IPL 2018 is on in full swing and it will be another 3 weeks before the eventual winners are known. But IPL 2018, like in each of the past 11 years, has had its share of thrills, adventures, disappointments and some earnest lessons. Interestingly, there are some interesting lessons that the stock markets in general and stock market investors in particular can take away from the IPL. If you look at yourself as the captain of your IPL team, here are some key takeaways…
Do your homework on the ground and the weather
When it comes to IPL we are using these terms literally. What does a good captain typically do? He judges whether it is a quick wicket or a flat wicket and accordingly decides whether to bat or to bowl. Even the team composition of batsmen and bowlers is decided based on the nature of the wicket. What happens if dark clouds start hovering? The captain quickly calculates what he needs to do to win under the Duckworth Lewis method and paces the innings accordingly. As a stock market investor, your focus should be on understanding the stock, the market structure and the external environment. Like a smart IPL captain, you can succeed in the markets only if you master these.
Spread your risks adequately
How does a smart IPL captain spread his risks? He probably includes that extra bowler if he expects it to be a bowler’s wicket. On a hard wicket his focus will be on adding that one more batsman. Alternatively, he can look for an effective all-rounder like Hardik Pandya, who can deliver with the bat and the ball. Lower the risks you start off with while investing; the higher are your chances of being profitable.
Keeping moving forward and wait for the opportunities
This is a lesson that investors can learn from a shrewd captain like Kane Williamson who leads the Sunrisers Hyderabad. While chasing a challenging score of 165 against Delhi, he focused on rotating the strike and just hitting at the bad balls. Above all, he ensured that they did not throw wickets away. That is what investors need to do. Keep working at your investment plan and strike hard when the opportunities come in front of you. Avoid suicidal moves.
Take your strategic time out for better perspectives
Why do we have strategic time outs in the IPL match? It is an opportunity for the captains to get back to the drawing board, seek feedback and rework strategies if required. It also pulls the team out of the grind of the game and gives a fresh perspective. As an investor or a trader, you too need to take your strategic time outs. If you are just talking and thinking investments all the time then you are likely to develop a one-track mind. Take a break, rethink, re-strategize and then re-assemble.
Take calculated risks when they really matter
A successful IPL captain takes that calculated risks from time to time. Opening your attack with a spinner, letting your best bowler complete his spell early, using a pinch hitter on top are all strategies that IPL captains use quite effectively. Calculated risks tend to have two advantages. Firstly, it tends to confuse the opposition and secondly it helps to throw in that surprise element. That is what you need to do as investors too. A straightforward indexing approach cannot make you a successful investor. When you can afford to take a risk, you must take calculated risks. That is the only way to succeed in the markets.
Build your investment mix like the captain builds the team
What is the similarity between selecting an IPL team and selecting your portfolio? It requires an eclectic mix. When an IPL team is being put in place, it calls for combining youth and experience, aggression and defensiveness, pace and spin etc. It not only ensures variety but you have an answer for every situation. That is how your portfolio should also be. Get your equities, bonds, liquid assets and gold together in such a way that you are ready to take on any kind of market challenge.
Focus on the key impact points in your portfolio
How did Kane Williamson manage to defend 3 low scores consistently? Good bowling alone is not the answer. He managed to tighten the fielding in the last 10 overs to an extent where there was little room for the batsmen. This forced batsmen to commit mistakes. That was the impact point as it enthused bowlers and fielders to deliver the best. Similarly, in your stock market portfolio there are some key impact points. Just focus on them and your portfolio returns will be taken care of.
Invest in your players and start early
Although it may still be too early, the Delhi IPL team can be seen as a team that has invested in its young players. When a young captain like Shreyas Iyer put faith on players like Shaw, Pant and Vijay Shankar, the results were amazing. At least, they have shown that if the captain bets on the youngsters, they can deliver over time. That should be your approach when you buy stocks. Spot them early, give them time to grow and they will surely deliver results. We have seen that in mid-caps, haven’t we?
Always be prepared for shock treatment
That is an important lesson that successful IPL captains have learnt over the years. There are times when you may be left in a situation where everything appears to work against you. That is when the captain needs to rise to the challenge and carry the team along. The way Rohit Sharma took the Mumbai Indians in the 2017 finals by the skin of the teeth is a classic example. The same story applies to the stock markets too. Always be prepared for the occasional shocks and rise to it.
Ultimately, it is all in the mind and in the attitude
Chennai Super Kings has a team whose average age is probably the highest in the IPL. Under Dhoni they have snatched some audacious victories in IPL 2018 through sheer self-belief and the right attitude. That is what investing in stock markets is all about. Build your mental strength, keep your attitude intact and you are likely to win in the long haul!