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Friday, April 1, 2016

Risk vs. Return - a T20 Cricket analogy

There was a time, when cricket matches were played over 6 days - 3 days of cricket followed by a rest day, and then 2 more days. They were called test matches. 

Players behaved like gentlemen. The umpire's decision was final. There were no TV reviews or 'snicko-meters'. If a fielder didn't take a catch cleanly, or stepped over the boundary rope doing so, he signalled it promptly to the umpire.

There was fierce competition, but no sledging. Batsmen appreciated a good ball by an opposing bowler. Fielder's appreciated a good stroke by an opposing batsman. A maiden over was applauded by spectators.

Test matches are still played - over 5 days. But they often finish in 3 or 4 days. Why? Because batsmen and bowlers adopt tactics they have learned by playing the shorter versions of the game - like slower balls, scoop shots and reverse sweeps.

Initially, there were 60 over games. India, under the captaincy of Kapil Dev, won the World Cup in 1983 by scoring 183 runs. They were all out in the 55th over. West Indies managed 140 in 52 overs. Those scores are now considered inadequate in T20 cricket! 

In the inaugural World Cup in 1975, a gentleman by the name of Sunil Manohar Gavaskar remained not out for 36 runs after carrying his bat for the entire 60 overs against England. That was probably his way of protest against the shorter version of the game.

Many (including yours truly) don't like T20 cricket. The art and finesse of out-thinking a bowler or batsman by working on their weaknesses for 10 or 15 overs has almost been forgotten. Now the emphasis is on heavy bats with which it is easier to hit sixes.

Batsmen have forgotten the meaning of 'footwork'. Bowlers can no longer scare a batsman into submission with bouncers because batsmen have additional protection from helmets, arm guards, chest pads, thigh pads. In any case, bowlers are restricted to 1 or 2 bouncers per over.

(People talk about Sachin Tendulkar as an all-time great because of all the hundreds he scored. But has anyone kept a score of how many times Sachin was hit on his helmet? Gavaskar never wore a helmet and hit hundreds against fearsome West Indian fast bowlers like Holding, Roberts, Marshall.)

Virat Kohli is one of the few modern batsmen who has shown that footwork and proper cricketing shots have a place in T20 cricket as well. He has cut down on risk by hitting more shots along the ground - only resorting to hitting a 6 when the situation demanded it, like in the recent T20 World Cup group match against Australia.

By contrast, Bangladesh threw away their group match against India by taking on undue risk by trying to hit over-boundaries when they could have easily won the match by taking a couple of singles.

And there lies a lesson for young investors, who feel that high risk is associated with high returns. Investing is not a T20 game of 3 hours. It is more akin to 6 day test matches of olden days.

To build wealth from the stock market, you have to plan a strategy well in advance and execute it over a long period of time. Buying a penny stock and hoping for multibagger returns is like dancing down the track to hit a 6 in a T20 game. More often than not, you will either get stumped, or get caught in the deep.

As Geoffrey Boycott once said to a schoolboy cricketer: "Don't get out. The runs will come." 

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