What The Olympics Teach Us About Investing?

By Suresh Soni

Sports enthusiasts are watching the Olympics eagerly with India already opening the medals account. It’s an exciting time to see multiple nations compete across varied sporting events. Just as athletes prepare for the Olympics over several years, investors too need to plan, save and invest wisely over years, to meet their financial goals.

Let’s look at what the Olympics can teach us about long-term investing in mutual funds.

At first glance, the Olympics and large-cap mutual funds seem to occupy entirely different universes. But beneath the surface, a fascinating set of parallels emerges revealing a surprising kinship.

Effortless is a myth…

Large-cap mutual funds focus on seasoned, well-recognized companies; titans of industry, and household names that have weathered economic storms over a long time. These companies have usually spent a significant amount of time and effort decoding markets and products, reaching a place where they are now established. Much like a seasoned Olympic team, these large-cap companies have put in a lot of effort to look effortless today. They are likely to have steady earnings growth, possess strong brand recognition, and have the resources to adapt to changing market conditions. This stability translates into relatively lower volatility, similar to how an established Olympic team with a history of success is less likely to be thrown off balance by unforeseen challenges.

Willpower is the key to success:

Imagine a seasoned marathoner who understands the physical and mental demands of the race and has developed strategies to cope with fatigue and unexpected situations. It is easy to run the first few miles but if an amateur marathoner continues, his legs start giving up, and he gets out of breath. Without proper attitude and mental training, it is easy to give up at this point. But seasoned Olympic players persist, as they have trained themselves for every situation. This kind of seasoned experience is precisely what large-cap companies bring to the investment table. They've faced market downturns before, navigated changing consumer demands, and possess the financial muscle to weather temporary headwinds. These companies have experienced storms and now know how to navigate them.

Melting Pot & the Power of Diversification:

Athletes from every corner of the world converge in the Olympics to compete in a multitude of disciplines. The 2024 Olympics will have 329 events across 39 sports with breakdancing entering the games for the first time.  

Large-cap mutual funds echo this very concept through diversification. Just like participating across a spectrum of events increases a country’s potential medal tally, investing in a wide range of companies across various industries and sectors, helps large-cap funds reduce risk.

Focus is sacrosanct:

The Olympics only come around every four years. Years of training, meticulous planning, and unwavering focus are required. Large-cap mutual funds share this long-term perspective. They invest in companies built for sustainable growth, with a focus on generating consistent returns over extended periods. Think of a distance runner meticulously planning their training program, gradually building stamina and endurance over months and years. Similarly, large-cap mutual funds invest in companies that are positioned to capitalize on long-term trends, such as technological advancements or demographic shifts.

Resilience is the ultimate goal!

There are no guaranteed victories, but by understanding the potential pitfalls and implementing strategies like diversification and a long-term perspective, investors can increase their chances of bagging the medal.

Large-cap funds, like Olympic winners, have earned their position by hard work and perseverance. Invest in a large-cap fund with a long and consistent track record of performing across market cycles to go for your financial gold medal.

(The Author is CEO of Baroda BNP Paribas Asset Management India Pvt Ltd.)  

Disclaimer:

The material contained herein has been obtained from publicly available information, internally developed data and other sources believed    to be reliable, but Baroda BNP Paribas Asset Management India Private Limited (BBNPPAMIPL) makes no representation that it is accurate or complete. BBNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of the people who receive it. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as ‘will,’ ‘would,’ etc., and similar expressions or variations of such expressions may constitute forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BBNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. Words like believe/belief are independent perception of the individual and do not construe as opinion or advice. This information is not intended to be an offer to see or a solicitation for the purchase or sale of any financial product or instrument. The investment strategy stated above is for illustration purposes only and may or may not be suitable for all investors. The information should not be construed as investment advice and investors are requested to consult their investment advisor and arrive at an informed decision before making any investments. The Trustee, AMC, Mutual Fund, their directors, officers, or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive, or exemplary damages arising out of the information contained in this document.

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