A new rule in T20 cricket introduced by the Indian Premier League or IPL, the annual mega event, has lessons for your money. Every team can introduce an ‘impact player’ at any time in the game. It is a substitute player you take based on the match situation. The concept is not new, as substitution existed in football and partially in cricket before. However, the change could make strategizing for every game interesting.
As cricket evolves, your money strategy also deserves an evolution. You cannot rely on advice from people you think to know a lot about investing. You have to get an independent financial advisor to support you. While the financial advisor can recommend investing strategy, your impact player has to be determined by you. You may have to choose an impact player from available options in every situation.
Financial goals
The first step in financial planning is setting up financial goals. Your dreams primarily drive these. They could be related to ‘World Travel’ and ‘owning a home at an exotic location’, among other things. A professional financial planner would be your impact player. You must sit with them and identify your life goals. The next thing to do is split them between short-term and long-term goals. Once you do that, you can make an appropriate asset allocation with the help of your financial advisor.
New to investing
If you are new to the investing world, your impact player is your ability to absorb information. You must work on that and know as much as possible about the asset classes you wish to invest in regularly. There are books, periodicals and articles you should read. Have conversations with your knowledgeable friends. If you can, engage a professional financial advisor.
Your first step could be to start a systematic investment plan in an exchange-traded fund. However, you must know the basics before you take that step. For example, you need to know about factors that influence interest rates or companies’ future profits.
Already investing
If you are already an investor and manage a portfolio, you must focus on identifying assets that could potentially give you that impact player performance. That could be a bunch of fundamentally solid companies or a portfolio of sectoral funds. Your advisor can help you identify new ideas.
Those could be buying property at a location with growth potential or companies that could turn into multi-baggers. You need to tread carefully in such a situation, though. You need to do your research besides listening to advice from others.
Protecting your capital
You need a well-diversified portfolio in a situation of rising interest rates and volatile financial markets. The impact player in such a situation could be a debt fund or a liquid fund, or even a fixed deposit. For example, the year 2022-23 turned out to be a year of negative returns for investors if you look at the performance of the S&P BSE Sensex.
In such a situation, gold turned out to be an impact player. It gave you appreciation at a time when everything else was trading flat or losing value. The other important thing to do is get good life and health insurance. You do not want to cut down on your investments in case of any emergency. Your money must work for you while you are busy with your work.
Financial markets are driven by greed and fear. You must learn to understand the factors that drive prices, even if that means spending a few minutes every day reading a financial daily, periodicals or books. You may not be a finance professional. However, you must assume that some knowledge of finance is suitable for your financial well-being. Your money needs direction.
If you are not willing to shepherd it, somebody else will. Finance can get overwhelming if you are not into it. But then, not everyone can play professional cricket too. It is like how you know so much about cricket without playing it.
Impact player performance
If you are already an investor and manage a portfolio, you must focus on identifying assets that could potentially give that impact player performance. That could be a bunch of fundamentally solid firms or a portfolio of sectoral funds. Your advisor can help identify new ideas.
Rajas Kelkar
(The author is editor-in-chief at www.moneyminute.in)