The cricket season is in full form. With the IPL (Indian Premier League) just having ended, cricket fans in the country have immediately jumped on the bandwagon of the Cricket World Cup. This year, the World Cup is being hosted by England- the place where cricket was born.
But if cricket was born in England, it truly grew up and found its roots in India. Here, we call cricket our religion and worship the likes of Sachin Tendulkar. In this market of over a billion people, cricket has found strategic and financial importance in almost every home. As a result of this, the game has become a multi-billion-dollar industry.
So, let’s find out what is it that cricket can teach us about money and personal finance.
Every coach and captain makes a conscious effort to select the best line-up of players for every game. They need to ensure that there is a right balance of ability in the players they select. The team of 11 players must consist of specialized batsmen, specialized bowlers (both seamers and spinners), as well as all-rounders and a wicketkeeper.
Similarly, when you make your investment portfolio, you must ensure that it is well-balanced.
While high risk instruments is necessary for wealth creation in the long run, you should not avoid safe investments like Savings Accounts, Fixed Deposits and Recurring Deposits.
When a player plays cricket, it is vital for them to know the format of the game. Their playing style would differ based on if a match is a T20 match, a One-Day International, or a Test Match. The lesser the overs the more ruthlessly they play. In longer formats, players need to conserve energy, and hence play relatively slowly.
This attitude works in investing also. You must invest in respective investment options as per your time horizon. E.g., if you won’t need money for a longer term say 10 years then it will be better to invest in high yielding asset classes such as equities. On the other hand, if you will need money in a year’s time, fixed deposits or recurring deposits can be the ideal saving investment option for you.
Powerplay refers to the fielding restriction in limited overs cricket. The rule says that in the first 10 overs of the 50, only 2 fielders are allowed outside the 30-yard circle. This allows batsmen to find gaps and hit as many boundaries as they can in the initial overs. In the latter over, up to 4 fielders are allowed outside the 30-yard circle.
This correlates with the thumb rule of asset allocation. This rule says that the percentage of equity exposure that you should have is 100 minus your age. This implies that when your younger, you should make more risky investments as you can take risk. It is because the longer time horizon balances out the risk associated with equities.
It is always beneficial for a team to have a consistent player who scores a healthy amount of runs in each game. A player who perfectly fits this description was Rahul Dravid. Dravid was never a hard-hitter. But he always put in a shift for the team, and created meaningful partnerships with teammates in games, allowing them to score as well.
While making investments, having an asset which gives healthy returns consistently is extremely important. Fixed deposits, Recurring Deposits, National Saving Certificate(NSC) are such investment products that gives a fixed rate of return irrespective of the market condition.
Hence, if you watch cricket and know what to learn, in addition to being an avid fan, you will also learn a lot of finance and investment.
Here’s how IPL and Savings Account are similar!
Financial Viability of a Football Club, and Why Banks Invest Heavily into Football
Tags: financial lessons, fixed deposits, savings account, recurring account, cricket