Portfolio construction:

Dashers or grafters? Strike bowlers or containers? Entertainers or finishers?
Welcome to the art of portfolio construction.

Selecting a cricket team is not unlike building a portfolio of investments. Making a fund manager’s job just as challenging as that of the much maligned cricket selector.

The selector knows that an over that produces 1,1,1,1,1,1 contributes the same to the scoreline as an over that produces 0,0,0,0,0,6. And yet, he also knows there is a tremendous difference between the two. Similarly he knows that a bowler who turns in figures of 4-1-12-0 is just as useful than an expensive bowler who ends up with 4-0-47-4.

In the world of mutual funds, as in cricket selection, it is all about balancing risk and responsibility; potential and performance; glamour and grit. And in both cases, the fundamental approach is that of building a team around a strong core. A core of dependable, proven and seasoned players. Players who, like good companies, can read the conditions, adjust to the situation, and deliver the need of the moment drawing from talent, expertise and experience.

Around the core, both in cricket and a portfolio, you look for exciting prospects. Who on their day can boost the team’s performance several notches, but run the calculated risk of failing. But if the balance is right, these players make the team a stronger prospect. Certain sectors and some individual stocks are like these exciting fringe players that surround the core. They add a dash of uncertainty to the team, but also come with the potential of high delivery. A smart fund manager knows precisely how to balance these chances.

(On a regular basis, the 'Cricket Fund Managers' will be given tips, aid and other educative content here to help understands investments better through the medium of cricket.

Watch this space for more)