Nine Mutual Fund Investment Lessons From The Games of IPL

Every year, millions of cricket-crazy Indian fans gear up for the Indian Premier League. But did you know that apart from being highly entertaining, the IPL can also teach us a thing or two about investment? From the timing of investments, to the planning and execution, a quick IPL T20 game can give you plenty of ideas on how to go about investing your hard-earned money. Here’s how:

In an IPL game, the initial overs of powerplay are the best time to go off to a rollicking start for the batsmen. If the batters make the most of it, the free-flow of runs in these overs can eventually decide the outcome of the match since the team would be able to post a huge total on the board.Similarly, in investment, it is prudent to start investing as early as possible. The earlier you invest, the more time you give your investment and hence, like your favourite IPL team, you’re able to create a huge corpus that is akin to making a big first-innings score.

IPL teams do not randomly come on to the pitch and start playing without a gameplan. An IPL game plan begins with the pitch inspection. The teams look closely at the wicket, and decide on what would be a good score. If the wicket is hard, the team knows that a big score will be needed since runs can be scored freely, and vice versa. Based on this plan, the teams also choose their playing eleven and decide on the batting order.In almost exactly the same way, investment is all about planning. You must have a goal in mind that you can work towards by carefully planning your investments. For example, you must ask yourself: What am I investing for? Is it for my child’s education, marriage, my retirement? Once you have a goal in mind, you will know exactly how much money you’d need and thus you can plan your investment.

A balanced cricket team is one that has the perfect mix of big hitters and defensive batsmen, fast bowlers and spinners, as well as allrounders. This ensures that the team has a variety of different talents and that they can tackle every situation thrown at them.Investments, too, need to be diversified with different types in order to tackle every situation. You need a good mix of equity, debt and liquid assets in your portfolio so that it is balanced enough to handle market fluctuations. Equity investments would give you the most returns and help you beat inflation, but to counter their risk you’d need debt-based funds to stabilize your portfolio.

In a quick IPL game, presence of mind can actually help you win a game. If a team loses quick wickets, the players must keep their cool, have the right attitude and prepare to battle it out to save the game. A lapse in concentration and they risk losing the game. In times of crisis, the proper mindset can help a team weather a storm and come out victorious.Similarly, when it comes to investments, market fluctuations are part and parcel of it. So you must never lose your cool if you feel your investments are not performing well. Just stay in the game, bide your time, keep your investments in for the long term and you’re bound to win in the end.

Every IPL team wants players that are consistent in their performance. Consistency of performance means that the player is likely to perform well in every match that they play. At the end of the IPL, consistent players are awarded the orange cap and the purple cap for most wickets taken and most runs scored.Investment funds too, need to be consistent in their performance if one wants good returns. Funds that have performed well consistently are rated four or five stars, and it is always a good idea to invest in better rated and more consistent funds for stable returns.

Strategic breaks in an IPL game let captains and players take a step back and re-evaluate their strategies. If their performance is going wayward they listen to feedback and re-asses their gameplan, thus leading to a better performance in the rest of the match.Similarly, you must always periodically reassess all your investments to check whether they’re going in a direction you intended. If you feel they’re underperforming, you can modify them according to your needs, like switching your funds to equity or increasing your SIP.

Some unexpected things can happen in a cricket match. Your attack bowler suddenly starts struggling and is hit all over the park. If you do not have an alternate plan, this could potentially lose you the match. Captains always have alternate plans to fall back on in such scenarios. They may introduce part-time bowlers or spinners into the attack to form a counter-attack.A contingency plan in life is also of utmost importance. You may face an emergency period in case of a loss of job or a medical emergency. In such cases, your existing investment plan can be disturbed putting your family’s financial state in jeopardy. Therefore, you must have an emergency fund that can cover at least 6 months of expenses so that you can effectively handle your emergency.

When a batsman is concentrating on the next ball, he has to first subtract out all the external noise around him, the cheering of the spectators, the blowing of trumpets and the chatter of opposition fielders and bowlers. Only then can he concentrate on the ball and play it to it’s merit.Similarly, with mutual fund investments , you’re bound to hear a lot of chatter about when to buy into what funds, how to time the market and other advice. It is simply best to ignore all the noise and carry on with your investment based on your own research.

All cricket teams have coaches, and these coaches bring their own experience and expertise into the team. They also provide an external analysis of the team so that they can strengthen their weaknesses.Hiring a coach for your financial investment will also help you in a similar way. Certified financial advisors will take into account your financial goals and help you form a sound investment plan so your goals are met.

Thus, a simple IPL game can teach you so much about a topic as far removed from cricket as mutual fund investment. The next time you watch the IPL, keep the above points in mind and think of how you can apply them to your investment plan. These lessons will let you grow your investments and get excellent results if you play the right cards.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.