Can some elements of a war strategy be incorporated in a financial plan to meet life's financial goals? The answer is a yes. Here are some military strategies which could be used to put in place a long term investment strategy.
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Can football mimic the investing process?
Published On , 24 Jul 2018 By ET Wealth
It can, with coaches as financial advisors, the team as the portfolio of an investor while players as asset classes.
The Fifa World Cup is halfway through and 12 teams are remaining in the fray to lift the ultimate trophy in about two weeks from today. As an investor, financial planners and advisors say that there are quite a few lessons that an investor can take from the game of football.
MANAGER = FINANCIAL PLANNER
Just like the manager of a football team, who earlier used to be called the coach who analyses his team as well as the opponent, and then strategises, a financial planner also acts likewise for the investor who seeks his help in putting in place a financial plan. Like the manager of a team selects his players, a financial advisor selects the right mix of funds that an investor should have in his portfolio.
TEAM = PORTFOLIO
Just like the striker in a team, a financial planner would advise to put some money in Equity funds that can give high returns in the long run. He will also put some money into fixed income funds which even at the time of market volatility, usually do not decline as sharply as equities do and give some stability to the portfolio. And some money is parked in a Liquid Fund for use during the emergency.
STAYING THE COURSE
In a game of football, as we have seen in the current tournament when fortunes of several teams changed in the last few minutes, in investing too, it’s important to stay the course and not to cash out just because the market is in a bearish phase.
In football, team formations like 3-3-3-1, 4–4–2 etc. are attacking styles of play while formations like 5–3–2, 5–4–1 etc. are defensive styles. Similarly, in investing, the financial adviser could construct a portfolio with funds which is aggressive, conservative or a mix of aggressive and conservative type. The portfolio could have small and midcap funds (aggressive), large cap funds (mildly aggressive), balanced (mix of aggressive and conservative) and Debt funds (conservative).
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