The IPL has lots of glitz and glamour. But when you look at it from the cricketing perspective, it can provide valuable lessons in money.
Here’s a look at five such tips from IPL to improve your financial game.
Start Early: IPL has a concept of powerplay, which means that in the first six overs, only two fielders can stay outside of the inner circle. That is the time when the batting team tries to make the maximum runs to get a head start in the game. If one does not score enough runs in the first six overs, one may not be able to set a high target or chase down a target. Similarly, it is important to start your investments early. The earlier you start, the more ahead you are in the game and you can easily achieve your financial goals.
Build A Strategy: The main thing we can learn from T20 cricket is about building a strategy! You will agree that the second half of an IPL game is more exciting than the first half. This is because a target is available that needs to be chased.
“This is exactly the same situation as purpose driven financial planning, where we help clients to set their financial goals at various stages of life and plan their investment strategy accordingly,” says Chenthil Iyer, founder and chief strategist, Horus Financial Consultants.
Diversify Your Portfolio: A good team does not have 10 great batsmen or 10 great bowlers. Instead they have a right mix of batsmen, bowlers and all-rounders. On a given day, one or two bowlers or batsmen may perform brilliantly, but it is teamwork that contributes to a team’s victory.
Similarly, one should never invest all of one’s money in one asset class, such as equity, debt, real estate or gold. Instead, the portfolio should have the right mix of asset classes, based on one’s risk appetite. Even when the stock markets are performing very well, one should not put all money into stocks. Similarly, one should not pull out money from the markets in a bear phase.
Horses For Courses: A one size-fit all solution does not work for financial planning. In T20 cricket, especially in IPL, the one parameter that is tracked throughout the run chase is the Required Run Rate (RRR). After every over this gets reset based on the remaining runs to be scored and the overs remaining. The funny thing about the required run rate is that no team scores exactly the same amount of runs every over, and hence the rate keeps fluctuating.
“So you may wonder, what is the relevance of such a number? This rate actually is a very good indicator of the degree of aggression that needs to be shown in order to chase down the target. In other words, it represents the risk that needs to be undertaken. If the RRR is eight runs per over, the batsmen need to score aggressively to win the game even if they have to risk losing a wicket,” says Iyer.
However, if the RRR is only four runs per over, they can play very thoughtfully, taking minimum risk to chase the target. A similar RRR can be tracked in the case of financial planning as well. It’s called the Required Rate of Return! This can be derived based on the amounts required for the targeted goals which are identified during the comprehensive financial planning exercise. This is how one can create one’s financial strategy and arrive at one's personalised risk-return profile.
You Need A Financial Coach: A team may have the best players, but they need to be guided well. Also, someone needs to craft a strategy. This is where a coach comes in. Stephen Fleming, Tom Moody and Mahela Jawawardhane are some of the most famous coaches in IPL and have led their teams to glory.
Similarly, to achieve your financial goals, you need a coach or a financial advisor. Also, it is important to know one’s risk-return strategy, and accordingly structure one’s investment portfolio diversified across various asset classes appropriately.
“This can be a cumbersome exercise in practice and hence might necessitate the assistance of a qualified professional,” says Iyer.
