When you combine cricket with the two words World Cup, it ends up uniting the whole country in frenzied passion. Every one is an expert and most people can poke holes in the Indian cricket team’s strategy with their own take on what they could have or should have done, during a post match analysis.
However, what if you looked at your mutual fund portfolio as your personal cricket team where too you could strategise and play the innings over an investing lifetime? Confused? Read on to know exactly what I am talking about.
1. Target
Be it a team batting first or the team chasing, both teams go out to the ground with a range in mind, taking the pitch conditions into consideration. Your financial goals are like a cricket target. You take into consideration the present-day required amount and the existing rate of inflation to come to the right funding amount.
2. Team selection
Just like team selection in cricket, asset allocation is an important factor in your investing journey. Different mutual funds have a different purpose and are expected to play varied roles. Depending on whether you want a more attacking lineup or a more defensive one, it is up to you to select your team or define your asset allocation.
3. Opening batsmen
Opening batsmen are crucial to any innings in cricket, stabilizing the innings and maintaining a decent run rate, setting the tone for the remaining bit. In a mutual fund portfolio, large cap as well as index funds play that part as they are less volatile yet promise fair returns over a long period.
4. Middle order batsmen
The middle overs in any cricket innings are tricky, with the decision of whether to be solidly defensive or to pace the run rate. Multi cap funds can play that role in your investing journey smartly by tweaking to focus on the stabilizing large caps or changing gears to higher potential small and mid cap stocks depending on the markets.
5. Pinch hitters
Pinch hitters are like trump cards in any batting lineup. They may or may not fire in some matches but when they do, they make up for any previous slump. Small and Mid cap mutual funds perform in a similar manner. They perform in some years while some years are bad. However, in the years they do perform, they wipe out all the reds they might have chalked up in the previous period.
6. All rounders
All rounders are the important players in a cricket team who come with both skills, bowling and batting. While some all rounders are stronger in the batting department, some are better known for their bowling skills. Similarly, hybrid funds are the all rounders of your mutual fund arsenal, which could be stronger in debt or in equity.
7. Bowlers
With a strong bowling line-up, even when the batsmen post a lousy total, the team is able to defend it. When it comes to financial assets, in most years, equity and debt move in opposite directions. So, in the years that equity does not perform, ensure you have some allocation to debt funds so that it is able to cushion the hit and make up for it.
8. 12th Man
While we may overlook the 12th man, every cricket team ensures they have one for any match that they play. The 12th man is there to provide refreshment and moral support in the drinks break as well as to make short term play if the situation so requires. In your arsenal, ensure you have six months worth of expenses in liquid or arbitrage funds so that it is there in case of any unforeseen expenses, allowing your other investing to go as per plan.
9. Umpire
The umpires play the vital role of regulating the game all through to ensure things are going as per the rules. They are also often called in to review the proceedings. A regular portfolio review can play that role for you to ensure that everything in your investing is going as per plan and you are on track to achieve your financial goals. It also allows you to see if any mutual funds need to be declared out or if any tweaks need to be made for course correction.
When you look at it, your mutual fund portfolio can become your personal cricketing league. Gamify your investing journey to make the most of it.