It's just not cricket... or is it?
The Australian “summer of cricket” started recently (call me old fashioned, but the hit and giggle formats don’t count) and it occurred to me that there are plenty of investing lessons that can be learned from those in the baggy green.
It takes a little while…
More commonly phrased by my fiancée as “how and why are they still playing” winning a Test doesn’t happen in a day, often taking four or five days, to achieve a result and sometimes a draw is the only outcome.
Our portfolios are no different despite the many pundits out there spruiking investment opportunities with bold claims that they will double or triple in no time at all. Chipping away at your goals over time, focusing on total returns and making ongoing contributions to a portfolio aligned to your time horizon will put you on the path to success.
You won’t win every session…
Unfortunately we won’t always get everything our own way whether it be a stubborn batting partnership or an excellent spell of bowling there will be swings in momentum that will see captains relying on their teams ability to defend before a breakthrough allows a more aggressive, attacking style to shine.
Markets are the same; there will be times when everything seems to be on your side and others when nothing seems to be going right but this is where a diversified portfolio of assets aligned to your goals can be your saviour.
Having exposure to defensive assets like bonds and cash to protect you when growth assets like Australian and international shares stumble will mitigate risk but still allow your returns to bounce back when the tide turns.
Stay focused, dig in…
Opening batsman and former Australian coach, Justin Langer once said that “the pain of discipline is nothing like the pain of disappointment” and he should know, notorious for his mental fortitude that saw him amass 23 centuries across his career.
Discipline for investors is a crucial skill to develop as we are often our own worst enemy.
It is common to see investors lose faith in their plans when markets experience volatility. Fear and a failure to exercise control leads to kneejerk decisions that greatly reduce performance. Some of the biggest mistakes include:
- Selling for a loss, siting in cash while markets recover, then buying back at higher prices
- Riding out volatility and returning to a previous high or breakeven, then liquidating
- Adjusting the asset mix to the point where it impacts the chances of reaching your goal
- Stop making contributions that would reduce the cost-base plus help compound future returns
We don’t expect everyone to be Bradman, but by taking these three points onboard you will increase your chances of achieving your investment goals. If you would prefer to sit in the stands watching the professionals go about their work, then feel free to check out our range of diversified portfolios by clicking here.
Frequently Asked Questions about this Article…
Investing is similar to cricket in that both require patience, discipline, and a long-term strategy. Just as a cricket match can take several days to reach a result, successful investing involves chipping away at your goals over time and focusing on total returns.
Patience is crucial because, like a cricket match, investing doesn't yield results overnight. It involves making ongoing contributions and staying committed to your strategy, even when markets are volatile, to achieve long-term success.
A diversified portfolio can mitigate risk during market volatility by balancing defensive assets like bonds and cash with growth assets like shares. This approach helps protect your investments and allows for recovery when market conditions improve.
Common mistakes include selling for a loss, sitting in cash while markets recover, buying back at higher prices, and adjusting the asset mix too drastically. These actions can hinder your investment goals and reduce performance.
Discipline helps investors stick to their plans despite market fluctuations. Avoiding kneejerk reactions and maintaining a steady course can prevent costly mistakes and improve the chances of reaching your investment goals.
Continuing contributions can reduce your cost base and help compound future returns. Regular investments, even during market downturns, can enhance long-term growth and improve your overall investment performance.
Investors who prefer not to manage their own portfolios can consider exploring diversified portfolios managed by professionals. This allows them to benefit from expert management while focusing on their long-term investment goals.
Investors can increase their chances of success by being patient, maintaining discipline, and diversifying their portfolios. By avoiding common mistakes and staying committed to their strategy, they can work towards achieving their financial objectives.
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