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Opinion | It’s all about pushing boundaries, whether cricket or your finances

Both sports and investing involve continuous skill building and practice

I am a huge Chennai Super Kings (CSK) fan. Maybe it’s because my roots are Tamilian. But mostly I am a CSK cheerleader because I respect and admire M.S. Dhoni. Let’s remember the CSK versus Rajasthan Royals (RR) match held on the Chepauk grounds on 31 March. On a slow wicket, Dhoni scored an unbeaten 75 off 46 balls, leading to an admirable team total of 175. However, RR quickly wrested control of the game. With 12 runs to win from the last six balls, RR was within touching distance of a win. Then Bravo was brought in to bowl the final over. That brilliant over flipped the direction of the game and steered CSK to an edge-of-the-seat eight-run victory.

In IPL matches, the fortune of a team could be decided by a single bad ball, an erroneous umpiring decision or a dropped catch. So did CSK win because of the team’s skill or because of RR’s bad luck? Fans would attribute CSK’s win to skill and team effort. But had they lost, many may have attributed the loss to plain bad luck!

This behaviour of attributing poor outcomes to chance and good outcomes to skill is not unusual. Many investors who manage their own portfolios attribute a positive performance to superior investing skills. However, when the portfolio underperforms, they attribute the downside to bad luck. This overconfidence in skills is a common though irrational behavioural bias. And interestingly, the more educated a person is, the more biased she is likely to be. This phenomenon can possibly explain why some of the most intelligent people are also the worst investors.

In reality, it is discipline, skill, tenacity and the tenure of investing that separates the winners from losers. Luck plays a part only in speculative transactions, which tend to be short-term gambles. In such a zero-sum-game scenario, for each winner there is a counter-party, who is a loser. In the long term, there is hardly an element of luck to winning. Everyone can win. And this kind of winning requires rigour, discipline and persistence, whether you are an investor or an adviser.

Malcolm Gladwell’s book, The Outliers, attributes success in any field, be it music, sports, medicine, architecture, or even finance, to at least 10,000 hours of practice. It seems a believable theory. How can you possibly excel in any field unless you equip yourself with knowledge and relentlessly practice your skill? Would you trust a doctor who has performed only one surgery in his entire career to operate on you?

In almost every aspect of our lives, we repose our faith on entities with proven expertise. However, there is an anomaly in our behaviour when it comes to money management. Even though we may not have the required knowledge and skills, we assume we can do it ourselves. Even if we entrust the decisions to a professional, do we check whether he has the right qualifications and experience?

Many so-called financial planners don’t even have basic certifications. They are taught to sell the flavour-of-the-month products to customers, regardless of age or circumstance. An 80-year-old client was coerced into taking a loan against security product just so the bank manager could meet his year-end targets.

The financial planning profession requires continuous practice and upskilling. Practice in this context implies a strategy that incorporates rigorous training, role plays, continuous education, creating and driving financial plans for hundreds of customers, prioritizing and strategizing expenses and goals, portfolio rebalancing and then closing the loop with constant feedback from clients and managers for further improvement.

However, if you have learnt a technique in a faulty manner, practising the same technique for years will not make you an expert. Think of the bank manager who only knows how to sell and doesn’t consider customer-product suitability.

Both sports and investing involve continuous skill building, practice and knowledge. Both need discipline, perseverance and the right attitude to succeed. Both are subject to unpredictability and perhaps a bit of luck. In personal finance, many investors or professionals tend to stop upskilling themselves because they perceive themselves to have reached a certain level of proficiency. Imagine if Dhoni thought the same way and stopped training right after he captained India’s 2011 World Cup win. I doubt he would be playing the 2019 World Cup. And I shudder to think of CSK’s fate. No “whistle podu" from me, for sure.

Priya Sunder is director, co-founder of PeakAlpha Investments

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