As the much-awaited 2023 Cricket World Cup commences, the fans in cricket-crazy India are brimming with excitement. It is extra special this time as the tournament is happening right here on our home turf. With cricket fever in the air, it's an ideal moment to explore the remarkable parallels between the game of cricket and the realm of financial planning.
Here are the key lessons to learn from the game to improve your financial well-being.
1. Know your game and play it well
Cricket is played internationally in three distinct formats, each with its own duration – Test matches, One-Day Internationals (ODIs), and Twenty20 (T20) Internationals. Test matches span five days, ODIs are faster-paced with 50 overs per side, and T20 is the quickest format, featuring 20 overs per side. Each format requires different rules, strategies, and even players.
Similarly, your financial goals can be categorised by their time horizon – short, medium, and long-term goals. There's no one-size-fits-all approach. Your investment strategy should revolve around products that align with the time required for your goals and offer an appropriate risk-return potential.
2. Building a well-rounded team
The perfect cricket team comprises a well-balanced combination of strong batsmen, skillful bowlers, and versatile all-rounders. This balance is crucial because scoring runs aggressively, saving runs through tight fielding, and taking wickets through effective bowling all play equal roles in winning a match.
Just as cricket revolves around runs and wickets, investment revolves around risk and returns. Striking the right balance is the key to success in both of these arenas. Similarly, your investment portfolio should be diversified across investment products like fixed deposits, mutual funds, small saving schemes, NPS, PPF, Digital gold etc. With the right asset allocation, you can harness the risk and reward potential of equity, fixed-income and gold asset classes.
3. Consistency is the key
A batsman who consistently scores a half-century (50 runs) in 6 out of 10 matches is often preferred over a batsman who hits a double century (200 runs) in one match but gets out for single-digit scores in the other 9 matches. Consistency holds greater value than flashes of brilliance. In bowling as well, a bowler who delivers maiden overs regularly, even with fewer wickets, is often rated higher than one who takes 10 wickets in a single match but struggles in others.
Likewise, many investors believe they need a substantial sum of money to begin investing. However, it's important to note that you can start with a small amount. The key is to invest regularly. Instill discipline in your investments by initiating a SIP in a mutual fund or contributing to a recurring deposit. To illustrate, just investing Rs 5,000 every month for 30 years with a 12% annual return can accumulate to a substantial Rs 1.76 crore.
4. A strong start sets the winning tone
When a team manages to score well in the first 10 overs, it often sets itself up to post a formidable target of, say, 300+ runs. This can pose a daunting challenge for the opposing team and put them under significant pressure to chase.
Similarly, beginning your investment journey early can work wonders. This is due to the compounding effect, which has a multiplying impact on your wealth creation. For instance, if you start investing Rs 10,000 every month at the age of 35, you could accumulate Rs 1.90 crore by the time you retire at 60, assuming 12% annual returns. However, if you begin at an earlier age, say 25, you can amass wealth worth Rs 6.50 crore – that's the power of compounding.
5. Be resilient despite pressure, hurdles
Cricket is a game of surprises. You can never know when a sixer or a wicket can turn the direction of a losing or winning match. A successful sportsman is one who remains resilient, even when faced with various pressures, like the fear of losing, sledging from opponents, crowd noise, adverse weather conditions, injuries, and more.
Even equity markets go through bouts of volatility and sometimes a huge downfall. However, to succeed as an investor, it's crucial to remain resilient during market turbulence and avoid panic selling. The best way to deal with such situations is to maintain a long-term view, invest regularly and diversify your investments wisely.
6. Give due respect to the 12th man in the team
A cricket team typically comprises 11 players, but it also includes a 12th man. This 12th man serves as a reserve or substitute player during a cricket match, playing a crucial role in case of injuries or unforeseen events.
Similarly, in financial planning, it's essential not to overlook the significance of maintaining an emergency fund. This fund proves invaluable during times of uncertainty, such as job loss or medical emergencies. Strive to maintain an emergency fund equivalent to at least 6 to 12 months' worth of expenses, which can be placed in a savings account or a liquid fund.
To sum it up, be it cricket or investments, the goal is to win the game. Inculcate these cricket-related insights into your financial planning process and gain an advantage in your investing endeavors.
Happy Investing!
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
