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(Precious) Words of Wisdom : "Only those who are asleep make no mistakes." ~ Ingvar Kamprad

Don't Play Like Dhoni For Your Financial Goals

India lost the World Cup semi-final match. A lot has been said and written about it.

Well, here's my take on India's 'unexpected' defeat... Dhoni.

We lost the match because of Dhoni's strategy.

Virat Kohli said it was 45 mins of bad cricket. Wrong! It was 2 hrs of bad cricket (by Dhoni).

Virat Kohli said we lost the match because of bad shot selection. (Partly) Wrong! We lost the match because of non shot selection (by Dhoni).

Yes, Pant played a bad shot. But, Pandya was forced to play a rash shot because Dhoni was not scoring at all. He was (so) so defensive that he wasn't even taking singles. For almost 3-4 overs, Dhoni managed just 3-4 runs. This created enormous pressure on Pandya.

Dhoni was run out by Guptill. Wrong! Dhoni's extremely slow batting earlier forced him to take extra risk in the end. And he perished.

Since last few years, M.S. Dhoni has often preferred to keep his wicket intact till the very end; and leave around 30-45 runs to be scored in the last 2-4 overs.

This, in my opinion, is an extremely high-risk strategy.

financial-goals
Don't be caught on the wrong foot with your finances!

Yes, it's important to preserve one's wicket. But, it would be far more intelligent and prudent to keep scoring a few singles also every over, without taking any undue risk.

One can easily push the strike to around 70-75, instead of getting stuck around 50. This would leave a lot more manageable target at the end. It is definitely not easy to score 12-18 runs per over. You would have to take an undue amount of risk to maintain that kind of run rate.

I wonder why such an intelligent cricketer — one of the best brains ever in the history of cricket — does not see the obvious flaw in his plans.

Well, I guess he too his human. And humans become rigid in their beliefs. They become so enamoured by their greatness, that they fail to see the flaws in their thinking and approach. Since they have been successful in the past, they will stick to the same plan, without considering the changed circumstances.

For example, the bowlers today have a lot more variety. They are not easy to hit as in the past. They have evolved.

For example, the fielders today are a lot more athletic. They won't allow easy boundaries and take great catches (Dhoni's run out is an example of this). They have evolved.

But, our dear Mr. Dhoni has stopped evolving. He is still living in the past.

Anyway, let's move on and wait till the next World Cup.

Meanwhile, coming to personal finance:

As is clear from the title of this blog post, you shouldn't be following the same strategy with your financial objectives. Because that will be a recipe for disaster. Because, this plan of action, will often lead you to financial doom.

Let's say your goal is Rs.1 crore corpus after 15 years.

If you start now, you will have to save and invest Rs.25,000 p.m. (assuming 10% p.a. returns).

If you start after 5 years, your savings rate jumps to Rs.50,000 p.m.

And if you wait till the slog overs and save for the last 5 years only, your savings rate would have to be a steep Rs.1.3 lakhs per month, which is more than 5 times the first scenario. Or else, you will have to take a high risk with high-return investments, where the failure rate too would be high... as good as gambling.

Would you like to play a lottery — like Dhoni — with your retirement corpus?

Would you like to play a lottery — like Dhoni — with your children's education?

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