Cricket and life: Five financial lessons to learn from IPL

• The batting team needs to score maximum runs in the power play to stay ahead. Likewise, early-career investments can help a lot!
  
• Like a well-rounded team of batsmen, bowlers and all-rounders, your portfolio needs to be diversified across asset classes
  
• Like a good coach, you need a good financial advisor to increase your chances of success
  

It is that time of the year when a Mumbaikar may pick a fight with a Bangalorean over a match of cricket. The Indian Premier League (IPL) is upon us and for the next one and a half months or so, it is sure to take up a lot of mind space for all cricket lovers.

Cricket is not just a sport in India, it’s an emotion. And as an engaging game, especially the short T20 format of IPL, it can teach us some valuable financial lessons too. Here are a few cricket-inspired financial wisdoms:

It pays to start early

In a T20, in the first six overs, also known as power play, the fielding team is allowed to have only two players outside the 30-yard circle. This allows the batting team to strike the ball over the inner fielding circle and score more runs. So, taking risks and putting up a good score during the powerplay, can help you stay ahead throughout the game.

Similarly, when it comes to your investments, starting early helps because you can reap the benefits of compounding. Moreover, the number of financial commitments tends to be fewer at this stage, and this could be the best time to inculcate the habit of saving and investing.

However, while taking risks is important, it should be well-planned. Taking undue risks can lead to the batsman getting out or your investments taking a beating too early.

Never rely on past performance

If a batsman scores a lot of runs in one year, or a bowler takes a lot of wickets, it does not mean that the same performance will be repeated next year.

The same applies to your investments, especially to those in equity. Let us take the case of small-cap mutual funds. According to Value Research, in 2024 till date, small caps as a category have given a return of 6.44%, while over 1 year it gave a returns of 57.73%.

The lesson to learn here is that, just like a good player may have a bad IPL season, certain asset classes can have bad phases too and it is important to keep that in mind while making investment decissions.

Diversify your portfolio

One or two very good batters or bowlers cannot make a team successful (as RCB and DC fans are well aware). A team needs the right balance of batsmen, bowlers and all-rounders for long-term success. Each player in the team may perform well on different games but the team will win crucial matches if there is a good balance.

Similarly, when it comes to your portfolio, it should have the right mix of all asset classes like equity, debt, gold, real estate and so on, according to your circumstances. If your portfolio is highly concentrated in a single asset class, it may suffer at certain times. So, keep your portfolio diversified and balanced.

You need a good financial advisor

It is not just the players who are in the news in the IPL, the coaches play a very important role too. A team may be good, but the strategies it employs and how it bounces back after a setback have a lot to do with the coach. Rickey Ponting, Tom Moody, Andy Flower, and Mahela Jayawardene are some of the most successful coaches in IPL history. And their contribution to the teams’ success can’t be overstated.

Similarly, when it comes to your finances, it is important to take advice from a good financial coach or a financial advisor. They can help you devise a financial plan depending on your risk appetite and goals. A good financial advisor will also help you manage your investments and make prudent decisions even when the markets are not doing well.

Review your investments regularly

The IPL games are played over 20 overs, but the tournament goes on for about 2 months. This is a pretty long period and the performance of players can fluctuate over this period. In addition, team strategies like the batting order or impact substitutes also need constant fine-tuning. Even within an IPL match, there are two strategic time-outs allotted to revisit the match strategy for both batting and bowling teams.

Likewise, it is important for us to regularly review the performance of our investments and make changes accordingly. Review your investments in both short- and long-term, take expert guidance, and periodically make changes as required to increase the odds of long-term success.