People from all over the world witnessed a nail-biting match between France and Argentina at the Lusail Stadium as Messi lifted the coveted trophy to seal the latter’s win at the FIFA World Cup 2022 Final. Over the last month, our minds have been occupied with the tournament. You must have noticed, during this period even casual football followers turn into experts, and non-followers also start watching. While only a few follow the sport throughout the year, many get into the game during the world cup period only. If you compare this with the stock market cycles, this is clearly a boom time, that’s exactly what happens during a rising bull market right? The experienced pretend like they always knew it, the beginners think they have unlocked some magic formula, and the newbies jump onto the train to get a piece of the pie. Interestingly there are many more parallels you can draw.
There are quite a few money lessons that we can take away from sports and especially from a tournament like the world cup. So, here are my top 5 takeaways from this year’s world cup that will help you manage your money better:
1. Even the best can under-perform in the short term
In their very first match, Argentina lost the group stage match against the second lowest-ranked team, Saudi Arabia. The same happened to France as well. They lost to Tunisia in the group-stage match. We all know what happened after that, both France and Argentina went on to play the final, and Argentina eventually won the world cup. So, if you only look at the group stage results, you might underestimate the potential both those teams had.
Similarly, if you do your research properly, understand the fundamentals and identify the good stock, then short-term volatility should not bother you. You can never predict short-term ups and downs. But if you stay invested, good companies will give you a good return in longer terms.
2. Sometimes your best-selected team may not deliver
Belgium has been everyone’s favorite for a long time. They have been number 1 for many years, but most often than not, they fail to deliver in the big tournament. Having the best names doesn’t always make the winning team.
Similarly, in the stock market, sometimes a stock with good fundamentals may under-perform for a long time. You should know when to take the tough call. It is okay to hold on to it for some time. But after a certain period, you should be prepared to let it go.
3. Picking a good mid-cap or small-cap stock can be tricky, most can’t make it to the top
If you followed the world cup from the group stage, many underdogs like Japan, South Korea, Morocco, and Australia looked very promising. For some time, they performed well and many of us felt they could qualify for the quarter-final. But only Morocco did.
Similarly, looking at a brief period of performance many small and mid-cap stocks seem promising. But you should be aware of the risk while investing in such segments. While there are some stocks, which will give you great returns, for most others, you might end up losing capital. So, invest wisely and diversify your portfolio.
4. Past performance does not necessarily guarantee future potential
Many people had a lot of expectations from teams like Germany and Spain. In the previous world cup tournaments, they did well, so normally people had high hopes. However, if you look at their current team, you know they are not the same team as before. Their fans were left disappointed.
Similarly, while choosing a stock, don’t go by only big names. They might have done well in past, but they can surely fail in the future. So, look beyond the name, and do your fundamental research properly before investing.
5. External factors should not matter if you are here in the long run
Before starting the tournament, there were a lot of talks regarding potential issues like Qatar as a location, alcohol ban, migrant labor issues, human rights violations, etc. Though those were very relevant issues, in the end, the tournament turned out to be successful and enjoyable.
Similarly, when is comes to your investment, you should not worry too much about external factors such as expert opinion, timing the market, pieces of advice from your friends/relatives, etc. So, if you make the right strategy, invest in fundamentally sound stocks, diversify your portfolio, and aim for the long run, you will surely achieve great success in your investments.
Hope you also learned something useful today, if yes do let me know in the comments your thoughts. Happy investing 😊
