Diversified Portfolio 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 well-diversified 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