- Date : 13/07/2018
- Read: 10 mins
Have a look at some important investing lessons you can learn from specific instances taken from the football world cup.
The 2018 edition of the FIFA World Cup has thrown up its share of wisdom for businesses to absorb, the most important perhaps being the ability to recognise one’s own strengths, identify the weaknesses of the opponent, and use this knowledge effectively to work as a team to reach the intended target.
The Germany-Mexico Group F clash is a great example of this. Going by track record and individual names, Germany was the hot favourite to win. But on the field where it matters the most, they were just a bunch of individuals trying to attack whenever they could. On the other hand, Mexico worked as a team, counterattacked, and exploited the spaces Germany left to shock the world with a 1-0 scoreline in their favour at the end of a play.
Businesses can learn teamwork from here – how not to get intimidated by the business rival’s strengths but get the best out of their own to find their winning formula. Even you, as an individual, can take lessons from how these World Cup teams plan, so that you can reach your personal investment goals.
Let us look at some things you can learn from the FIFA Cup 2018, taking specific instances of team strategies, and how they can resonate with your investment planning.
Related: Investing in Equities- Identifying the Best Plan for Your Financial Goals
1. Review your needs
World Cup scenario: In the final stage of league matches in Group C, France – already among the last 16 – needed to top the standings to avoid a last-16 clash with Croatia, which was headed to top Group D. On the other hand, Denmark would have been ousted if they lost to France and Australia beat Peru (all Group C), which was being played simultaneously. But when news reached that Peru was leading 2-0, Denmark decided to play defensive and play for a draw. France was only too happy to oblige, as they needed to avoid a loss.
Lesson for you: Get a fix on your financial and material goals by reviewing your needs, and tweaking them from time to time; it is quite like the French and the Danes working on what needed to be done to sail through to the quarterfinals, or play the opponent of their choice.
Spend some time thinking of all you would like to accomplish for yourself, and earmark these as short-, mid-, and long-term goals. Buying an expensive phone or saving up for an advanced managerial course at an institute of repute can be short-term goals, while purchasing a house, buying a bigger car, or getting married can be mid-term/material goals. Planning for retirement and saving for the kids’ college education can be long-term/financial goals. Your investment plan should be based on both financial and material goals.
Though the bulk of your investing should ideally be based on financial goals, there is no reason why your material goals (a second-hand car in the first year of employment, a better car by 30, a house of your own by 35, etc) cannot also be pursued. In fact, material goals should constantly goad you to be a proactive investor.
Related: How and when to de-risk one's investment portfolio
2. Find investment funds
World Cup scenario: Harry Maguire, who scored the first of England’s two goals against Sweden in the quarterfinal, had travelled to watch England as a fan at Euro 2016; two years later, he is a pillar of England’s defence, having been spotted and backed by manager Gareth Southgate when a new team was being formed.
Lesson for you: Winning the Cup was England’s goal; the manager needed the right team for that. Similarly, once you have worked out your goals, you will need investible funds, and you may have to work on building this. As an investor, you must clearly understand that you can only invest what you are left with after your expenses; this is your investment surplus.
Study your current financial state carefully and analyse your earnings and expenses; this will guide you through your annual cost of living and indicate the savings or surplus money available for investment. This may take time, but don’t worry – once you start, it will become a habit. You have to back yourself to do it, just as Southgate backed Maguire.
3. Explore investment options
World Cup scenario: In the final stage of Group F, Sweden faced off against Mexico, while Germany took on Korea. For Sweden, there were three possibilities (comparable to ‘options’ in financial terms): a loss would mean they crash out, a draw or win by one goal would leave the field open, while a win by more than one goal would mean they top the group. Taking no chances, Sweden went all out for a big win, and got it – winning 3-0.
Lesson for you: Just as Sweden faced possibilities, you have investment options: you can keep your money in banks and earn steady but low interest, or go for other options to gain better profits and returns. Some of these are various types of mutual funds (bonds, debt, equity), equity-linked savings schemes (ELSS), exchange traded funds (ETFs), money market funds etc. The important side of investing is doing so in the right instruments, so choose your options wisely.
Please bear in mind that the amount you get back would also depend on the duration for which you keep the money invested, among other factors.
Related: How to clean up your investment portfolio?
4. Plan asset allocation
World Cup scenario: Germany may have made a first-round exit this time, but at the previous World Cup in Brazil, they were the champions under current coach Joachim Loew, who is known for tailoring his tactics for specific oppositions by changing the basic 4-2-3-1 formation to 4-3-3 or even 3-4-3 and 3-5-2. He introduces different types of players and also likes to tweak a game’s pattern.
Lesson for you: Your ‘players’ are the schemes and instruments you have invested in (fixed deposits, mutual funds etc); these are your ‘assets’. Like Joachim Loew, play around with different sets of players – it is called ‘asset allocation’ or deciding the mix of assets in an investment portfolio. This is needed because if an asset class doesn’t earn, another set of assets may yield positive returns.
Apart from the traditional ways of building assets, like various schemes, FDs, savings, etc., you can also investing in assets that will appreciate in value faster. Mutual funds, commodities, and real estate are some options that will appreciate with time. This brings us to what you must do next: diversify.
5. Employ diversification
World Cup scenario: When there was a group tie between Iceland and Argentina group, the scoreline read 1-1. A highly rated team was knocked off its pedestal by an underrated outfit, and Messi angrily kicked away the ball and tore off his captain’s armband in disgust. Throughout the tournament, it seemed as if Argentine players only looked to their superstar captain to take them home, but when Messi was blocked by rival players, his teammates did not know what to do.
Lesson for you: Never invest in just one basket, like the Argentines did in Messi. Instead, it pays to ‘diversify’, or divide your investible fund amount across a portfolio and start investing the portions into various asset classes. This way, as explained earlier, if one asset class underperforms, there are others to even things out. Basically, diversification is a good strategy to reduce risk, which can be either company-specific or sector-specific; for example, a fraudulent company is a firm-specific risk, while an airline strike is an industry risk.
There is also the market-specific risk, which cannot be wished away if you are investing in financial markets, as they can be triggered by interest rates, exchange rates, and recessions. Diversification cannot lessen market risk.
Related: How to diversify your portfolio like an expert?
6. Monitor and rebalance
World Cup scenario: Andres Iniesta, the Spain midfielder who is admired by countless fans across the world, was not at his best in this tournament. Subsequently, team manager Fernando Hierro dropped Iniesta for Spain’s last-16 clash with Russia. Along with Iniesta, teammates Thiago Alcantara and Dani Carvajal were also sent to the bench for the game.
Lesson for you: As an investor, you should always review your portfolio at least once every quarter and rebalance at least once a year. You would need to see scheme performances and ensure that good performers exist in the portfolio. Or you would need to change your holdings and replace laggards with better performers.
For the average investor taking the long-term SIP route into some equity mutual funds with an aim to meet long-term goals, rebalancing may not be required. But a review of the portfolio at least once a year (if not a quarter) is advisable. If you find funds are grossly underperforming, it is better to shift.
7. Have an emergency fund
World Cup scenario: England has been traditionally miserable in taking penalty shots. But this year, in a last-16 clash with Colombia, skipper Harry Kane scored the first goal for England through a penalty. Later, when Colombia equalised and the game went to the tie-breaker. , England won 4-3. Coach Garreth Southgate says the team had been practising, studying, and developing strategies for penalty shootouts since March.
Lesson for you: Like Garreth, prepare for contingencies, and build an emergency fund. A little something from your earnings, set aside on a regular basis, should go a long way in building an emergency fund. This is a key step to avoid any financial problems later in life. Emergencies could come up if you lose your job through downsizing at the workplace, unexpected health issues could crop up, and accidents can happen to anyone. If you build an emergency fund, you are assured of financial security when times are bad.
Related: Novice or expert, there’s an investment strategy for you
8. Develop patience
World Cup scenario: Belgium reached the semifinal to take on France, having beaten Brazil 2-1 in the quarterfinals. The only time they had come this far was way back in 1986. Their recent rise is the result of a long-drawn planned process. As a Guardian columnist wrote in 2014: “Belgium’s emergence as one of the strongest nations in world football has exceeded all expectations. (It) has produced… a golden generation of footballers.”
Lesson for you: You have set out to make an investment plan to generate a regular income in the time period you have earmarked for your goals. However, take a lesson from the Belgium story: it took them 32 years to reach the semis again; similarly, you must have patience with investments. It is very important to remember that for any investment, it takes time to produce a healthy output. Most healthy investment yields come when funds have been invested for a longer duration.
Last words
Crucial to your investment strategy are three words that should be etched in your brain: Never Invite Debt. Most of us have some kind of financial liability (a house loan, money borrowed for sister’s marriage etc) and paying these off should be a priority in your monthly budget. Bear in mind that chalking up heavy debts through excessive use of credit cards can scupper your financial plans. If you use a credit card, be sure to settle your monthly dues on time.
At the 2004 Berkshire Hathaway annual meeting, a 14-year-old shareholder asked Warren Buffett if he could give one piece of advice to young people. Buffett famously replied, “Don’t get into debt.”
The 2018 edition of the FIFA World Cup has thrown up its share of wisdom for businesses to absorb, the most important perhaps being the ability to recognise one’s own strengths, identify the weaknesses of the opponent, and use this knowledge effectively to work as a team to reach the intended target.
The Germany-Mexico Group F clash is a great example of this. Going by track record and individual names, Germany was the hot favourite to win. But on the field where it matters the most, they were just a bunch of individuals trying to attack whenever they could. On the other hand, Mexico worked as a team, counterattacked, and exploited the spaces Germany left to shock the world with a 1-0 scoreline in their favour at the end of a play.
Businesses can learn teamwork from here – how not to get intimidated by the business rival’s strengths but get the best out of their own to find their winning formula. Even you, as an individual, can take lessons from how these World Cup teams plan, so that you can reach your personal investment goals.
Let us look at some things you can learn from the FIFA Cup 2018, taking specific instances of team strategies, and how they can resonate with your investment planning.
Related: Investing in Equities- Identifying the Best Plan for Your Financial Goals
1. Review your needs
World Cup scenario: In the final stage of league matches in Group C, France – already among the last 16 – needed to top the standings to avoid a last-16 clash with Croatia, which was headed to top Group D. On the other hand, Denmark would have been ousted if they lost to France and Australia beat Peru (all Group C), which was being played simultaneously. But when news reached that Peru was leading 2-0, Denmark decided to play defensive and play for a draw. France was only too happy to oblige, as they needed to avoid a loss.
Lesson for you: Get a fix on your financial and material goals by reviewing your needs, and tweaking them from time to time; it is quite like the French and the Danes working on what needed to be done to sail through to the quarterfinals, or play the opponent of their choice.
Spend some time thinking of all you would like to accomplish for yourself, and earmark these as short-, mid-, and long-term goals. Buying an expensive phone or saving up for an advanced managerial course at an institute of repute can be short-term goals, while purchasing a house, buying a bigger car, or getting married can be mid-term/material goals. Planning for retirement and saving for the kids’ college education can be long-term/financial goals. Your investment plan should be based on both financial and material goals.
Though the bulk of your investing should ideally be based on financial goals, there is no reason why your material goals (a second-hand car in the first year of employment, a better car by 30, a house of your own by 35, etc) cannot also be pursued. In fact, material goals should constantly goad you to be a proactive investor.
Related: How and when to de-risk one's investment portfolio
2. Find investment funds
World Cup scenario: Harry Maguire, who scored the first of England’s two goals against Sweden in the quarterfinal, had travelled to watch England as a fan at Euro 2016; two years later, he is a pillar of England’s defence, having been spotted and backed by manager Gareth Southgate when a new team was being formed.
Lesson for you: Winning the Cup was England’s goal; the manager needed the right team for that. Similarly, once you have worked out your goals, you will need investible funds, and you may have to work on building this. As an investor, you must clearly understand that you can only invest what you are left with after your expenses; this is your investment surplus.
Study your current financial state carefully and analyse your earnings and expenses; this will guide you through your annual cost of living and indicate the savings or surplus money available for investment. This may take time, but don’t worry – once you start, it will become a habit. You have to back yourself to do it, just as Southgate backed Maguire.
3. Explore investment options
World Cup scenario: In the final stage of Group F, Sweden faced off against Mexico, while Germany took on Korea. For Sweden, there were three possibilities (comparable to ‘options’ in financial terms): a loss would mean they crash out, a draw or win by one goal would leave the field open, while a win by more than one goal would mean they top the group. Taking no chances, Sweden went all out for a big win, and got it – winning 3-0.
Lesson for you: Just as Sweden faced possibilities, you have investment options: you can keep your money in banks and earn steady but low interest, or go for other options to gain better profits and returns. Some of these are various types of mutual funds (bonds, debt, equity), equity-linked savings schemes (ELSS), exchange traded funds (ETFs), money market funds etc. The important side of investing is doing so in the right instruments, so choose your options wisely.
Please bear in mind that the amount you get back would also depend on the duration for which you keep the money invested, among other factors.
Related: How to clean up your investment portfolio?
4. Plan asset allocation
World Cup scenario: Germany may have made a first-round exit this time, but at the previous World Cup in Brazil, they were the champions under current coach Joachim Loew, who is known for tailoring his tactics for specific oppositions by changing the basic 4-2-3-1 formation to 4-3-3 or even 3-4-3 and 3-5-2. He introduces different types of players and also likes to tweak a game’s pattern.
Lesson for you: Your ‘players’ are the schemes and instruments you have invested in (fixed deposits, mutual funds etc); these are your ‘assets’. Like Joachim Loew, play around with different sets of players – it is called ‘asset allocation’ or deciding the mix of assets in an investment portfolio. This is needed because if an asset class doesn’t earn, another set of assets may yield positive returns.
Apart from the traditional ways of building assets, like various schemes, FDs, savings, etc., you can also investing in assets that will appreciate in value faster. Mutual funds, commodities, and real estate are some options that will appreciate with time. This brings us to what you must do next: diversify.
5. Employ diversification
World Cup scenario: When there was a group tie between Iceland and Argentina group, the scoreline read 1-1. A highly rated team was knocked off its pedestal by an underrated outfit, and Messi angrily kicked away the ball and tore off his captain’s armband in disgust. Throughout the tournament, it seemed as if Argentine players only looked to their superstar captain to take them home, but when Messi was blocked by rival players, his teammates did not know what to do.
Lesson for you: Never invest in just one basket, like the Argentines did in Messi. Instead, it pays to ‘diversify’, or divide your investible fund amount across a portfolio and start investing the portions into various asset classes. This way, as explained earlier, if one asset class underperforms, there are others to even things out. Basically, diversification is a good strategy to reduce risk, which can be either company-specific or sector-specific; for example, a fraudulent company is a firm-specific risk, while an airline strike is an industry risk.
There is also the market-specific risk, which cannot be wished away if you are investing in financial markets, as they can be triggered by interest rates, exchange rates, and recessions. Diversification cannot lessen market risk.
Related: How to diversify your portfolio like an expert?
6. Monitor and rebalance
World Cup scenario: Andres Iniesta, the Spain midfielder who is admired by countless fans across the world, was not at his best in this tournament. Subsequently, team manager Fernando Hierro dropped Iniesta for Spain’s last-16 clash with Russia. Along with Iniesta, teammates Thiago Alcantara and Dani Carvajal were also sent to the bench for the game.
Lesson for you: As an investor, you should always review your portfolio at least once every quarter and rebalance at least once a year. You would need to see scheme performances and ensure that good performers exist in the portfolio. Or you would need to change your holdings and replace laggards with better performers.
For the average investor taking the long-term SIP route into some equity mutual funds with an aim to meet long-term goals, rebalancing may not be required. But a review of the portfolio at least once a year (if not a quarter) is advisable. If you find funds are grossly underperforming, it is better to shift.
7. Have an emergency fund
World Cup scenario: England has been traditionally miserable in taking penalty shots. But this year, in a last-16 clash with Colombia, skipper Harry Kane scored the first goal for England through a penalty. Later, when Colombia equalised and the game went to the tie-breaker. , England won 4-3. Coach Garreth Southgate says the team had been practising, studying, and developing strategies for penalty shootouts since March.
Lesson for you: Like Garreth, prepare for contingencies, and build an emergency fund. A little something from your earnings, set aside on a regular basis, should go a long way in building an emergency fund. This is a key step to avoid any financial problems later in life. Emergencies could come up if you lose your job through downsizing at the workplace, unexpected health issues could crop up, and accidents can happen to anyone. If you build an emergency fund, you are assured of financial security when times are bad.
Related: Novice or expert, there’s an investment strategy for you
8. Develop patience
World Cup scenario: Belgium reached the semifinal to take on France, having beaten Brazil 2-1 in the quarterfinals. The only time they had come this far was way back in 1986. Their recent rise is the result of a long-drawn planned process. As a Guardian columnist wrote in 2014: “Belgium’s emergence as one of the strongest nations in world football has exceeded all expectations. (It) has produced… a golden generation of footballers.”
Lesson for you: You have set out to make an investment plan to generate a regular income in the time period you have earmarked for your goals. However, take a lesson from the Belgium story: it took them 32 years to reach the semis again; similarly, you must have patience with investments. It is very important to remember that for any investment, it takes time to produce a healthy output. Most healthy investment yields come when funds have been invested for a longer duration.
Last words
Crucial to your investment strategy are three words that should be etched in your brain: Never Invite Debt. Most of us have some kind of financial liability (a house loan, money borrowed for sister’s marriage etc) and paying these off should be a priority in your monthly budget. Bear in mind that chalking up heavy debts through excessive use of credit cards can scupper your financial plans. If you use a credit card, be sure to settle your monthly dues on time.
At the 2004 Berkshire Hathaway annual meeting, a 14-year-old shareholder asked Warren Buffett if he could give one piece of advice to young people. Buffett famously replied, “Don’t get into debt.”
