Sports enthusiasts are watching the Olympics eagerly, with India already opening the medals account. It’s an exciting time to see multiple nations compete across varied sporting events. Just as athletes prepare for the Olympics over several years, investors too need to plan, save and invest wisely over years, to meet their financial goals.

Let’s look at what the Olympics can teach us about long-term investing in mutual funds.

At first glance, the Olympics and large-cap mutual funds seem to occupy entirely different universes. But beneath the surface a fascinating set of parallels emerges, revealing a surprising kinship.

Effortless is a myth…

Large-cap mutual funds focus on seasoned, well-recognised companies; titans of industry, household names that have weathered economic storms over a long time. These companies have usually spent significant amount of time and effort decoding markets and products, reaching a place where they are now established.

Much like a seasoned Olympics team, these large-cap companies have put in a lot of effort to look effortless today. They are likely to have steady earnings growth, possess strong brand recognition, and have the resources to adapt to changing market conditions. This stability translates into relatively lower volatility, similar to how an established Olympics team with a history of success is less likely to be thrown off balance by unforeseen challenges.

Will power is the key to success

Imagine a seasoned marathoner who understands the physical and mental demands of the race and has developed strategies to cope with fatigue and unexpected situations. It is easy to run the first few miles but if an amateur marathoner continues, his legs start giving up, he gets out of breath. Without proper attitude and mental training, it is easy to give up at this point.

But seasoned Olympics players still persist, as they have trained themselves for every situation. This kind of seasoned experience is precisely what large-cap companies bring to the investment table. They’ve faced market downturns before, navigated changing consumer demands, and possess the financial muscle to weather temporary headwinds. These companies have experienced storms and now know how to navigate them.

Melting pot & the power of diversification

Athletes from every corner of the world converge at the Olympics to compete in a multitude of disciplines. The 2024 Olympics will have 329 events across 39 sports with breakdancing entering the games for the first time.  

Large-cap mutual funds echo this very concept through diversification. Just like participating across a spectrum of events increases a country’s potential medal tally, investing in a wide range of companies across various industries and sectors helps large-cap funds reduce risk.

Focus is sacrosanct

The Olympics only comes around every four years. Years of training, meticulous planning, and unwavering focus are required. Large-cap mutual funds share this long-term perspective. They invest in companies built for sustainable growth, with a focus on generating consistent returns over extended periods. Think of a distance runner meticulously planning their training programme, gradually building stamina and endurance over months and years. Similarly, large-cap mutual funds invest in companies that are positioned to capitalise on long-term trends, such as technological advancements or demographic shifts.

Resilience is the ultimate goal!

There are no guaranteed victories, but by understanding the potential pitfalls and implementing strategies such as diversification and a long-term perspective, investors can increase their chances of bagging the medal.

Large-cap funds, like Olympics winners, have earned their position by hard work and perseverance. Invest in a large-cap fund with a long and consistent track record of performing across market cycles to go for your financial gold medal.

Suresh Soni

The Author is CEO of Baroda BNP Paribas Asset Management India Pvt Ltd.  

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