POSTED BY April 10, 2011 COMMENTS (33)ON
Does cricket have anything to do with your financial life? I say, Yes!. Cricket and Financial life have some amazingly common things! There is much, we can learn from cricket and implement in our financial life. Both cricket and Financial life involves achieving goals. Let’s see what we can learn from cricket, to use in our financial life.
In cricket, making a good score within the first 10-15 overs helps a lot. It’s much easier to score 300, if you’ve already made 80-100 runs in the first 10 overs. However if you make a very bad start; losing wickets and not making enough runs, you will have to work much hard later to reach a good score. We see this in every match. Once the first 15 overs are, well over, we have fielders placed well, all over the field and everyone is warmed up. So, a good start in the start of the match compensates for the slow run rate later, and at the end you get a good score.
In the same way, your time, at the starting years of your financial life is like a precious “wicket”. Dont lose it. The longer you have in your hand, more is the risk you can afford to take. Saving more in the start helps a lot in building corpus. For example if you invest Rs 10,000 per month for 30 yrs , you will build a huge corpus at the end. However if you decide to save additional 4,000 per month and invest 14,000 per month for first 10 yrs , you can then stop your investments and leave that accumulated corpus to grow for 20 more years to reach the same corpus. So an extra saving of Rs 4,000 per month makes sure you don’t have to take on a much larger load later. The assumption is that you get 12% return on your investments.
What will happen if you decide to have 11 Sehwag or 11 Zaheer Khans in the team? Will India win? I doubt it! A good team has a good batting line up, great bowlers, a wicket keeper with really safe hands, and quick, sharp, athletic fielders. Having a team that is extremely dependant on one single ability, would mean that we ignore other areas and leave big wide gaping holes which in turn lead to failure… big time.
Having 11 Sehwag’s would mean we can theoretically score 400-450 in 50 overs, but then we won’t be able to stop the other team by chasing, because we will not have a great bowling attack. In the same way, if we had 11 Zaheer Khans, we might bowl out the team under 150 runs, but won’t be able to chase that tiny total either. So a balance within a team is required.
In the same way, our portfolio is a team and it has different team members like mutual funds, direct equity, ULIPs, Insurance, PPF, other debt products and of-course – cash. Each of these have different functions and are useful in different ways. You can’t afford to have your team always stuffed with a single kind of financial product unless you are super-expert in that. You can definitely favor one product or strategy, more than others, but only if you know what you are doing. This can’t be the case in general for a common investor. One cant have only equity all his life or only debt products all his life ,you need to have balance and their comes asset allocation.
This is my favorite! If you look at any match, 6s and 4s are always there and that what most of the viewers like to watch, but you can’t deny that the actual score comes from 1s and 2s; runs which players make consistently. It’s the core of the score. There are bowling deliveries which has to be identified well to hit boundaries, but if one tries to smash every ball out of the park, failure is almost certain! All the wickets will fall sooner rather than later. A team has to make sure that they keep taking singles and doubles consistently, and hit boundaries on weak deliveries.
In the same way, in our financial life, some years can be awesome with 50% or 100% returns like 2010-2011 or worst like -50% return in year 2008 , However dont get disheartened by these extreme years, you have to make sure you make average good returns consistently each year and keep moving towards your target. Its much easier to get 12-13% return on yearly basis compared to getting 40-50% year over year. There will definitely be times when you will make amazing returns from your money. It could be stocks, mutual funds or real estate. But don’t get used to it!. Look for a good average return overall, with great returns once in a while. Having said that, don’t feel bad if there are some years which are bad and your money does not grow a lot, because even in cricket, there are some maiden overs! . If you didn’t score any runs in an over, it does not mean that you have lost the game; it just means that you are facing a strong bowling attack.
Don’t lose your sleep over it. If you look at the world cup final between India and Sri Lanka, you will appreciate the fact that India maintained its run rate till the end and made sure they preserve the wickets till end and that’s the reason it become very easy to chase the score and finally play some winning shots with the backup of our wickets in hand. In the same way, you need to ensure while chasing your goals, that you maintain a good run-rate year after year. There will be good years and bad years, but don’t let them weaken or slow your run-rate.
A lot of unexpected things happen in a cricket match. For example there can be a bad start with very low run rate, fall of important wickets, excellent fielding by the opposing team etc., which might make you feel as if the game is all over, but there are many occasions where the losing side has won. It all happened, due to focus, being calm, reevaluating the situation and finding the strategy of what’s to be done “now.” With slow and steady progress, and some calculated risks there are many matches where losing side have won.
In your financial life, there can be many issues like losing the initial years of your life without investing any money, loss of income, change in taxation rules which affect you badly, many bad years without any good returns etc., and all this can make you feel that you will not achieve your targets on time. It’s true, that situations get tougher and reduce your chances of getting closer to your goals easily. It does not mean however, that things are over! You can always take charge of your financial life and really fix it. You can spend good time over your financial life and be extremely committed to make it awesome. Learn personal finance, find out how to get better returns from your investment, be more aware of what precautions can be taken etc. You need to be more alert and keep evaluating your strategy for improving your financial life.
Can you share more learnings from cricket which we can relate to personal finance ? Also, share if you like the analogies in this article ?
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33 replies on this article “4 amazing things you can learn from Cricket”
Amazing article Manish. As usual, its superb
Interesting comparison between two fields. Both Fields have one more thing in common, most Indians are interested in both :).
While reading the first point it however clicked to me about Margin of Safety (have been reading about Value Investing), Investing at a discount might very well be a good start I guess..
Thanks for the nice article.
Thanks for your appreciation 🙂
Nice example. It is a very well explained article indeed.
I believe you gave your “Guru Gyaan” / “Guru Mantra” in one short and crisp article (Which you have actually tried to share with us throughout the time).
Keep rocking man !
Sehwag is not that bad of a bowler….. Im sure he can defend 400 runs with his bowling! 😀
Anon , It was just an example , I meant a good batsman , try Gautam Gambhir
Life is beauty, admire it.
Life is bliss, taste it.
Life is a dream, realize it.
Life is a challenge, meet it.
Life is a duty, complete it.
Life is a game, play it.
2 cents from my end. Don’t play T20 or one day. You stand to loose.
Play long innings (longer than Test Match!) and one will definitely win.
How does that relate to personal finance, can you give full analogy
Cricket is the liked and loved by majority of Indians and I guess that is the reason for this post. The same analogy can be driven from other sports viz. Hockey.
In game the credit should also go to the coach (ref Gary) who is instrumental in understanding every team member, compiling strategies and working towards a win. Coach can be FP in real life. (Looking for next sequel to this post on this topic).
In real life Long inings refers to Systematic Investment. Having done all the planning initially (Replanning on continuous basis) its wise to keep investing for longer term, irrespective of Healthy or Stick wicket.
Life is beauty, admire it.
Life is bliss, taste it.
Life is a dream, realize it.
Life is a challenge, meet it.
Life is a duty, complete it.
Life is a game, play it.
As such one can compare anything to any other thing and explain. Our god men are experts in this.
However it needs a shrewd mind to draw apt comparisons and maturity to really analyse them and utilise them to one’s advantage.
Nothing is a panacea and one has to take his realities into account to arrive at a conclusion. This is required as only he knows his situation best. In this context we have to take Manish’s quote “biggest guru to someone is you yourself”
To this end, one may try various paths.(Investment strategies in this case) Like the famous saying “Ekam sat Vipraah bahudhaah vadanti”, One can evaluate various means and choose the best fit for his situation.
Thus the main purpose of articles like these is to show the fact from various angles so that the reader gets a better picture of the situation and begin analysing things from his perspective culminating in an informed decision making process.
Thanks Manish for the good article.
Yes , you have summerised the essence very well .. Keep reading
Some other lessons that I could think of from cricket.
1. Even your best bowlers cannot prevent runs during powerplay and final overs.
This is the testimony for anyone during the volatile period. For a equity player, this is a key lesson. Even the best scrips underperform during certain period.
2.Don’t do the obvious and use your brain
Everyone on the street was telling that track was good for spinners and they should consider taking Ashwin. If we have lost the match, people would have also criticised for Dhoni’s move of coming at No.4 instead of Yuvi who is in great form. This is to say, do you own research and arrive at the decision. Suffice to say ignore what people say & recommended in Media.
3. Always ‘more at crease’ batsmen is a threat to the opponent team than the just arrived.
Great returns or significant positive impact could be possible only with the higher duration of investment.
2nd and 3rd are really good points . 3rd point is really something which can be looked upon as strong learning in mutual funds 🙂
Thanks for taking my views very sportingly.
Personally I dislike the comparison of investments and any game. It gives the feel of gamble. Even if you see CNBC ’20-20′ program, they suggests some stocks for intraday. In the program they states like “aaj DLF per daanv lagaya jaye”, this is purely a gamble statement.
Victory and defeat is an integral part of the game. That is not about investments.
We watch cricket for entertainment and we make investments for..(you better know)
Here in city like Aurangabad, most of the people think equity, MF as a gamble, and comparing the things with game, unknowingly we nourish their feelings.
That s all.
Thanks for your reply . the whole idea was to take away some learnings from the game .
To achive our financial goal (world cup) we should hv a balanced portfolio (team) i;e-a blend of Large cap(sachin,sehwag,zaheer,dhoni), mid cap(gambhir,raina), multi cap (yuvraj) ,small cap ( virat) & also thematic fund (pathan).
But we should not forget the role of “JAGO INVESTOR” ( guru-gary)
Thanks a lot MANISH for being our coach in financial planning.
thanks for your appreciation , the biggest guru to someone is you yourself , because the action comes from you , everyone else can only motivate .
very nice & well explained. Thanks
I am strongly dis agree with you.
Life is not a game. And that too cricket.. not at all.
1. In initial overs you must concentrate on wicket rather than to score. In real life also you have very low scope for savings initially. Your concentration should be on job and work rather than earning and savings, which will pay you in later years.
2. 11 Sachin..wow.. what else should one have? If someone has 11 Sachin in his team then what are you waiting for? go and make 450,500 also more.. what is bad in it?
Diversification required when you are doubtful about performance. If one Sachin doesnot perform there are other Sachins to perform.
3.Practically what will happen when you lose the match? Nothing !
You will be the second team. That means you will slightly deviate from your goal. Which cannot be considered as your failure.
Again don’t you think that singles and doubles are like debt instruments. It is very difficult to achieve goals depending upon debt instruments only! You must have fours and sixes i.e.equity..without witch you cannot beat even inflation (Bangladesh)!
4.This is correct. But this applies every where in life.Not only in cricket.
Thanks for giving your views and giving a different way of looking at each point raised by me . Looks like you have taken each point very seriously and tied it to a cricket match . Yes the point put by me might not always be right in all events , but overall the intention was to make the personal finance teaching hilarious and with an analogy to something which everyone loves .
Now lets get back to each point you raised , let me share my opinion .
1. I agree with you point that one should concentrate on wicket more than score, I dont disagree , but I think a mix of both would be better . At any point one should look after wickets and make more runs in the start .
I want to know in detail why you say that “In real life also you have very low scope for savings initially. ” . what you said is generally true for a smaller percentage of people atleast in good jobs like in metro’s . They are young , not married , most of them with almost no responsibility , you can see most of the people earning 30-50k salary and its easy for them to save a lot in start “if they really work on it” . But I see the major challange is to keep a roadmap and be disciplined .
Please share why do you say that “In real life also you have very low scope for savings initially.” . For how many people have you seen that , which industry are you talking about ?
2. I said “Sachin” earliar , but what about “Sehwag” or “Gautam Gambhir” , what I said would now dilute a bit but the main argument remains the same ,dont take that exact sentence very seriuously and revolve around cricket , the only intention was to say that team has to be balanced , and dont you think if we stuff only good batsman in team , we can really find out many good batsman from India and make a team , will it perform always and we will win the world cup every year ? I am not sure ! and as I am not a big cricket fan or fanatic, others cricket lovers can comment on it 🙂
3. Agree to you point, but where did I say that 4;’s and 6;s are not important ,they are .. All i said was that the maximum runs comes from 1’s and 2’s in any match and what that maps to “average year returns” in your portfolio , not “debt” products .
4. True, Cricket is only taken for analogy here and some entertainment 🙂
Great to hear your views and opportunity for me to really open up and share more ideas , would like to hear your views on what I said .
As usual a well timed and captivating post.
Quite brilliantly, you have used the common cricket knowledge to bring financial wisdom to the table of amateurs like us. The thought of 11 Sachins was quite neat as we do need diversification to save ourselves from the Black Swan events…don’t we? 🙂
yea , sort off ,. What kind of black swan events are you talking about ? Portfolio gets a lot of problems because of no proper allocation , but those are well known events and not rare events . Was there any thing specific in your mind when you said “Black swan events” ?
Free Hit in Cricket : You dont always get this chance. When you get it, try to make maximum usage. Be Fearless, Try your best.
In Finance World. Some time Bank celebrates Siver Jubliee or Golden Jubliee during this period (may for a month or less) they give higher rate of interest for Fixed depoist. Utilize it. Example Couple of years ago South Indian bank announced 11% interest for deposits for 3 years.
Very Safe Right? User such opportunities.
yea, there are cases when we have a extremelly low risk or No-risk opportunities and one has to grab it that time . Its a good point, however it captures a very small part of the cricket and a rate event . what do you say ?
Totally Agree with you Sir. Low Risk opportunties not always keep knocking at your door. We need to make sure we grab this opportunity. Bank interest rates was one of the examples. It can be buying good stock when it is available at dirt cheap price.
You might not always get this bargain again
Excellent article, very well explained.
One more example would be nurturing / training the Junior members in the team. In case of personal finance educating family members namely spouse, kids of your various financial investments.
thats a good analogy . Training the next genertion and current family members if very important .
Thanks for sharing that point