Essential lessons for stock market investment |

Cricket is a game of glorious
uncertainty. Anything can happen at any moment in the game of cricket. Nothing
is decided till the game is over. It is a team game played by 11. Individual
performance can’t win you a match. Well, sometimes individual performance
drives the result of a match, but team performance is the key to long term
success.

Image Source: financialexpress.com

You need proper planning, good
team combination, knowledge about the opponent and the ground as well to win a
cricket match. These strategies can be seen as financial lessons. Let’s see
how.

1. Right combination

Team combination is very important
for a cricket match. Proper team combination is an advantage for any team at
the first place. Just like this, combination of financial securities and assets
in portfolio in essential for success in stock market. Equity, debt, bond,
mutual funds, real estate and physical assets like gold, everything needs to
combine perfectly for a successful portfolio.

2. Game plan

Cricket match is won by effective
game plans. It is not a game that you can come to the ground randomly and play.
Pre-match planning is a must for success as you need to study on opponent, their
strength and weakness and the ground as well.

Game plan is a must; Image Source: rediff.com

Similarly, success in stock won’t
come without proper planning. You need to set your goals, research on the market and the
companies which you are interested to invest in, annual growth and market trend
everything. Once you’ve researched on these things, plan your approach.

3. Start at an aggressive note

This is a frequently applied
strategy in cricket. Teams batting first or second, tend to start aggressively.
An aggressive start gives mental boost to the batting team. Especially the team
batting second, needs to have a breezy start if they are chasing a big total.
Top order needs to take risks while middle order’s responsibility is to play
according to the situation.

Now, this approach is very much
applicable to stock market. You need to start aggressively if you want to
achieve something really big. As mentioned before, you’ll invest in the market
with proper planning and a set goal. If your goal is not that big, you are ok
with a slow or mild start. But, if you are ambitious, you need to take things
seriously and take some risks as well.

4. Respect the situation

This is very important in the game
of cricket, respecting the situation. Suppose you have come out to bat in a
situation when your team is reeling with 4 wickets down under 20 runs. Should
you play aggressive in this situation? The answer is absolutely no. You have to
respect the situation and play with singles and doubles without taking any
unnecessary risk. Similarly, when the opponent needs 20 runs to win from 10
balls, you can’t experiment and give a flat ball to lure the batsman. You need
to bowl maintaining the line and length in utmost possible way.

The same strategy is applicable
for stock market situations. Stock market is highly unstable and full of
uncertainty. Situation fluctuates time to time here. You can’t just keep going
in the same approach all the time. When the market is having an upward trend,
keep investing more and more in the right sectors, don’t bother high or low
growth rate.

Again, when the market is going
downward, sit back, don’t panic, think calmly and take decision what to do. You
don’t have to pull off from the market for the simplest of negative trend. Give
it a chance, use stop-loss or futures as financial securities to minimize the
overall loss.

5. Keep your substitution ready

Though cricket is played by 11
players, you’ll always need some substitutions. Because, nobody knows when a
player might catch injury. Also, some players might not live up to the
expectation and you’ll need to give chance to others. At the same time, the
substitutions need to be as good as your playing eleven’s players. Only then
you can be confident of your team.

Substitution bench needs to be as strong as the playing eleven; Image Source: sports.ndtv.com

This lesson teaches about the
portfolio diversification. If you don’t have a diverse portfolio and keep
investing in a certain sector, you’ll
lose everything once the market starts to have a negative trend. So, it is wise
to invest in several sectors and diversify the portfolio so that, if one sector
fails to perform, another can come to the rescue.

6. Protective gear

When a batsman comes to the pitch
to bat, he wears helmet, gloves, shin guard and many other protective gears to
save himself from any unexpected injury. Similarly, protective gears needed in
the stock market too. You can use portfolio hedges, futures, stop-loss and many
other financial instruments to safeguard your investment and minimize the loss.

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