This may not be a right time to discuss cricket, you may think. Especially, if one is a die-hard cricket fan and had burnt the midnight oil to watch the Indian team fare miserably during their truncated World Cup campaign.
However, try to detach the performance of the Indian team from the game of cricket. Try to look at it as a game that can teach you great lessons in the art of creating wealth. It is then that the bigger picture begins to take shape.
This is exactly what finance expert Sanjiv Mehta has tried to bring out in his book Winning The Wealth Game: Cricket Strategies For Financial Freedom. Sanjiv, an MBBS from the All India Institute of Medical Sciences, New Delhi, and an MBA with Dean's Honours List from Wharton School, USA, is currently managing director with wealth management company Finance Doctor Pvt Ltd.
Read on for an excerpt from the book...
Similarities between wealth and cricket
Rahul (the protagonist in this book, who has been asked to lead the Wealth Creation Team, which has not been able to meet its targets yet again) marvels at the fact that the wealth creation game has remarkable similarities to one-day cricket, although the time horizon is much longer. The feeling of exhilaration when hitting the winning shot or when getting the last wicket of the opposing team, is replicated many times over when winning this game of life. He starts enumerating all the similarities in order to leverage his cricket experience.
1. Building up an innings
The game of wealth creation is nothing but building up an innings bit by bit, run by run, capitalising on opportunities and preserving profits. In cricket, the challenge is to score runs while not losing wickets. It's all a question of maximising score at minimal risk.
2. Laying a solid foundation
Imran Khan, after winning the 1992 World Cup, said retaining wickets and the consequent ability to accelerate was an important factor in their success.
In an investment portfolio, a solid foundation is similarly important. First, liquidity has to be taken care of, then safety and, finally, acceleration with yield enhancing assets (stable profits).
3. Always on the lookout for runs -- not letting go of opportunities
Australia is dominating world cricket; one of the important factors in their approach is converting dot balls into 1s, 1s into 2s and so on. They do not let go of any scoring opportunities. They are always on the lookout for weak bowlers and weak fielders.
Similarly, a winning portfolio will not have funds (money) lying idle. Even liquid and safe funds will earn returns. Capitalising on numerous investment opportunities make a difference.
4. Importance of right technique -- just follow basic investment principles
Batsmen like Tendulkar, Lara, Ponting, Jayasurya and Gilchrist have good averages as well as good strike rates. This implies that not only do they score consistently, they also do so at a fast rate.
The beauty of the wealth game is the same -- by just following basic investment principles, it is possible to consistently make high returns.
5. Knowing your goals
No victory is possible if there is no well-defined target. If a team does not know what a winning total will be, it is leaving the result to chance.
Similarly, in the wealth game, it is important to define and quantify your financial goals -- like ability to maintain a good retirement lifestyle, children's education and a good home.
6. Long-term orientation
Victory in a one-day cricket match is not determined by scoring 18 runs in one over. It is achieved by putting up a good overall total that surpasses the opponent's total.
Similary, in the wealth creation game, many investors get sidetracked if one stock does exceptionally well for a short period of time.
However, the real victory lies in converting the Rs 1 lakh set aside for a child's education at her birth into Rs 15 lakhs when she is 18 years old; thus giving her a real head start and making a real difference.
7. When to attack, when to defend
Each over is different. Conditions are dynamic in both cricket and the wealth game.
In some ways, each over can be compared to a year of investment life, where the challenges and results can be variable. Economic conditions are different, personal conditions might have changed and therefore, while the final goal will be still the same, the path has to be evaluated in a dynamic manner.
In a cricket match, if the target is 250 runs in 50 overs, no captain will direct his team to score five runs in each and every over. There will be some maiden overs, while some overs will be very productive. When to attack and when to defend is an important skill in determining success.
Tomorrow: Part II
~ Excerpted from Winning At The Wealth Game: Cricket Strategies For Financial Freedom, by Sanjiv Mehta, published by Tata McGraw Hill, Rs 295, with the publisher's permission.
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