\”The most consistent performing asset class for the last 20 years\” are pro sports franchises, and that \”It is one of life\’s cruel ironies that (only) billionaire white men…the same people who own the closest thing there is to a license to print even more money\”. I had to stop reading this Saturday\’s paper to do some quick maths this weekend.
My problem with this statement (other than the lack of irony, and its banking on readers being upset by old white dudes having money): the same returns are available to anyone willing and able to save, and invest a little of their own money and effort. Regardless of class, gender, religious beliefs, ethnicity. Granted, it might be more difficult for some than others (geography, extreme poverty, etc…), but let\’s stick with the basics, and do some quick maths on one of the examples listed in the article.
The Kansas City Royals went from $100M to $1B, over 20 years (I\’m rounding some #s here to keep it simple). Crazy, Right?!?
But let\’s knock off 6 zeros from each, and pretend we\’re investing $100. Add to that a further 5% yearly ($5), over 20 years (because I\’m pretty sure pro sports teams owners invest a little time and money in their franchises as well). In this scenario, you\’d need an average 10.5% return and 20 years to get $1040. Now, add the six zeroes back to the end of the numbers, and they will look much outrageous, but the returns are the same.
Some things I\’ve noticed:
- You need to be able to put the initial money away, and a little more each year. Start with a little, obviously it can turn into a LOT over the long run. Remember, think like an old, rich white man, not a middle-aged white man with no savings that only fully realized the benefits of this about 5 years ago. Play the game, or you\’re on the bench, no matter what league you\’re in.
- The article mentions \”the market\”, as the benchmark that\’s being outperformed. Not sure what this refers to, but the S&P 500 (a good benchmark for US-listed public companies) has averaged 15% over the last 5 years, 9% in the last 20, and 11% in the last 30. Meaning your mini-billion dollar pro sports franchise equivalent returns are completely attainable. The Motley Fool has a good article here on average returns (and how the market average returns beat mutual funds and bonds over the long term).
- Chill. You\’re in this for the long-term. That means not only investing your money, but letting it work for you. Notice the swings in the S&P returns above. There will be dips, and swings, but they balance out over time. Keep calm and carry on.
- Loopholes. The best ones are encouraged by the government. Registered retirement plans let you pay less taxes on money that earns you more money. Sounds almost criminal, right?!
- Pass this mindset and some of what you\’ve earned on to your kids. If you can\’t own a sports franchise today, maybe they can tomorrow.
I\’m writing this article because I\’m frustrated seeing numbers like this, and old white men, and everything else getting eyeballed because of their color and wealth. I\’m not envious of the huge numbers they put up. What I do regret is not fully realizing the mindset that makes this possible, until now (being forward-thinking, getting money to work instead of buying stuff now, and the game-changer that is compound interest). Stuff that wealthy people already know, and pass on to their kids. We stand on the shoulders of our ancestors, and we all want our kids to stand taller than we do.