Money lessons from the game of cricket
1. Don’t step out into the field without protective gear
Tip: Before you start investing, secure yourself against the risks to finances, life and health. An emergency corpus, a health cover and a life insurance are a must to safeguard your and your family’s financial interests.
2. Stay put for the long haul
Tip: Legendary knocks require grit and patience to tide over turbulent phases. Equity investors should invest for the long-term and not be perturbed by short-term volatility.
3. Don’t bank on a single player
Tip: Experts advise against focusing on a single sector as it leads to concentration risk. Focusing on sectoral funds can both lift as well as sink your portfolio. Spread your bets to mitigate the risk quotient.
4. Communicate well
Tip: Keep your family members, especially your partner, informed about investments and insurance. This will help them take charge of financial matters if you are in any way incapacitated.
5. Keep the asking run rate in check
Tip: Late start means investing a lot more to build the same corpus. Early start can help achieve long-term goals such as retirement or children’s higher education relatively easily.
6. Follow the rules of the game
Tip: Pay your credit card bills and EMIs regularly to avoid poor credit scores. File tax returns on time to avoid penalties.
7. Read the googlies carefully
Tip: A clever salesperson can sweet talk you into making bad investment choices. Asking for the internal rate of return (IRR) of a financial product is a smart way to avoid sub-optimal investments.
8. Build your innings steadily
Tip: Don’t put off investing till you have a ‘large’ surplus. Start small and increase your investment when the situation permits. SIPs in mutual funds are a smart way of achieving financial goals through small-ticket, regular investing.
9. Being overly defensive doesn’t pay
Tip: Investing in equity is the best way to earn decent, inflation-adjusted returns. Don’t shy away from equity, especially if you want to meet long-term goals.
10. Imbalanced team can lead to losses
Tip: Going overboard on equity in the hope of high returns or playing ‘safe’ and investing in just debt can lead to sub-optimal returns. Consider your age, risk appetite and the goal horizon to decide the asset allocation that suits you best.