Tuesday, June 27, 2017

Money and the NFL

Pining for football during the extended no-football drought? Here are a couple links to topics related to both the NFL (to address your craving for NFL news) and money (because this is a personal finance blog...):
  • An inside view of what it's like to make a bad decision while you're wealthy, famous, and young: https://www.theplayerstribune.com/plaxico-burress-advice-for-nfl-draft-class/
  • Rookie hazing: https://www.theguardian.com/sport/blog/2016/dec/20/kj-dillon-dinner-bill-nfl-hazing-culture
  • Why did the Rams, the Chargers, and the Raiders all recently decide to move to a new city? Because the owners didn't get a big enough handout from their current cities to construct a new stadium: https://www.theguardian.com/sport/blog/2017/jan/12/san-diego-chargers-los-angeles-move-nfl-owners 
    • When cities capitulate to such demands from billionaire owners, under the threat that "we're going to move the team if you don't do this," it makes me really mad! It shouldn't fall on the taxpayers to give these rich owners a new stadium, which those billionaire owners will then profit from...
  • More than 1 in 10 NFL players file for bankruptcy within 12 years of their retirement! However, there's an increasing number of programs to help retired players adjust to life after football: https://www.ft.com/content/c965a3d6-168f-11e6-b197-a4af20d5575e
  • How to avoid going broke as an athlete: https://www.youtube.com/watch?v=Glw6zGwxm80  Good for Bart Scott and Drew Hawkins for taking it upon themselves to tackle this problem! [pun totally intended!]
  • Ryan Broyles, a former WR for the Detroit Lions, gets it! He lives on about $60,000 per year, and invests the rest, so that he doesn't have to rely on paychecks. He's financially independent and retired early, commonly known as FIRE among personal finance enthusiasts. Good for him; it's refreshing to see players that are so sensible and self-reliant about their money! https://www.theplayerstribune.com/ryan-broyles-nfl-60000-budget/
    • However, he's not following my recommendations. According to this MarketWatch article, he keeps about 20% of his investments in cash (the other 80% is split evenly between stocks and real estate, which is reasonable). 
    • Since this is presumably in a money-market account, which typically yield rather low interest rates (currently less than half a percent, in many cases), he's sacrificing anywhere from 2% to 6% returns compared to bond funds. 
      • Wait...bond funds?! Are those different than bonds? In a word—yes. If you buy a 20-year bond, it doesn't mature for 20 years and you're therefore going to have to hang onto it for the full 20 years if you want to get the promised return. If you need to sell it early, it'll be worth less than you'd like.
        A bond fund, though, works much like a mutual fund does for stocks. An investment firm gathers money from a lot of different investors, and then sinks all of that money into a variety of different bonds. Since the fund holds the bonds and not individual investors, it maintains liquidity—that is, you can take your money out at any time—but you get returns that are much higher than a money market would ever give you!
        For an example of a bond fund, see VBTLX on Vanguard's list of bond funds
      • The only reason I can see for Mr. Broyles to maintain that much in a money market is if he's planning to buy more properties to add to his real estate portfolio. It's understandable if he keeps so much in cash for this purpose. Still, he's probably better off putting at least some of that money into a bond fund. He can still take the money out if/when he needs it!
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