The Pro Athlete’s Guide to Investing
Picture this: you are on a rocket ship but with limited fuel. It is fun while it lasts but you need to plan now for when the fuel runs out.
I know this world because I lived this. I was the 9th overall pick in the 2009 MLB draft going from having a few hundred dollars in my bank account to millions overnight. I saw teammates struggle with sudden wealth and have seen the various pitfalls professional athletes fall victim to.
While wealth management is a more complex process with 6 different categories, this article will focus on just 1: investing.
Investment Strategy: The Three Buckets
On one side you have the advantage of the greatest superpower that exists with investing, time.
On the other side, you have the disadvantage of a laundry list of unknowns.
- What does next year look like?
- What will my contract situation be?
- What would I do if my career stopped tomorrow?
Investing for professional athletes is a constant tug between a decades-long time horizon and a day-by-day career.
The best decisions always start with the end in mind.
Consider this, your career ends, and your investments provide these two things:
1. The flexibility to choose what you want to do next.
2. The optionality to decide what that timeframe looks like.
In the simplest form, this is the perfect outcome when investing money for athletes.
You turn your future unknowns (an inevitable part of being an athlete) into something you control.
Consider your investments in three buckets.
1) War Chest – The investments that will be there for you no matter what. The returns are lower but the known is higher.
- Cash
- Bonds
- Private Credit
2) Growth Strategy – The investments that will build long-term wealth while protecting the snowball you have built.
- Stocks
- Real Estate
3) Aspirational Strategy – The investments that could be home runs but could be strikeouts.
- Private Equity
- Venture Capital
- Business Ventures
Simply put, your core portfolio consists of buckets 1 and 2. You need enough there that can sustain your lifestyle forever before diving into bucket 3.
Compound Interest: The Power of Staying in the Game
Consider this, Warren Buffett has a net worth of $136 billion. More than 97% of that or $133 billion came after his 65th birthday.
Buffett didn’t suddenly realize something he had previously missed. In fact, he didn’t do anything different.
He just let time continue to be his superpower.
Compounding is funny, it is hard to see until it is impossible to ignore.
- 8 + 8 + 8 + 8 + 8 = 40
- 8 x 8 x 8 x 8 x 8 = 32,768
See what I mean?
Athlete wealth management is about approaching investing like this:
What is a good (if not great) rate of return we can sustain for the longest possible period in time?
To win the game of investing, you just need to stay in the game long enough.
After all, time is your greatest superpower.
Here is the deal ~ managing your wealth as a professional athlete from the start matters.
You have one chance to do this right.
Money (and investing) mistakes you make are not like stubbing your toe, it is more like breaking your leg.
You are on a rocket ship with limited fuel ~The best time to start looking at how to land that rocket is now.
I say this because I have walked in your shoes.
I made millions of dollars from the time I was 18 to 29 years old.
I made smart money moves for a decade that set my family up for future decades.
As specialists in athlete wealth management, we can help you do the same thing. If you are a professional athlete who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder.
Not sure what questions to ask? check out this video on 10 questions you should ask when interviewing a financial advisor.
For more help getting started with investing, or mastering any other part of your finances, you can join The Players Company newsletter. We’re athletes helping athletes achieve financial freedom.
