The World Cup and Long-Term Investing: A Comparative Analysis

Posted On Wednesday, Jun 13, 2018

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Plans are made, old friends are catching up dusting off jerseys of their ‘second country’ , merchandise sale is set to shoot up, probably even more flights flying to Russia than ever before. Yes, the Football World Cup is back!

As 32 teams are set to do battle to hold the famous gold trophy, ultimately the team that plays the best across the grueling tournament and has a judicious mix of attack and defense will be the one that achieves the goal of lifting the most prestigious trophy in the most followed sport in the world.

Football fever catches up with us too, but like the value managers we are, we love to relate everything that’s going on with all things investing. Hence we thought this could be interesting way for us to explain that investing for the long term goal is no different from a football match!

Let’s see how:


In football you have 11 players, each performing their own function. There are three sections into which a team is usually divided:


Defence
Comprising of a goalkeeper and defenders, their task is to ensure that the rival team doesn't sneak in and put a ball into the net. Going a goal down early in the game usually means an uphill task to win the match.

Debt/Liquid funds perform this task admirably in terms of providing a some sort of cushion for your investments ,certainly subject to market risk. Without an adequate exposure to debt/liquid, your portfolio could face an uphill task to recover when the equity markets are down. Debt/Liquid funds generally tend to help you park your money for the short term. Investors can invest their contingency fund in debt/liquid funds.


Mid Field
The value of a strong mid field cannot be understated. The mid field is the most agile part of the team, mid fielders can attack, providing the forwards with the impetus of an attack, often producing the vital pass that leads to a goal. The mid fielder can also run back and defend, if necessary, taking the ball away from the attackers of the opposite team.

Gold can be one of the better mid fielders for your portfolio. Generally negatively correlated with equities (which means the price of gold moves up when equities are down) gold tends play the role of the defender (diversifier) to the portfolio, adding to the ‘attacking’ capability of the portfolio, in other words the ability of the portfolio to beat inflation over the long term.


Attack
The players who have the most ‘glamorous’ role in the team are the attackers or forwards, whose responsibility is to score goals for their team and win the adulation of the crowd. The job of the forward is to keep pushing the opposition and providing that main thrust that will carry the ball past the opposition goalkeeper and into the back of the net.


Equities, with their ability to deliver the maximum returns with high risk while comparing equity, debt and gold are the forwards for your portfolio. However in football parlance, there are times when the ‘defense’ is too strong and the markets crash as though poleaxed by a well-aimed tackle. Just like the temperament of the star forward, equity markets are volatile and could win the match for you and could also be equally responsible for the dip in your portfolio value.

As an investor the key is to think like a manager of a football team. You need to have a sensible mix of defenders, mid fielders and forwards. Over reliance on defense may ensure that you do not get optimum returns – you may draw the match but not win, which might not be enough. Over reliance on attack could ensure goal after goal, but if the defense is weak then the opponent can match that, again leading to a draw and not victory. You need a perfect mix of attack and defense to win the match.


Coming back to investments, investors need to get their asset allocation between equity, debt and gold right. Too much reliance on equity could be detrimental for the portfolio when markets are down, too much debt could lead to even negative net returns if inflation levels are higher than the rates of interest. Hence we would encourage you to ensure that your portfolio has a prudent mix of equity, debt and gold, or investments in a multi asset fund, which takes care of this allocation for you. At Quantum our multi-talented fund (or a “football” fund ;-)) as we like to call it Quantum Multi Asset Fund gives your money a diversified portfolio with a mix of equity, debt and gold. All you have to do is invest in one fund. This gives you the ease of looking at the performance of one fund in one statement, rather than looking at multiple statements and trying to rebalance the portfolio yourself.

Moreover we urge you to please do consult your financial advisor before making any investments related decisions.



Product Labeling

Name of the Scheme & Primary BenchmarkThis product is suitable for investors who are seeking*Risk-o-meter of Scheme
Quantum Multi Asset Fund of Funds

(An Open Ended Fund of Funds Scheme Investing in schemes of Quantum Mutual Fund)
• Long term capital appreciation and current income

• Investments in portfolio of schemes of Quantum Mutual Fund whose underlying investments are in equity , debt / money market instruments and gold
Quantum Multi Asset Fund of Funds
Investors understand that their principal will be at Moderately High Risk<

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Disclaimer, Statutory Details & Risk Factors:


The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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