The Indian Premier League?s fifth season is over, but with lot of controversies and new records. However, this tournament offers enormous opportunities to learn lessons to master the art of investment.

Always have the end in mind

The champion team that emerged from the nine teams that played the tournament had the end in mind. In other words, the winning team was looking for ?completeness? in all the key result areas. The search for ?completeness? starts with setting the goal in a clear and understandable manner and striving with 100% commitment and focus to achieve the same. Similarly, investors should set their investment goals in clear and lucid terms besides making a 100% commitment to achieve the same. For instance, if an investor wants to have a lump sum amount after 20 years, he/she may start with an SIP of a specific amount (either monthly or quarterly) for 20 years, such that he/she reaps the intended benefit at the planned investment horizon. For achieving the pre-set investment goal, the investor should be clear about the objective for the investment, the investment horizon and the ways to achieve it, along with the risk-return trade-off of the same, besides having the commitment to meet the periodic investment requirements.

Attain competitiveness

The winning team should be able to change its team composition, batting order, bowling strategies and game plan according to the nature of the pitch, opponent team?s strengths and weaknesses. The rate of return achieved by the investors varies according to the country, industry and company in which they have invested their money. For instance, India had withstood the subprime crisis, but not so with the recent economic crisis. Some industries and companies are recession-proof, while most of them are subject to the negative impact of a recession. So the golden rule in investment is to get out of the concentration risk, which means the investor should invest his money in a portfolio of avenues instead of selecting just one or two avenues.

Adaptability, the winning mantra

Every team that plays in the tournament has a desire to grab the title of ?winner?. However, it is the champion team that exhibits a competitive edge over the opponent teams at the critical time. In other words, all the teams are equal in terms of their potential during normal scenarios, but produce different results when they are subjected to complex situations. For instance, when the opponent team is hitting 4 continuous sixes in an over, this adds pressure to the bowling team. But, if the team has the ability to change the bowling sequence and strategies according to this situational demand, then such adaptability acts as the winning mantra for the team. On similar lines, all investment avenues may deliver expected returns when the economy is doing well, but, during a slowdown the different investment avenues produce different results. The implication for investors is that they should monitor the performance of their investments on a regular basis and change their portfolio compositions according to the changes in the economy and the industries.

Consistency = completeness

Any team aiming to take hold of the championship should make sure that all its 11 players are consistent in the playground. In other words, all the bowlers are economical not in just one match but in all the matches, and all the batsmen are scoring runs in all the matches. Similarly, investors should park their hard-earned money into investment avenues that are consistent in all the essential parameters of a successful investment, i.e, the investment avenues chosen by the investor should be consistent on safety, liquidity and profitability.

Progress = prosperity

Though the winning team would like to win in all the matches it plays in the tournament, it can hardly do so. This is because, sometimes, in spite of putting in best efforts in all the departments, the team ends up losing the match. Losing one or two matches in the league round does not spell disaster for the team, but not learning from the lost matches can quickly end the dreams of the team. So, the search for continuous improvement is a must for winning the title. For investors, it is certain that they are going to lose their money in one or two investments. However, they should make an attempt to learn from such wrong investment choices and move towards the future in an improved way. It is always better to start the investment game with small amounts and graduate to investments of higher amounts over a period of time.

Virtues of timely decision-making

It is evident from the IPL-5 that it is the decision-making abilities of the team management and captain that spell success for the team. Similarly, a successful investor should possess (or develop) the ability to take the right decision at the right time. For instance, seasoned investors know when to invest and when to disinvest, while it is big question subject to chance for a novice investor.

The point to be noted here is that no investor becomes the Oracle of Omaha overnight. Even novice investors can become seasoned through their continuous efforts to learn the art of investment decision-making.

The author teaches accounting and finance courses at IIM-Shillong