An analogy highlights the similarity between two otherwise dissimilar things. For example, compare a human nose with an elephant’s trunk. Both are used to breathe but the trunk has many other functions and appearances are very different.
Analogies can be both illuminating and dangerous. On one hand, they help us understand an unfamiliar thing through comparison with the familiar. But the differences should never be forgotten.
This primer of financial planning is structured around an analogy, stretched as far as it can go and maybe just a bit further. Financial planning is presented in the terms of cricket, the most popular game in the subcontinent.
Most Indians love cricket. Most are much less familiar with financial planning—a life-activity that’s rarely defined in sporting terms. Yet, cricket has many strategic and psychological nuances. And, financial planning combines strategic/psychological activity in sports-like ways. While it’s an unusual pairing, the analogy is certainly valid.
Sanjiv Mehta’s unusual approach to life is evident from his biodata. Quite a few medical doctors move into other professions. A random selection of famous doctors would include Somerset Maugham (writer), W.G. Grace (cricketer), Pravin Togadia (politician), Shreeram Lagoo (actor), Aditi Gowatrikar (model) and Palash Sen (singer).
Mehta went on from an MBBS from Delhi’s All India Institute of Medical Sciences to an MBA from Wharton School, Pennsylvania, which is one of the best B-schools in the world. He is also (surprise!) a cricket enthusiast.
Assume you are a neophyte at financial planning while being a passionate, knowledgeable cricket fan. Would this book engage you sufficiently to enable a basic understanding of financial planning? Probably. The drier details are interwoven with enough cricket action for you to stay tuned.
Mehta broadly defines financial planning in the terms of a match where you, as captain of the “Wealth Creation” team, must beat the opposing “Financial Needs” team. The format and examples are all culled from limited overs game, so it’s batsman- centric. Well, the idea is to highlight financial planning, so it’s okay to ignore the more complex mechanics of Tests where bowlers play a more critical role.
Right at the onset, he points out two important differences between cricket and financial planning. One is that you cannot opt out of financial planning; you must play it in order to survive. The other is that everyone can be a winner at financial planning, unlike at cricket.
From there, we embark on a step-bystep tour of financial planning. Keeping track of data and preparing a foursquare matrix of assets, income, liabilities and expenses is equated to organising the ball-by-ball data of a cricket scorecard.
Economic cycle staging is compared to assessing the pitch. If you’re on a good wicket (in a boom or a high-growth economy such as India’s), you play ambitiously trying to score quickly. During a downturn or in a mature, lower-growth economy, your goals must be less ambitious. Identifying financial goals and setting good behavioural patterns are compared to the mindsets of focused, winning teams. The analogies continue when he deals with specific assets and asset allocations. Stocks are the equivalent of highscoring batsmen with high strike rates, real estate is the wicket-keeping allrounder, debt is the steady batsman, small savings are the sometimes useful, ageing player. Insurance is the essential twelfth man, retirement planning is the team sheet anchor and derivatives are the all-rounders and bits-and-pieces guys. Alternative investments such as art and commodities are reserves, trotted out only at need. The unidimensionality is mildly irritating to the diehard cricket fan—bowlers do play a role even in the most slam-bang of oneday internationals. But the definitions may help get the essential qualities of different asset classes and their roles in a portfolio across.
The stretch becomes marked when the book tries to fit concepts like tax advantage and NRIinvesting opportunities into the matrix of cricketing metaphor. Tax advantage is like “regulations governing team selection”— no comment.
The investment opportunities for NRIs in India are seen in the context of India’s rise to the status of cricket’s financial powerhouse. Just as the blue billion’s manic support has brought in megabucks, the rapid growth of the Indian economy has created mega-opportunities to invest in India.
The most interesting part for this reviewer was the last section where suggested life-cycle investment allocations were charted in exhaustive tables linked to scenarios. These are useful as signposts though one or two scenarios seem unrealistic in specifics.
For example, it is suggested that a “middle- aged (40-55) married (person) in not so favourable economic conditions” should have 10% in liquid funds, 45% in cash, self-occupied real estate, bonds, etc., and just 5% in stocks. The rest should be in real estate investments (10%) and bond funds (30%). In practice, unless you’re really rolling in the stuff, real estate will have a far larger allocation due to its lumpiness.
Despite the flaws and stretches, it’s an interesting book. After the “Caribbean Collapse”, a lot of planned couch-potato time has suddenly been freed up. Instead of moping around, it may be a good idea to spend some of that time reading this book and doing some financial.
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