The FIFA World Cup, one of the most spectacular sporting events on planet earth, is all set to culminate in a few days. The beauty of any sport lies in the great uncertainties it holds. Football is no exception. FIFA World Cup 2018 has proved it, yet again. While pundits and fans made their own predictions, and rooted for their favorite teams, this world cup proved to be largely elusive in nature when it comes to forecasts.
In our last article, we quoted the lessons that football teaches us and while we were watching the game like you are; we thought to bring forth little things to your knowledge from this so much predicted world cup that has just left its fans wondering “What went wrong”.
What do all these have to teach us about investment management? A lot. Let’s take a look at some of the debacles of FIFA World Cup 2018 and learn our lessons fast.
The Downfall Of “Messi” and the best who couldn’t enter “The Eight”
Messi – the name evokes emotions beyond compare. But this world cup has been disastrous for his fans. At no point, the man could live up to the expectations upon him.
On the other hand, three teams that stood out before the commencement of the FIFA World Cup 2018 were Argentina, Brazil and Portugal. Three star players – Messi, Neymar and Ronaldo – were the cynosure of all eyes. Of all these the stakes were at the highest on Argentina. But they failed miserably and let down their millions of fans. The story of Portugal was no different either. They failed to secure a place in the quarter finals.
Wondering, what does it transpire to us from investment point of view? Do you remember asking your financial advisor – “What’s the best fund to invest in” as against “To invest in the fund that is best for your plan”. What we ignore here is that best is for the past and the funds that have had the best performance in the past may or may not continue to do so in the future.
For instance, Axis funds were show-stoppers and people’s all-time favorite till some time ago. 2016 went pretty bad for them & that got reflected in their performance analysis by investors in 2017. Investors started raising doubts on it 2017; many redeemed, many stopped their SIPs during that year. However, it had the best returns in 2017 which became people’s notice only during its analysis in 2018. Again, people have started eyeing for it by looking at its past performance.
Few quarters or years of bad performance does not mean that it is a bad fund just like Messi is not a bad player but the fact is there’s no guarantee that they’ll keep up the same performance every time.
The German Fiasco
Ever since the world cup began, there were speculations about Germany winning the FIFA world cup 2018 as they won the last world cup too and this got further strengthened with predictions by various agencies based on analysis and algorithms across the globe.
“According to Bloomberg, Swiss Investment Banking Company UBS deployed a team of 18 analysts and editors and ran a simulation of the tournament 10,000 times and ranked teams based on its findings. Based on these simulations, it was predicted that Germany had the highest chance of winning the world cup”
However, not even the worst critics of the German team might have foreseen the humiliation awaited them.
When it comes to investments, we often hear people talking, that their investment plan is fool proof because their choice of funds is the result of algorithms and careful study done by the research analysts. What we often forget is that even the most trusted prediction, analysis and reports fail.
Hence, don’t fall prey to the popular belief that scientific calculations do not fail.
If there’s one financial lesson we can take home from the FIFA World Cup 2018, it would be this: there is no short cut to attain financial wisdom. It takes patience, experience and the willingness to be a lifelong learner to invest right!
