Don't Hit All Your Boundaries to One Corner - A lesson in diversification and discipline from Virat Kohli
/2016-06-27 09:02:52
mcg

Despite having made his debut in 2008, it would take Virat Kohli three years before he would be a regular feature in the Indian ODI and Test teams. From being the U19 captain of the world cup winning Indian team in 2008, to the captain of the Indian test team in 2015, the journey has not been without its share of slumps (or in financial market terms – volatility).

So how did Virat Kohli, the brash, often arrogant 19 year old boy from 2008 transform into the run making machine that he now is? Two words – discipline and diversification.

If he wanted to deliver consistently, he realized that he needed a more holistic approach towards the game – an approach involving both fitness and technical skill.

• The fitness of a marathon runner to ensure the stamina for a long innings
• Running the one’s and two’s which count towards the bigger score
• A defensive technique to counter any curve balls
• Aggressive stroke-play to score the big boundaries

By ensuring that he has all ends covered, he has transformed from being an absolute powerhouse on the leg side to a beast on the off side as well. He’s made the cricket field his own but this only came after he realized previous errors and approached his coach and mentors in the team for guidance.

Top batting performances in T20 internationals

Virat Kohli may not be the hardest hitting batsman or the highest run getter, but discipline and training to upgrade his skill portfolio has pushed him to the top in terms of consistency in delivering match winning knocks.

If we were to use Kohli’s cricketing journey as an analogy for the journey of wealth creation, similar to the time taken by him to develop his consistency, every portfolio takes time to be built.

  • This could be through the one’s or two’s or Systematic Investments Plans (SIPs) that will create long term investment discipline and fitness.

As an example of this discipline, let’s look at A and B who each start investing Rs. 10,000 by way of an SIP for 10 years. B however is more disciplined and decides to increase the amount of his SIP by 10% every year. At the end of 10 years, B is left with a significantly higher corpus than A.

Larger Corpus with increase in SIP

  • An experienced Registered Investment Advisor or Certified Financial Planner would also be your coach or mentor in your financial journey. And their first suggestion to you would be to diversify – never to keep all your eggs in one basket. Make sure the runs are being scored in all areas of the field.
  • The defensive part of the portfolio aiming at steady returns and countering the curve balls and market volatility should also be as sound as the aggressive component in the portfolio which will help you to generate that excess returns.

And fitness for a marathon or your asset allocation will help you build a more complete portfolio for the long term.

The chart below shows you the advantages of having a diversified portfolio to meet all the curve balls. When you diversify across asset classes, you may miss the chance to participate in a large positive market movement but then you benefit from what could be called ‘dependable or smart diversification’ and you avoid the large negatives as well.

Advantages of diversified portfolio

1. Aggressive Equity – equity only portfolio

2. Conservative Debt – debt only portfolio

3. Moderate Diversified – a mix of Indian equity, international equity, debt and gold

Be it a business or a family, you’ll have to take on yorkers and bouncers on an everyday basis. But unlike Kohli, you’ll have more than just a split second to decide your next move. In fact, with an experienced financial advisor by your side, you can plan your wealth well in advance to make every investment innings a winner and the results will speak for themselves in the long term.