Investing:
Learning from the beautiful game

Football - the beautiful game. You love it, you dream about it, and you cannot get enough of it. But there’s more to football than just the artistic flair. Beyond the sublime dribbles and shots that take football teams to the top of the table lies the mastery of building a solid team and managing tactics geared towards wins, season after season.

Parallels have been drawn between football management and investment management. Like top-level football managers, portfolio managers creatively structure investments and implement strategies for the long term.

To better understand investments and how they can score better returns, let’s take a look into the minds behind the game.

It's never a level playing field

Football managers and investors share the same goal: earn a return greater than the given level of risk on the playing field.

But because chances and risks are huge variables, strategy is key in both worlds. Just as how football managers devise strategies playing against different teams, investors tailor-make investment strategies to make the best out of current market conditions.

It's a battlefield out there, as football managers often put it. They allude to how conditions are never on their side. Coincidentally, one of the founding fathers of value-investing, Benjamin Graham, coined the definitions ‘aggressive’ and ‘defensive’ – two main investment strategies still used today in different market conditions.

Aggressive or defensive?

Which football manager or investor are you?

Do you prefer to play safe and spread out your funds across typically lower-risk assets such as fixed deposits, income funds, and other principal-protected structured-investments? Or do you take advantage of market conditions by allocating larger sums in forex, equities and alternative investments including private equities?

Playing as a defensive investor, you also spend less time in stock-picking. Instead, you buy shares from household names with a strong and consistent financial history.

As an aggressive investor, you may have a wider array of stocks to pick from, but you should be careful to keep assets outweighing liabilities. Aggressive investors also typically look for unpopular established companies, which may be underpriced or have a share price that is equal to or less than its working capital. Bolder investors in this category also venture into the technology territory. Fast-moving and unpredictable, winners have the potential to win big but losers can suffer losing their shirts – or jerseys.

Changing with the game

As a football manager would tell us, an entire season cannot be played through on a single surefire tactic alone. Every outing is different from the one before. A string of successes often never lead to a win in the next match – neither do previously successful investments promise high returns for the coming year.

Sometimes a match turns unfavourable, and managers would quickly go to the drawing board and tweak an existing gameplay or field a fresh pair of legs. Smart investors think very much in the same way. Market changes might take an investment portfolio off course. The idea is to have a balanced portfolio to start out with and can be updated over time to allow for growth, to lessen risks or ailing stocks, even to counter the effects of inflation.

It is generally wise to maintain a flexible portfolio with a hybrid from the aggressive to the defensive – just as how a football team is a balanced mix of defending and attacking skills. Speculative prospects should make up the smallest proportion of the whole. This is also true with football formations – with attackers making up the least number of players on the field.

Two professions of more than a century old are unlikely to be wrong in these aspects. Although the main idea is to win, it is crucial to first protect yourself from being played out of the game.

A word from the sidelines

A few years ago, researchers at Harvard Business School cast convention aside and approached a football manager – Sir Alex Ferguson – to learn how business leaders can better manage major organisations.

Unless you are consulting someone who is possibly the greatest mind in football history, be cautious of seemingly reliable sources, whether they are made public or whispered over the grapevine.

They are the speculators and pundits: the gamblers of these worlds. Even on the darker side, we see parallels between football management and investing. With market pundits, their biases get the best of them and they could hurt your investments. Likewise, personal predictions and high expectations by sport pundits can sometimes ruin the morale of a team ahead of the match.

Conclusion

Ultimately ‘the ball is round’, and no single or hybrid strategy is likely to be effective for the entire life of an investment portfolio. The best portfolio managers often advise clients to be flexible and ‘change with the game’ as market conditions change and new prospects develop. It is important that you have access to solid fund advice, valid market perspectives and a healthy sum of options at all times.

If you are unsure about your current portfolio, visit any RHB branch for a personal consultation. Keep in touch with your Relationship Manager to periodically review and constantly improve your investment portfolio to ensure it meets your needs now and for the future.

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