The month of August brought bad tidings for cricket fans as the Indian team was decimated in a humiliating 3-1 test series loss to England. While Alastair Cook and his men seemed to be in top form, nothing seemed to work for our boys in blue. To put it down to a stroke of luck does not exonerate the cricketers of their responsibility.
Rajiv Raj, Director & Co-Founder of CreditVidya, draws a parallel to investing. If you fail to pay attention to your finances and ensure that all your investments work together as a team to deliver results, you could face dire consequences.
- Give careful thought to your selection
The Indian team seemed to be “hastily arranged”, one of the prime contributors to the poor performance. On the other hand, Team England was carefully selected based on each player’s skill set. Consequently, they did exactly what the situation demanded of them.
Similarly, if you do not give careful thought to your investments and just pick assets based on what you see on the TV, or a billboard, or a “tip” from a friend, you most probably will end up with a disastrous financial plan. As a result, you will never be able to meet your financial goals and are not likely to have the funds when you need it the most.
- Do not depend overtly on one asset class
While Team India put up a poor show on foreign shores, Captain Dhoni held his own, putting up a brave front for most part of the series. But in the end, he too succumbed to the pressure that was inflicted upon Indian batsmen by the English bowlers.
Over-dependence on one asset class will make your portfolio lopsided and could spell doom in adverse market conditions. Construct a well-diversified portfolio, so that even if one asset class is facing a period of underperformance, the portfolio will be balanced by other assets.
- Position your portfolio to perform in adverse conditions
An issue discussed after India’s defeat was the inability of the Indian cricket team to perform in unfamiliar conditions. Dhoni pointed out that the wicket was good and there was a nice bounce and pace to it that the English players could take advantage of. Unfortunately, the Indian players could not figure out how to make of most of the situation.
In the above point, we spoke about the need for diversification in a portfolio. However, there may be instances, such as 2008, where every asset class is punished. Don’t panic and sell in a hurry. Similarly, if all is going up in a frenzied bull run, look at booking profits on some investments or consolidating your portfolio to some extent under such conditions.
In a last ditch attempt to salvage his team, the Indian skipper said that most of his teammates lacked in experience as far as international test cricket is concerned. He went to express his hope that with this defeat, the cricketers, who have so far been basking in the glory of the Indian Premiere League, will come out stronger and wiser and learn from their mistakes.
Similarly, there will be times when you have chosen a particular investment thinking that it will augment the value of your portfolio, but it ends up doing just the opposite and eroding value. At such time, don’t spend time lamenting on your losses. Learn from your mistake and move on. Ask yourself if an investment is right for your risk profile and return horizon. See how it fits in with your overall portfolio.
As you can see, there are lessons to be learnt from a defeat as well. Take a fresh look at your portfolio and see if there is scope to improve its performance by applying some of these lessons our cricketers learnt the hard way on the pitch.
This article has been written Rajiv Raj, Director & Co-Founder of CreditVidya.
