It did not go India’s way. New Zealand played some exceptional cricket and pipped India to win the
inaugural World Test Championship.
Yes, you are right. This column is not about cricket or sports. However, the game is played in mind much before the first ball is bowled. Like how cricket teams prepare for important matches, you need to do something similar for your money.
Here are a few lessons that you could use for your finances from the recently concluded cricket event.
Team selection
New Zealand picked the right team. They chose a team suited for the pitch. They had five bowlers who could swing or move the ball off the pitch. India went with three seam bowlers and two spinners. The thought was that the same team won matches in the past in different conditions. However, it did not work for India last week. Your asset allocation is just like the team selection, and it depends on a combination of factors.
Your financial goals, risk appetite, and income determine the balance you need in your investments. Just like they pick different teams for test cricket and limited-overs cricket, you may want to create small groups of instruments suitable to each financial goal. The same set of investments may not work for all plans. For example, retirement is a long-term goal, and hence you must have more allocation to equity assets for this goal. Buying a car is a short-term goal, and you must have a higher allocation to debt funds or fixed-income investments.
Temperament
According to expert opinion widely published, the New Zealand batters and bowlers showed better temperament in the game. Their batters left alone deliveries outside the off-stump, and bowlers kept bowling in the right areas making India’s batters play shots. In the process, they protected their wickets and took twenty Indian wickets. There was a point when it looked like India’s batters would take the game away from New Zealand by playing some aggressive cricket. However, they stuck to the plan and showed patience.
Your investments require a similar approach. If you get emotional and act, you could lose opportunities or make losses. The grit needed to hold on to your equity investments for years without giving in to the short-term temptation to book profits and spend determines the future of your money.
Support staff and training
A lot of analysis is done before every game. The support staff of cricket teams help in picking the strengths and weaknesses of the opposition. You must also anticipate that the opponent would target your weaknesses. The support staff of both teams worked hard. You could see the tension in the game even when New Zealand crawled in the second innings to a famous victory. It would help if you created your support team for your investments. Like teams need to analyse the data on the right way to bowl on a particular pitch or to a specific player, you need knowledge about the right way to invest.
Arm yourself with some knowledge before jumping into the stock market or buying any financial service like insurance or mutual funds. Getting a financial advisor would be like getting a coach. It would be best if you had someone to guide you to do a proper asset allocation.
Learning from your mistakes
In the first innings when India batted, New Zealand allowed Indian openers to get away with a good start. That was despite bowler-friendly conditions. While the New Zealand team succeeded in getting three wickets, they could have been happier to get more on that day. They learnt from the mistakes they made on the first day and adjusted their bowling length. The next day, they pitched most deliveries in the right area to make the Indian batters play. The result was that India’s first innings folded up quickly. That tells you about a timely adjustment needed to your portfolio when you realise that you have made a mistake. You must work with your financial advisor to get emotions out of the way and make necessary changes to cut any losses.
(The author is editor-in-chief at www.moneyminute.in)