Personal Finance

Bouncing off five investing ideas

Adhil Shetty | Updated on January 23, 2018 Published on May 17, 2015

Cricket has some lessons to offer



With another IPL season in full swing, let your favourite sport inspire your investment planning too! Cricket and investing, though worlds apart, still have some things in common.

Diversity: Just like a team with talent in batting, bowling and fielding is essential to win a match, your portfolio needs diversity with a mix of asset classes such as equity, debt, real estate, gold and liquidity.

And just like IPL team owners pick the right mix of talent for their team, a planned asset allocation would help you reach your goals despite setbacks such as inflation and unexpected cash outflows.

Combining diverse assets helps you spread your savings equitably and reduce risks.

Don’t panic: In the recent World Cup final, Kiwi captain Brendon McCullum was an important cog in the batting line-up. But McCullum, who took charge of the attack in the earlier matches, failed in the crucial match and that cost the Kiwis badly. This holds true for investing too.

High-flying blue chip stocks won’t give you returns day in and day out. There can be ups and downs in the economy. Patience, discipline and a long-term plan bring you the desired result. Keep in mind that the superlative players’ stamp is that they can bounce back.

Pick and choose: A batsman should select a shot based on the merit of the ball. While investing too, judge not only what to buy and when to buy, but also what not to buy. If you are aggressive and a risk-taker, you can make profit in the short term through the equity route.

But you can also lose money. A conservative investor can invest in the debt market where both risk and returns are less, but still make a profit in the long run.

Re-assess: Many batsmen, once they hit the century mark, re-assess the situation, set new goals and refocus. But some get complacent and lose focus, which often results in their dismissal. In investments too, whirlwind profit can get to one’s head. After achieving some goals, it's easy to lose focus and squander the advantage.

If you are an aggressive investor, keep in mind not just the short-term goals, such as owning a house or children’s higher education, but plan for a retirement kitty as well. Plan it such that you gradually move from equity towards less volatile asset classes, such as debt and hybrid funds.

Protect yourself: Any cricket fan knows that it is a sport which is unpredictable. Similarly, life too is full of uncertainties. A planned life and health insurance coverage is a must-have in every investor portfolio. Just like a sturdy helmet, it offers you good protection against financial bouncers that life can fling at you. Many investors who ignore the need for insurance in their portfolio end up clueless when unexpected expenses drain their well-planned finances.

Above all, it is about gumption and conviction. Be confident and stick with the investing decision, if it was taken after due diligence. You should also have the tenacity to bounce back if there are any setbacks.

The writer is CEO, BankBazaar.com

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