We are all aware of the contrasting styles with which Sehwag and Dravid accumulate runs. While Sehwag is flamboyant and risk-taker, Dravid is a cautious playing-by-the-book player.

 

A similar kind of contrasting approach is also seen amongst investors, when it comes to accumulating wealth. On one hand, there are investors who take aggressive risks in equity and on the other we find risk-averse investors who prefer only bank FDs.

 

Let us study Sehwag's and Dravid's batting styles and draw lessons on risk - appetite, perception and management - and see how the same can be applied in the field of investments.

 

The Flamboyance of Sehwag

Sehwag is young. He doesn't carry the responsibility of vice-captaincy. Even if he fails a few times, he is aware that he would get opportunities to make-up for his failures. He, therefore, can afford to take risks while playing his shots.

 

But one very important point to note is that he is not reckless. He is well aware of the bowlers' strengths & weakness, field placement, fielders' abilities etc. When he slashes outside the off-stump, he slashes hard to ensure that the ball travels fast enough to beat the fielder or even go for a six. This is his way of managing risk.

 

There a lot on investors who match the profile of Sehwag. They are young, earn good salaries, don't carry the responsibility of a family as yet and even if they were to lose some money, they will get opportunities to make up the losses and make money. Such investors can, therefore afford to take higher risks associated with equity investment. But don't be reckless. Do your own research. Listen to experts. Choose the right stocks. Don't be misled by rumours.

 

The Cautiousness of Dravid

Dravid is a senior player. As a vice-captain he has certain responsibilities. He generally play as per the coaching manual and is temperamentally risk-averse. He, therefore, uses lot of caution while playing.  As such, he accumulates runs at a slower rate than Sehwag.

 

But remember, he also plays to win. He is not a loser in attitude. He puts in extra effort for the team by wicket-keeping. He is also an excellent slip fielder.

 

If, as an investor, your profile is similar to Dravid, you need to be cautious while choosing your investment options. Being risk-averse, the options you choose would give lower returns vis-à-vis high risk high return options. As such, to reach the same financial objectives, you will need more time and as such you need to start early. You would need to put in extra efforts and invest more amounts.

  

It should, however, be kept in mind that both Sehwag and Dravid are match winners. Each one is clear of the goal. And they put in lot of hard work towards achievement of their goal. We cannot say that one approach is better than the other. Only the investment strategy would change based on the risk appetite.

 

Therefore, find out whether your profile is closer to Sehwag or Dravid and design your investment strategy accordingly. Do an honest assessment of yourself to find out your risk profile. A number of questionnaires are also available which would assist you in such assessment. Once you have assessed your risk profile, the investment strategy can be designed to suit your profile. This would help in arriving at a suitable risk-reward ratio.

 

The author is Vice President Nabriya Financial Services, Pune. He can be reached at smatai@hotmail.com .