Cricket and Investing

As investors we are always in a sea of dilemma. We are ankle deep in investing, but think knee deep, feel waist deep and act neck deep. Not very unusual for us to think more than once, that we have some magic formula, smart strategy, great recipe or secret sauce to think above the market. After all we are indeed fallible – but this does not take away the excitement or irrational exuberance (remembering Alan Greenspan).

 

This is for all my friends who dabble in equity markets ankle-knee-waist-neck deep!! Let’s see investing with cricketing lenses. Growing with our friends, colleagues and acquaintances have seen at close quarters the exhilaration and despondency, the smile and drooping shoulders many a times at the vagaries of Mr.Market.

 

So, here’s my cricket framework for investing – strictly for salaried class (harried as well) who dabble in equity markets but somehow could not find a big bang.

 

Played over 5 days and run rates in the vicinity of 2 per over and strike rates around 30-40 is indeed boring as we see bowlers coming up with maiden after maiden and batsmen leaving most of the deliveries to the keeper. Dull, tedious, boring, wearisome and ennui are some of the terms which someone in the 21^st century would describe a test match. But est cricket is the darling of connoisseurs and purists.

 

A major part of investing ought to be like test cricket – dull, drab and boring. As Gavaskar used to say that if you stay in the middle, runs would automatically come. Stay invested for a long time like Dravid, Boycott and Gavaskar used to occupy the crease for ages. My suggestion – for long term invest on in MF’s (7 to 25+ years) and SIP route is non-negotiable. Select a few diversified funds and start SIPs for as long as you can. Review and balance it periodically (1 or 2 years) but continue this march in a steadfast manner – unwavering in your discipline and focus. 60-70% of your equity investments must be in MF’s.

 

Remember the Hero-Honda bike advertisement of yesteryear for mileage – Fill it, shut it and forget it. This would work wonders in equity investing. A cursory glance at the SIP equity returns for 10, 15, 20 & 25 years would reveal that disciplined investing will go a long, long way in creating meaningful wealth. In fact, even laggards have provided 12-14% returns over 20 years while the top ones have churned out a mind-boggling 19-22+% annualized return. A SIP of 5k over 20 years would be now 1+ crore and a 5k SIP for 25 years in HDFC Flexi / Franklin Prima fund would have left you with 3.5 Crores. 😊

 

Enter ODI which revolutionized cricket in many ways and bought a different kind of fizz and pep to the game. Most of us are not content with dull and boring investing mode and always want something more interesting and exciting as is the wont with human nature. Direct equity investment is so tantalizing that it’s impossible to stay away from this lip-smacking allurement. Select a few fabulous blue-chip companies like Asian paints, Pidilite, Bajaj finance, HDFC bank and again follow the SIP route. Don’t forget to buy in market dips, crashes, corrections and depressions. These stocks are generally buy- and-hold for very long terms, long terms and medium terms. 20-25% can be allotted to invest in direct equity - to put into practice, the wisdom and knowledge gained over years. One assumes fundamental analysis and due diligence have been adhered to in stock picking.

Arnold Glasgow said, ‘Temptation usually comes through a door that has been deliberately kept open’.  Since we always keep the door open for thrills, excitement, adventure at least when it comes to stock market, there is no stopping our innate nature to indulge in outwitting, outsmarting and outfoxing Mr.Market. Nothing gives us more pleasure and anguish in doing this again and again. 

 

Play T-20 also in the stock market. 10-15% our equity investment may be channeled to day trading, ultra-short-term trading, F&O, derivatives. Commodities and whatever exotic product the Marketverse (I have coined this word on the lines of metaverse 😊) offers. You don’t have to restrain yourself in any manner. Paddle shot, reverse sweep, Dilshan scoop, ABD’s 360-degree shots and anything under the sun is acceptable. You can be as flamboyant and jazzy as you can. All caution can be thrown to the winds and ride the wild roller-coasters.

 

Would like to emphasize that you treat this as expense for all the joys and pain you may reap. Let there be no expectations on the returns. Just go about with gay abandon to massage your ego, to pat yourself on the back for your uncanny ability for stock picking, astute market timing and for the big killings!!! No restraints – only no holds barred investing – left, right and center. That’s T-20 investing for you.

 

All you need is to compartmentalize your mind for playing Test, ODI and T-20 in equity market to Create wealth and also to indulge yourself. 

 

Test Match – 60-70% only in MF’s for the long haul 

 

ODI – 20-25% in growth and value blue-chips

 

T-20 – 10-15% for anything and everything in the sun

 

Happy Investing 😊

Personal Finance - PPF

PPF

PPF is one of the safest instruments and should form a part of one’s portfolio. This is a long-term sovereign instrument with a 15 year lock-in period.

Ideally this can be used as a vehicle for your child’s education or retirement corpus. For a horizon of 15 years equity will beat PPF hands down any day but for conservative and risk averse investors this is godsend. Even for the risk takers, PPF can be a part of their debt portfolio (of course assuming asset allocation strategy is adhered to).

For funding your child’s education, start the PPF when the child is one to two years old and a sizable corpus would be ready when the child steps into college.

The minimum subscription is Rs.500 and the maximum is 1.5 lacs per annum.   My suggestion is to frontload the PPF i.e. invest 1.5 lacs a year at least for the first 5-6 years and then investments can be tapered if circumstances constrain you.

The power of compounding and long-term investing benefits can be seen below (@ 7% pa)

Investing 1.5 lacs for 5 years would fetch 17+ lacs after 15 years for the invested sum of 7.5 lacs

Investing 1.5 lacs for 10 years would fetch 30+ lacs after 15 years for the invested sum of 15 lacs

Investing 1.5 lacs for 15 years would fetch 40+ lacs after 15 years for the invested sum of 22.5 lacs

Though PPF is eligible for deduction under 80C, this is likely to vanish in the coming years as the govt is moving towards a less exemptions tax regime. So do not consider this as a tax saving instrument anymore.

Also, PPF interest is calculated on the least balance between 5^th and the end of the month, so invest it before 5^th of every month. Though the benefit is very miniscule considering the long-time frame it does gives you an opportunity to pat yourself that you are thinking smartly and bask in that glory.

For those considering this as a retirement vehicle the full limit of 1.5 lacs must be invested at least for 12+ years to reap the benefits.  Also PPF can be extended in blocks of 5 years with or without additional contribution.

Investing 1.5 lacs per annum for 15 years and extending for another 5 years would see the corpus growing to 55+ lacs.

The only caveat is the PPF interest rate is money-market determined and would move up and down but let this not deter you from investing in this risk-free sovereign backed instrument.

Happy Investing ☺