Download 8 Professional Athlete Diversification InvestWrite

Professional Athlete
Diversified Portfolio
Background
• It is very important for professional athletes to have a
plan to manage the money they earn while playing
sports so they will have money when they retire. It
is also critical that they diversify their investments to
protect against ups and downs in the market, so that as
one investment drops, another might soar. A welldiversified portfolio includes investments in different
asset classes (stocks, bonds, mutual funds) and
different sectors and industries (health, technology,
telecommunication, utilities, financial services, etc.).
Read the following:
By Seth Sandler
March 18, 2012
• How much money do athletes in different
sports make?
• How many years does the average player play
professional sports?
• NFL, NBA, MLB, NHL, which of these league's
players has the highest average salary per
player?
• The logical conclusion would be that NFL
players make the most since the league
generates the most money, right? Wrong.
• The highest average salaries in professional
sports are those of NBA players. In an article
on FoxSports.com the author wrote that.
• "Basketball stars get an average of $4.79
million per year or $92,199 per week”
• Compared to the average NFL salary which
according to BusinessWeek.com the, “Average
NFL player salary is $1.9 million.” This is an
annual difference of nearly $3 million per year,
per player in favor of the NBA vs. NFL salaries.
How long is the average career of a
professional athlete in these sports?
•
•
•
•
•
•
NFL: 3.5 years
NBA: 4.8 years
MLB: 5.6 years
NHL: 5.5 years
Volleyball: 5-8 years
NHL: 5.5 years
As a result….
•
• The data shows that the playing lives of professional
athletes are often very short. Brett Favre, Cal
Ripken and Roger Clemens, players who play for 15
plus years are certainly a rarity and not the rule. In
reality, most professional athletes are back in the
general workforce, with the rest of us, within three to
five years of being drafted.
• Justification for these types of salaries is up to you, the
reader—are they obscene or are they fair given the
player's short career spans?
Writing Assignment
Imagine after all you’ve learned in The Stock Market Game you become a
financial professional and you are hired by a famous professional athlete.
In your essay introduce the reader to your new client, real or imaginary
(for example, their sport, records they’ve broken, why you are interested
in the athlete). Also, assume you have already helped your client set up a
budget. Now describe how to help your client develop a diversified
portfolio that includes long-term stocks and/or bonds and/or mutual
funds. Include in your essay:
• Explain why diversification is important for your client to have a secure
financial future.
• Suggest at least two investments your client should include in their
diversified portfolio. These can be from your Stock Market Game portfolio
or others you are interested in.
• Explain why you would suggest these to your client.
• Conclude with the best advice you can give your client about the
importance of having a diversified, long-term financial plan.
What should a professional athlete
consider when investing:
• Insurance—an athlete requires insurance in case of an
injury.
• Real Estate: an apartment for the family
• A nice house -- $1mil.
• Bonds – municipal bonds—they are tax free . Bonds to
provide buildings and programs in cities and states.
• Stocks—include single stock choices and
• ETFs—these are stocks, the purpose of which is to invest in
stocks, bonds.
• Mutual funds—groups of stocks and bonds. These incur
fees.
What should the portfolio look like:
– 45% U.S. stocks.
– 30% global stocks
– 15% tax free—municipal bonds
– 10% alternative investments such as gold and real
estate