Outcome-based investing – Comparing it with a one day cricket game

South Africa’s hopes of a semi-final place at the 12th edition of the Cricket World Cup looked dismal after their fixture against the West Indies at the Rose Bowl was washed out last Monday. The win against Afghanistan over the weekend revived our slender hopes somewhat.

Needless to say, while South Africans may have to drag themselves back to their TVs, cricket fans all over the world are investing a month and a half of their lives indulging in their favourite sport by watching their national teams set and chase targets for over eight hours each day.

Rowan Burger, Head of Client strategy at Momentum Investments believes that, “chasing down a cricket total is a lot like saving for an outcome”. You need a good balance of chasing runs (returns) to offset losing wickets (risks). A good comparison to use with your clients during the next few weeks.

Burger explains that in the One Day International (ODI) format, you obviously have a different approach chasing down 200 runs versus 350 runs in a 50 overs match. When chasing a lower total you have the option of pacing yourself by just knocking around the ball for ones and twos and an occasional four here and there, basically taking less risks. But when you chase a large target like 350 runs, you are forced to take riskier shots in order to reach it.

According to Burger this is similar to investments. “While all investments carry some sort of risk whether it is economic downturns, inflation or other factors, the higher the investment risk, the larger the potential return on investment. Outcomes-Based Investing (OBI) is about maximising the chances of you achieving your investment goals, even through volatile markets and obstacles like inflation”, he shares.

Click here to read more about what ODIs and OBIs have in common.

Will tomorrow’s game against New Zealand bring more light in a very dark tunnel?

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