Kohlinomics: Investment lessons from the ace cricketer

Here are top five lessons from the Kohli primer to help you put your investment plan in perspective before you expect to reap rich rewards from it. Here goes:

A long term plan is MUST

This mantra may have been chewed like gum before but Virat Kohli has made it the in-thing, almost as glamorous as him. As soon as he comes out to bat, his self-belief is evident, you know he’s here for the long haul, ever mindful of his stay at the crease including that tiring and trying phase of little or no action. He has a master plan complete with contingency routes to counter unexpected developments. He knows periods of lull are not only an integral part of the game; they are accident prone too. Not every shot during this time would be fulfilling but he’ll get enough opportunities to unleash himself and steer his team to victory. He relishes the responsibility.

One can gainfully adopt the same approach to stocks – the markets go up and down from time to time and there are several junctures where you are tempted to make ad hoc emotional entries and exits in the heat of the moment. If you firmly believe in the long term story like Kohli, you will stay put. But this is possible only when your investments follow a well-researched plan in the first place in line with your money needs at key life milestones, financial capacity (current and future), and risk appetite. Once you have made your thoughtful pickings based on your master plan, you won’t read too much into the transient market movements. At every stage, you will evaluate short term gratification for the likely long term consequence. It does take time and effort to get into that “big picture” frame of mind in the living waters of field action but you can take heart from the fact that even Kohli went through a curve on this front.

This is not to negate the value of short term gains but the best investments are essentially ‘buy and hold’ picks that beat inflation and build wealth for you. A good plan will account for life events, short term included. So don’t confuse volatility with risk and play for the long haul …just like Kohli. Relish the responsibility.

Count on Common sense, not sixth sense

Virat Kohli is always open to opinions, advice and suggestions but he trusts his instinct the most. In an age of tech-enabled decision making and analysis, he likes to keep things simple, in paying attention to smaller details that are often discarded as humdrum. His common sense approach is his most uncommon trait powering his successful strides. He prefers to build his strategies in the guiding light of actual experience. There’s no divine intervention to help the cause. It demands hard work of self-analysis at the end of each game which Kohli invariably seems to do. No wonder, he’s able to come up with smart counter plans, proactively thinking of all possible attacks the opposition may have planned for him or deciding on strategies in line with pitch conditions on the given day (and never shy of neatly articulating them during award presentation ceremonies)

Investments also demand this level of articulation aimed at demystifying concepts for practical use. Of course, one must seek expert advice especially in areas where knowledge and experience both are in short supply but borrowed wisdom is no substitute for thought. It’s elementary to know the “what, why and how” of your plans in entirety. Simply put, you need to know your portfolio constituents in and out – what’s their mix and why, what purpose they would serve, what are the underlying risks, how liquid they are, what are their expected highs, how long should one hold them and the like.

Think Risk and Return intuitively
Kohli is one of the few players who are ever conscious of risk-return trade-offs. This assessment is embedded in his though process. He contemplates every delivery for the perceived risk and return in the exact context: how’s the delivery like – what’s the risk involved – is the situation demanding. No wonder, he is never found ‘too correct for comfort’ or unduly slow. At the same time, he steers clear of rash strokes and waits for the right opportunities to free his arms (save for the very few occasions when he falters and so does India following the Tendulkar pattern) Both his aggression and defense are never hard coded functions of time, they change with situations. And he doesn’t let them get adversely impacted by the failures of his team mates.

Same holds true for stocks. It’s always recommended to consider every asset class, every entry and exit action, and every market situation matching Kohli’s pace and precision. Of course, things could go wrong against your expectations at times but never lose sight of the risk-return trade-off that influenced your choice of investments. In other words, you should never fix your portfolio without answering two fundamental questions: what’s your readiness to reshuffle it in the event of unforeseen circumstances and is it in line with your intrinsic risk appetite? Then you won’t mistake volatility for risk.

It’s imperative to manage the manageable about your investments. The markets can be elusive, economic cycles are beyond your control, but your financial goals and risk appetites are your own. One’s risk-taking ability is linked to the kind of person one is, not the kind of instrument. Often investors are risky, not the investments.

Build a wholesome portfolio
Unlike many cricketing stars that have developed their niche spaces, Kohli has stamped his authority in all three formats – Tests, 50 over format and T20s. His adaptability is of course superlative, as sparkling as his ability and agility, but his success is also because he has no preconceived notions about any format. So his core remains the same – he doesn’t throw caution to the winds just because it’s a T 20 game, nor does he turn a tortoise in tests. This way, he learns more about the real nuances of each format with that much more clarity that enriches his experience game after game. He can leverage this versatility for career progression as a failure in one format can be offset by the success in another.

Like Kohli, one needs to get rid of pre-conceived notions about equity, debt, real estate, gold and other asset classes. Each class has a unique value prop and follows different trajectories in line with governing market movements, so a balanced portfolio will most likely fetch you consistent returns over time through the collective churn of different asset classes. If one fails, the other will make good the loss or minimize it. That doesn’t mean you should buy a slice of all asset cakes or fake knowledge of intricate products like Futures & Options but you should be certainly be more open to learn more about as many in line with your financial capacity and innate interest. Who knows, you may find a new avenue of handsome gains. In any case, irrespective of your life situations, you always need predictable cash flows of fixed income instruments as well as the inflation-beating prowess of equity and real estate. Why not make the best of both worlds?

Update and upgrade all the time
Not only does Kohli think on his feet, he learns from past mistakes in real quick time. That’s precisely why the database of his weak spots, superb graphics notwithstanding, becomes redundant very fast as Kohli is ever conscious about weeding out the grey areas the moment he spots them or they are brought to his notice.

He’s a proud student of the game. He continuously works on his mindset, tries to probe deeper into the nuances of the game, and learns by observing other greats or discussing cricket with his coaches and even friends who wish to learn more about the game.

Investments also call for fast learning from past debacles, blunders, careless actions and even trivial errors. It could be anything – too many funds locked up in ‘year-end’ tax saver funds or bank FDs, too much or too little insurance, investment in asset classes or mutual fund schemes with the least idea of how they work, trusting tips and half-baked analysis more than sound research, holding on to duds and selling booming stocks at lower prices with contrary expectations in mind. Be a proud student of the game and you’ll have more clarity about where you tend to go wrong or succumb to the lure of windfall gains and short cut routes. The database of your weak spots will then require constant updation like in Kohli’s case. It will also be sparsely populated over time.

If investors emulate Kohli in true spirit, there’s no reason why they can’t celebrate success in true-blue Kohli style, minus the cuss words of course. That is one lesson you don’t need to learn from him, Virat will profusely agree with us. Happy planning! Happy investing!

Courtesy: My thought piece on India Infoline

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