In Cricket and Financial Planning - Play to WIN!
Mar 30, 2011

Author: PersonalFN Content & Research Team

There’s a very important event occurring today.
People from completely different walks of life are united because of this event.
It’s being called ‘a friendly neighbourhood match’; and it’s only our national pride that hangs in the balance.

Consider the similarity between a match like today’s – where if we win, the entire nation will be one step closer to achieving its ambition, and the situation of achieving your own life’s ambitions.

Because the strategies that apply to winning at a sport, any sport, are the exact same ones that apply to achieving your life’s goals.

Let’s see how to apply the moves of the sport, to our own finances.

Have a good coach!

Your investments might consist of good individual performers, but its your financial planner who will build your overall investment schedule, keep an eye on it, identify strengths and weaknesses of individual investments and manage them correctly, so that from being good individually, they become excellent together.

Just like our team is doing well under Gary Kirsten, benefiting from his experience and coaching prowess, your wealth will benefit from the knowledge and technical know-how of your Financial Planner.
Get a strong head start!

This one needs no explanation. It’s certain that a team wants to build up an excellent score, just like you want to achieve certain things in your life like retiring early and retiring rich.

A strong head start is the best offense. If you’re chasing a huge score, you need to take strong initial steps to get those runs on the board.
Similarly, if you need an ‘x’ sum of money within ‘n’ years, get cracking with the right investments into the right products!

Remember, an investment of Rs. 10,000 per month started at age 30, going on every month until age 60, will yield almost the exact same future value as an investment of Rs. 45,000 per month started at age 40!
By starting just 10 years later, you have to invest 4.5 times the amount, to get the same end corpus.
Have a balanced team!

While 11 Sachins might seem like a dream, it wouldn’t work.
Our team needs to balance itself with strong performers in batting (equity), bowling and fielding (debt and gold).

Think of our batsmen like your portfolio’s equity component.
It is Dhoni (our cool and calm opportunities fund), Sachin (our beloved bluechip performer) and Sehwag (the ever aggressive midcap) that we pin our hopes on to get that run rate up.
Your equity in your portfolio is what will help you beat inflation and really grow your wealth.

But when equity is sitting it out, where would we be without Yuvraj, Bhajji and Zaheer to take those wickets. It’s the debt and gold in your portfolio that will perform when market conditions cause equity to wait its turn.

Depending on your age, time horizon to your goals and your risk appetite, you should arrive at the right mix of equity, debt and gold that will balance your portfolio.
Have a Safety Plan in case of a bad over!

We’ve all seen how one bad over can turn the tide. In case a wicket falls in your own financial life (an unforeseen financial emergency like loss of a job, health trouble etc), you need to have a backup plan. Build a contingency reserve (at least 6 months worth of expenses) to land on until you get back on your feet. You should also have enough life insurance to take care of your loved ones in case of any unfortunate event.
Pace yourself!

At the beginning of the match, we need to be aggressive. After all, we have wickets in hand.
Similarly, if you’ve got more than 10 earning years left until your goal, then the investments for that goal can go more into equity (up to 75%), and less into debt and gold (25%).

But when we’re almost out of wickets (earning years, the ability to take risks), we need to be cautious, play carefully, don’t try anything too wild. Go for a higher exposure to debt and gold, and minimize the risk to the portfolio by minimizing the equity component.
Know Where You Stand!

Every so often, review your score and your run rate (your investments and their performance). See how much wealth you have built up, and how much is left to be built. Assess the number of wickets in hand (how long till the goal arrives) and plan your strategy accordingly.

Remember, it’s not just a game, it’s a sport.
Just like achieving your life dreams is not just a question of investing, it’s a question of having the right Plan.

You need to know your goals, know your team (your investment options), know the pitch and playing conditions (the market scenario), pace yourself (consider how many years till your goals arrive), and above all, let your Coach help you to do the very best you can do.

And don’t forget, in cricket, as in financial planning, we’re playing to win!