and aim to win the goals (matches) in your life.
An investor education and awareness initiative by Franklin Templeton Mutual Fund.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Information contained in this article is not a complete representation of every material fact and is for informational purposes only. The recipient is advised to consult its advisor/ tax consultant prior to arriving at any investment decision.