Financial Lessons from Football

From portfolio allocation to fund selection to navigation volatility, there is a lot one can learn about financial planning from Football.

Don’t focus too much on Forward – The responsibility of forward players is to be aggressive and score goals for their teams. But forwards alone can’t win matches. An aggressive investment strategy focusing on mid-cap stocks or mutual funds can be rewarding in a bull run, but beware of their equally quick meltdown when the market falls. High returns come with high risk. Rely on asset allocation based strategy.

Don’t ignore Mid-fielders – Mid-fielders can both attack and defend, depending on the match situation. Investing in all-rounders like balanced funds brings stability to one’s portfolio. Balanced funds create scoring opportunities by investing in equities, even as they cushion the impact of market downturns by investing in debt.

Beef up your defence – Defenders are responsible for not allowing the ball go past them. They prevent losses. Limiting your losses by boosting your defence against sharp market corrections is as important as creating scoring opportunities.

Be watchful of market feints – Feints are deceptive movements of a player meant to confound opponents. Reading market movements during volatile phases can be tricky and is fraught with risk.

Adopt a Goal oriented approach – Ultimately, it is the goals that decide the winner. Linking your investments to financial goals is fundamental to financial planning. List out goals and their time periods and invest accordingly. Experts suggest investing primarily in equities for long term goals and in debt for short term goals.

Take stock at Half time – The break after 45 minutes of the game allows teams to refresh and re-strategize. Reviewing your portfolio regularly is integral to sound investing. Review and rebalance your portfolio every six months. If the equity component has risen in value, make incremental investments in debt and to maintain your preferred asset allocation ration.

Act as a referee for your investments – A neutral official on the field, the referee enforces rules and hands out punishment to players, if required. Arrive at decisions dispassionately, instead of letting emotions take over, particularly in a volatile market.

Do not commit fouls while investing – Breaking the rules of the game is termed as foul and invites punishment. Resist the temptation to stray away from your financial plan. Deviating from rules based investing can compromise your goals. Do not liquidate your investments made for specific goals to finance short term needs.

Make the most of penalty shootouts – Penalty kick is an easy scoring opportunity for the team to which it is awarded. If you are beneficiary of a joining or a performance bonus, channel it towards achieving your financial goals. The money is deservedly yours, don’t fritter it away. Use lump sum windfall gains to create an emergency fund, pay off loans or enhance term and health insurance covers.

Avoid getting the Cards – A yellow card by the referee denotes warning and a red card leads to the player being sent off the field for violating the rules of the game. Do not hide your capital gains from tax authorities. You might end up paying more otherwise.