EURO 2020: How Football can teach us about money and investing

 


Euro 2020 just started last weekend. Now all football fans enjoy watching and discussing what is happening around EURO 2020. But how can we relate football to money and investment?


 



Budgeting



One of the important decisions a manager has to make is to select only 26 players out of hundreds to be on the Euro tournament team.



This is where managers do ‘budgeting’. By considering strategy and formation, he selects enough players to cover all areas (goalkeepers, defenders, midfielders and forwards) for the first team as well as substitutes.



For example, the formation is 4-4-2. Therefore the team needs at least 3 goalkeepers, 8 defenders, 8 midfielders and 4 strikers. Others should be selected for the special features he wants, such as a midfielder who is good at marking or picking goals.



Just like managing our own money, we do budgeting for all our expenses. This is to ensure that we spend the same way and at the same time, can have a balanced lifestyle - necessities, savings, entertainment etc. The 50/30/20 rule is a good guideline for your budget allocation.



 



Diversity



Going into the list of front players in more depth, we don’t want them all to have the same type of play and skills. If a striker with speed can’t give us a goal, we go for plan B - replace him with a nice header striker that can be dangerous when we have a corner or a free kick.



If we talk about investment diversification, we can relate it to "don't put all your money in one investment." Because every asset value you buy comes with market risk - it can go down.



There are always the unexpected. Thus, by spreading the money into an investment portfolio across multiple assets, it can reduce the risk of them all falling at the same value.



 



Emergency tube



The winning team not only has a lot of superstar players but excellent depth in their squad. A good player on the bench can help during difficult times. For example, when we miss a goal, we can bring in another striker to help attack more.



With this analogy of a good bench player, we need emergency funds to prepare for the unexpected financial shocks that may arise in life. Example: COVID-19 pandemic.



 



Opportunity Cost



Did you watch Euro 2020: Croatia’s first match against England? Croatia lost 1-0.



But can they do better to prevent that defeat? Yes, they need to have the right forward center that can connect the attacking game with good players like Perisic and Modric.



With this, let’s say they can have 1 goal, which leads to a draw and gets 1 point in the group. 1 of these points is the opportunity cost they missed when going forward incorrectly.



This is a risk when you make an investment decision, and by leveraging the experience, you realize that you can do better elsewhere.
Previous Post Next Post

Contact Form