When we hear about investing in mutual funds , the word 'RISK' immediately flashes on the wall of our minds. The investment risk can be defined as the probability or likelihood of occurrence of losses relative to the expected returns on any particular investment . The word 'RISK' is also associated with the IPL cricket matches. In both the scenario , there is an uncertainty of achieving as per the expectations.
We are a cricket loving nation, it's a tradition that we all follow irrespective of our religion, caste, age-group, socio-economic backgrounds. The IPL has too, turned into a mix of cricket and entertainment, bringing in people from all walks of life. As the new financial year commences, let's change the narrative of how we look into investments in mutual funds. We give it an IPL makeover. The greatest lesson or direction which we can derive from the IPL are :
A powerplay is the name for the fielding restrictions in limited overs. In T-20 , the first six overs of an innings will be powerplay where in only two players are allowed outside the 30-yard circle. In general term we can say, the duration in which the teams play with their full capabilities is termed as POWERPLAY.
We can apply the powerplay rule to our Investment strategy. Investments are all about putting your savings to a proper use which helps us to generate a sizeable amount for future use. But, sometimes the savings becomes a big question in times of inflation, or if you are a spendthrift , or if some unavoidable circumstances occur in the family . A powerplay teaches us that as soon as you get your salary, set aside 10-20% of it in savings on monthly basis. This can be made as a habit of saving every month in the first initial days and then plan out your other expenses accordingly. These savings will help one to generate a huge amount over a period of time.
REQUIREMENT OF COACH
Every investor, like the players in the IPL aims to score high. Everyone wishes to start investing as early as possible in life , so that when they retire , there is a huge surplus amount which is generated. As in cricket, every team has a coach who helps them formulate strategies, review their performances, guide them with do's and don't's of the game. Similarly, it is necessary to have a financial coach while doing an investment. Let's see how a financial advisor can help you like a coach:
Preparations before the game - There is whole lot of preparation which goes before the match like having a proper ground check up, the pitch identification, planing out your strategy etc. Similarly , before investing, the financial advisor has to undergo a lot of preparations for you. He analysis the market trends as they decide the right time for buying & selling options of funds . He studies the GDP growth, inflation rate, interest rate, fund selection, various tax implications etc. Like in cricket, building a high score requires team effort, in investment also it is advisable to diversify it in various category of funds for maximum results.
Selection of the team- It is said that the winning formula of a match is its team selection. A good combination of batsmen, bowler and a wicket keeper decides the outcome of the match. Likewise , while constructing your portfolio , a financial advisor selects a right mix of asset classes, like equity and debt in the right combination. Sometimes you need consistent players and sometimes you require aggressive players who can get maximum fours & sixes . Mutual funds offer diversification and is an indirect route to stock markets.
Make use of the strategic break- In every match there is a strategic time allotted to the team to discuss the next strategy for the remaining overs. In financial investment also , your advisor takes your time to discuss about your portfolio and plan your next investments. It is always good to be in guidance with your financial advisor as they help in growing your funds wisely .
Cricket is a game of patience and the team that wins the game is the one that practices patience on and off the field. In the IPL , we have come across so many matches where in the early game, the team loses 3 to 4 wickets. It seems as if chasing a big score would be impossible. But then the mid order batsman makes it possible by keeping patience . Similarly , while investing through mutual fund , your financial advisor will always ask you to have patience. No need to watch your returns on a daily basis when one has invested for a long term towards a particular financial goal. However, quarterly review is necessary. Every run counts, a systematic way helps your every investment count. Invest small amounts in the form of SIPs to help you achieve more over a period of time. So when you and your financial advisor work as a strong team, you not only minimise the RISK but also generate a great amount of wealth.
So, while you leave your financial investments to your financial advisor, you grab a popcorn and enjoy your IPL matches . Like in cricket, "Dreams do come true in investments".