Before you play! Know Market Lessons from the cricket pitch | Espresso


Before you play in the market, here are some lessons from the cricket pitch

October 28, 2020
Before you play in the market, here are some lessons from the cricket pitch

The Indian Premier League (IPL) is well underway, and though COVID-19 may have robbed us of in-stadium excitement, the game is truly back in our living rooms. If you’re considering investing in the markets or are already in the game, here a few strategies that you can learn from Cricket.

1. Team Selection Is Key – A Good Team Is a Diverse One

The key to winning is to have the right mix of players, each with different skill sets. A good team needs attacking opening batsmen, a strong middle order and clinical finishers among batsmen. A complete bowling unit that has off spinners, leg spinners, seam bowlers and swing bowlers will ensure that you get wickets regardless of the conditions.

The team of stocks that you select should perform well individually and also work as a team to achieve your end goals. A diverse portfolio, with a good mix of stocks across sectors and marketcap, will ensure that it performs under different market or economic conditions. For example, post-COVID, Pharma and Tech stocks have done well, while Travel and Hospitality haven’t. A good team, both in cricket and investing, is key to winning the game.

2. Be an Accumulator – Regular Investing Is the Key to Success

Taking regular singles has been the cornerstone of most of the matches won by teams across formats and throughout the history of Cricket. Regardless of whether you are batting first or chasing down a big score, “keeping the scoreboard ticking” has been the key to success.

You must apply the same mantra to investments. Regardless of what the market condition is, regular and piecemeal investments will hold you in good stead through thick and thin. The most popular way to do this is to have a stock systematic investment plan (SIP). A stock SIP is similar to a mutual fund SIP, but instead of units of a mutual fund scheme, you buy shares for a fixed amount at regular intervals. SIP brings discipline into investing, spreads your risk and lowers your average cost of acquisition.

Whatever instrument you choose, you must remember to keep your scoreboard ticking.

3. Choose a Team According to Your Format – Let Your Goals Drive the Tenure

Cricket is probably one of the few sports that is played in three different formats. While the basics remain the same, the vast difference in time greatly changes the strategies adopted as well as team selection.

Just as there are different teams for Tests, ODIs and T20s, you need different stocks and other investment instruments depending on the tenure of your financial goals. For instance, a test match needs bankable players who can gruel a five-day match; a long-term strategy might include investments in blue chip stocks as well as debt instruments that will provide stability and performance over the course of several years. For the short-term, you may prefer to park your money in liquid funds instead of equity since the latter may be volatile when it comes to shorter durations.

4. Change Your Team Periodically – Churning Your Portfolio and Removing Underperformers

No one player can perform at a high level forever, and there comes a time that managers need to take hard decisions. It is important to know that even the most successful teams and players can fail. The best teams have gone through rough patches, but the truly great ones have shown the ability to bounce back after a bad year or a poor series.

While managing your portfolio, you must be able to put emotions aside and take a cold hard look at the numbers and decide if the stock can achieve your objectives. This is easier said than done, but it is important to keep reviewing the performance of your stocks periodically to see if there are better players emerging in the market.

Just because you had a bad season doesn’t mean you stop playing the game. You should review your portfolio and make the necessary changes that are needed to win again.

While making investment plans, set your target first and think of your plan as a long run chase. Many great captains choose to bat second as it helps them have a clear target, allowing them to adapt accordingly.

Having a clear target will go a long way in helping you frame strategies and adapt your strategies if things don’t go your way – maybe you lose a few wickets or rain disrupts the match. The target will remain the same. The good thing about chasing is that you can accomplish your target before you had intended to. What you get after that is just a bonus – something not available in cricket!

R. Kalyanaraman
by R. Kalyanaraman

Chief Executive Officer

I am a sales guy at heart with utmost willingness to listen to people – customers, employees, competitors et al. Nothing gets me a bigger adrenaline rush than an interesting conversation with my customer!