Glen Trillo. Photo / File
Belgium, France, England, or Croatia? Which football team are you betting on this World Cup? If you are a stock investor and an avid football fan, the soccer field can be a good place for a few investment lessons.
Be it star strikers like Lionel Messi, Cristiano Ronaldo, and Gabriel Jesus, or goalkeepers like David de Gea, and even top coaches, each one's game plan offers investment lessons.
Football has become a global sport, due to its ability to expand geographically and across different economic groups. One should understand that it is the simple rules that make football so popular.
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Investing also works if the rules are simple: just like a ball and goal post; that is what is needed in investing. No fancy stuff required.
Just like in football, management is a key aspect in investment. Each of the 11 players in a football team performs differently. Similarly, different asset classes work differently in a portfolio.
Under Sir Alex Ferguson's management, Manchester United always finished among the top three in the English Premier League.
However, after Ferguson's retirement in 2013, things changed. They have undergone three management changes since 2013, and in the following seasons, they finished seventh, fourth, fifth and sixth, respectively.
The second thing an investor can learn is that perseverance and consistency can do wonders.
During the 2014 World Cup in Brazil, Gabriel Jesus was painting the streets to beautify the city. Four years later, in 2017, he is one of the most important prospects of the Brazilian national team in Russia.
Star players are important, but it is the teamwork that matters. Even if a couple of players are not performing, the team can still collectively be good. The same goes for investing too, diversify your portfolio and spread the risk.
The other thing to learn is winning and losing is part of the game. What is important is staying in the game. Stock markets are volatile, but investment goals may only be achieved if you remain invested.
In a falling market, a portfolio reporting a zero return is undoubtedly good enough when other investors are down 20 per cent. A short-term setback in the stock market should not bother investors too much.
For an investor, risk minimisation is as vital as earning returns. It is likely that a player or two could get yellow cards in the match, or a team could be too focused on the defence, mid-field or the forward positions and leave one critical flank exposed. There must be a balance.
The logic is the same in investing too. You need to manage your levels of risk by diversifying your portfolio. A portfolio of all aggressive or all defensive stocks may not be enough to win in the market.
Finally, don't try to mimic a winning style, whether that's in investing or football.
For example, Kaka's 2009 transfer to Real Madrid from Milan for £56m made much news. He was to play along with Cristiano Ronaldo and target every trophy that they played for the following season. However, Kaka failed to find his prolific form and was unable to match the expectations.
It is common to be influenced by a Messi and a Ronaldo (big investors), but trying to mimic their investing style may not always help you perform well.
Good football teams analyse their games with their coaches and team managers which helps them see a different perspective. Where you went wrong is never obvious to you because you are conditioned to believe that you are right. Similarly, in investments, getting a second opinion and looking back at your decisions objectively makes a huge difference. Don't miss out on that.
And, remember, everything takes time. Great teams are not built overnight, and World Cup wins are not accomplished suddenly. It is a long journey to become like the Brazil, Italy, and Germany in the football world. Similarly, your portfolio is not built overnight. You have got to wait. It does take time!
• Glen Trillo is an Authorised Financial Adviser and Head of Wealth Management at Stewart Financial Group, a Hawke's Bay-owned and operated independent financial planning & wealth management firm based in Hastings. Stewart Group provides free second-opinion service on your current investments.
• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961.