While growing up, sports taught us about teamwork and fairplay. And now, in adulthood, it can even teach us about investing and money. While the Cricket World Cup has finally (and sadly) come to an end, here’s a look at some of the best moments from the World Cup, and the investing lessons they can teach us.
1. Predicting isn’t easy:
Experts get it wrong and that’s nothing new. Before the start of the World Cup, there were predictions of a possible 500+ score. Did that happen? No. The majority of games were actually low scoring (by relative standards).
In the investing world, experts like to predict how the equity markets are likely to behave the next week, the next month, the next year and on and on. And more often than not, they get it wrong. So, the next time you hear a prediction of the Sensex index at 50,000 by the end of 2020, take it with a bag of salt.
2. The importance of a good start:
A good start can never be underplayed. The semi-finalists India, Australia, New Zealand and England all had great starts to the World Cup by winning their initial games so much so that people believed that they would be the semi-finalists after the initial few games. This meant that even though New Zealand and England stumbled in the later stages, their strong start kept them in the running.
When you’re younger, you are likely to have fewer commitments. This also gives you the opportunity to start investing and building wealth without worrying about the responsibilities later. So even at a later stage of your career you stumble due to a loss of job or poor health, the good start can keep you afloat.
3. Getting the right advice:
New Zealand’s Martin Guptill called for a review of an LBW decision that looked fairly plumb to a viewer. Unfortunately, Henry Nicholls who was at the other end and supposed to advise him didn’t give the right advice. It could be because for someone who was out of form throughout the World Cup and started off the final fairly well, this could have been his big moment. But the enormity of the match could have led to bad advice which turned out to be unlucky for Ross Taylor later when he was given out, but wasn’t actually. He didn’t have a review to use.
A financial advisors’ job is to ensure that you avoid making emotional decisions with your money. They shouldn’t be afraid to disagree with you while giving you the right advice. Though you do need to make sure they have your best interests at heart first.
4. But mistakes do happen:
Sometimes a bad start doesn’t mean that it is end game. Remember the game against West Indies when Australia were teetering at 30-4 before the innings was rebuilt? They finished strong at 288 courtesy a flash of batting brilliance from Coulter-Nile.
If the start to your investment journey isn’t the best, don’t fret. It’s a marathon, not a sprint. You may have to increase the amount you save in order to reach the final goal, like increasing the batting run rate, but you can get there.
5. And yes, luck matters:
In the last over of the final, with 9 runs needed off 3 balls, England’s Ben Stokes hit the ball for two and as he scampered back for the second run and dove into the crease, the throw from the deep ricocheted off his bat and raced to the boundary, giving England an additional four runs. Ex-umpire Simon Taufel has now said that awarding six runs was an error of judgement by the umpire. Got lucky, didn’t they?
Just like with everything else in life, in investing also, you may do everything right but the market has a tendency to remain irrational. Prior to the 2008 financial crisis, economists like Raghuram Rajan had warned about an impending crash. But he was two years too early. Be prepared for your smart decisions to look foolish sometimes when it happens. Also, there is no single approach that will always lead to a successful result.
6. A bad game hurts, but...:
The Indian top order which had done exceedingly well throughout the tournament and topped the league table failed miserably in the half an hour of play during the semi-finals against New Zealand. Just one bad game or as Virat Kohli said, 45 minutes of bad cricket led to an exit.
One poor year like 2008 when investments fell by 50% can negate the good performance of the previous years. But luckily, investing isn’t a knock-out game and if you tie in your goals with your investments, don’t panic and stay invested, you can still achieve the end goal.
Maybe the ICC can also reward the teams that come out on top by using an eliminator format similar to the IPL for the next World Cup.
7. Don’t keep looking behind:
Pakistan’s World Cup run was eerily similar to their 1992 World Cup journey when they won the trophy that at one point had people actually believing they would go on to win the cup. Now we know that they didn’t.
Investors who steadfastly look at the past while trying to see if the same ingredients make up the present may be doing it wrong. Just because the market crashed in 2008 at a particular level doesn’t mean that it will fall again at the same level. It’s always good to understand financial history but within the context of the present. Don’t let the past determine all your investment decisions.
Nithin Sasikumar is the co-founder of Investography, a financial wellness company based in Bengaluru. He can be reached at firstname.lastname@example.org or on Twitter @NithinSasikumar