Topics around finance and investing can be a little boring and a lot difficult to understand for the everyday person. And perhaps that is why the use of sporting analogies can be a great way to explain complex ideas in a more relatable and understandable manner.

In this video, we shall look at 5 such sporting metaphors, 5 comparisons between sports and investing.

Topics Covered:
00:00 Introduction
00:43 11 PLAYERS MAKE TEAM
01:49 RISK, REWARD & REVERSE SWEEP
03:56 NOVAK DJOKOVIC & THE WINNER’S EDGE
06:14 LEAVING BALLS OUTSIDE THE OFF STUMP
07:55 SECRET TO WINNING TITLES


👉 11 PLAYERS MAKE A TEAM
A football team comprises 11 players on the pitch .. a goalkeeper, defenders, midfielders, and forwards. Now, each of these players has a specific role to perform and the more efficiently every player in the team performs the greater shall be the team’s success. Much like a team formation, an Investment portfolio needs to have different assets with each asset playing a diverse role.

1. Forwards are your Flexi cap, mid & small-cap funds, growth stocks
2. Midfielders are your large-cap, gold, and hybrid funds
3. Defenders & the goalkeeper in the form of debt funds, bonds, and cash
In essence, the right asset allocation is the operative word and one should aim for a diverse mix of assets in their investment bucket

👉 RISK, REWARD & REVERSE SWEEP
The reverse sweep, the ramp shot, and the switch-hit. The execution of these shots comes at a very high level of risk when compared to the returns they offer. Much like a game of cricket, successful investing hinges on being on the right side of the reward-risk equation

The investing version of a reverse sweep are situations
- When the valuations are obscenely high
- When the credit quality of bonds is falling
- When you buy penny stocks on a hunch

In other words, these are situations when you don’t know what you are doing or whether what you are doing is going to lead to a successful outcome or not. But there can be times when the odds are in your favor i.e. the return per risk is on the higher side. This typically happens when there are two things to your advantage
Your downside risk is limited
you are investing in a situation where you have a large margin of safety.

👉 NOVAK DJOKOVIC AND THE WINNER’S EDGE
Novak had to win just 8% more points to effect a 50% jump in the percentage of matches won which in turn took him from being the world’s 680th ranked player to being world number 1. Over the course of these 8 years, he took tiny decisions to turn the odds in his favor.

These tiny decisions included things like his mindset. the goals he developed for himself at a young age - diet, practice routines, stamina, analyzing games, and many such marginal improvements. This is what we refer to as the winner’s edge.

The investing version of the same will include small acts such as setting your financial goals, asset allocation, rebalancing, gaining knowledge, reviewing your portfolio, not speculating, investing for the long term, etc.

👉 LEAVING BALLS OUTSIDE THE OFF STUMP
In test cricket, the batsman has to be very selective of which balls he wants to put bat to. They often leave the balls that are outside off stump.
This approach to test match cricket is how good long-term investing should be. And in our case, instead of the bowlers, it is the stock market that keeps on throwing quotes at you every second. And just like you don’t have to swing your bat at every ball that is thrown at you. You don’t have to frequently buy and sell stocks to build your wealth.
Instead, you can be super selective. You can choose which stocks to work with, you can have a target price at which you want to buy or sell, you can decide which sectors you are interested in going after.

👉 THE SECRET TO WINNING TITLES
The last 17 years of data prove that with the Premier League winning team of all but one year also being within the top 3 defenses in the league that year

Now, like it is in football investing too assigns a higher value to your portfolio’s ability to defend rather than attack. For Instance, If your portfolio were to go down by 10% today then for it to come back to the same level a 10% rise will not be enough. A 10% fall needs to be compensated with an 11.1% rise in value, to get back on parity. So remember, if you take a loss then, you will need to work a lot harder to come back to the same level.

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