Financial Advisor For Professional Athletes

Athletes Find Out The Importance Of Diversification The Hard Way
But Free Retirement Essential Kit Shows Athletes What They Should Do Now
To Avoid Going Broke In Retirement

Diversification is clearly a very important part of an athlete’s investment portfolio.  Especially considering the alarming statistics of how many are going broke when they retire.  There are many reasons why they are going broke, the largest reason is the inability to stop spending and start saving.  How could this be, if according to ESPN, professional athletes score better than average on intelligence measures?1

Perhaps it’s no real world experience managing money and setting financial goals.  That’s why those who are savvy, and want to save, turn to advisors to help them diversify properly.  However diversification is easier said than done due to a big mistake most advisors are making.

The truth is, most athletes think they are diversified, but after careful analysis we find that most are not.  

To illustrate this point, imagine it’s game 7 of the playoffs.  You must catch a flight to Los Angeles to play the Lakers.  On the flight to LA, the captain of the plan changed the direction of the flight and went to Portland because he thought you had a better chance of beating the Blazers instead.  Would you be happy with that?  No, I am sure you would not, because you need to play the Lakers.

In the investment world this type of direction change is called style drift.  It is the power that fund managers (or in our example the pilots) have over the accounts they are managing.  They can change the type of stocks they are buying in your mutual fund.  A perfect example of this is when the name of a mutual fund has “small” in it, one would think it owns small company stocks, but a closer analysis may find that it really owns large company stocks.  The common investor would think they are buying small stocks to better diversify but they actually bought more large stocks, thus increasing their portfolio risk by owning more of the same asset class.  This happens all the time and advisors don’t even know it’s happening to their clients.

I recently did a review of a portfolio like this.  After looking at 15 different funds, all with “different names,” we found that all of them had Microsoft as one of the top holdings.   They were trying to build a diversified portfolio using these funds, however due to style drift they had little diversification.  Don’t be fooled by the name of a fund.  Even if they appear to be different, they could all be invested in the same kind of stocks.

Over the years we have heard people say, “I have a mutual fund, so I am diversified.”  This is both true and false.  True because you have spread your risk from owning one individual stock to many, so if one stock goes under you don’t feel it.  False if all the stocks you own in different funds are of the same asset category.  This means that when the market cycle for that asset class goes down, your whole portfolio goes down as well.  To be truly diversified, you must spread your money over many asset classes.   This is why people own many different mutual funds.  According to Investment News, this is a big problem of most consumer mutual funds, even the large, well-known ones, are guilty of style drift, so your portfolio still may not be properly diversified.2

The problem still remains: how can you build a truly diversified portfolio? 

The solution is what we call Structured Market Portfolios.  According to a study by the Financial Analyst Journal, 91 percent of a portfolios return comes from how well diversified the portfolio is.3

With Structured Market Portfolios investors get a truly diversified portfolio, owning many asset categories, while incurring far less cost because the fund managers of structured funds are not actively trading stocks in your account.  Also, there are no commissions associated with this type of investment.  That means you have more of your money working for you instead of going to an insurance agent you may never see again.  Combine that with proper distribution forecasting within your portfolio and you’ll achieve returns that are at least consistent with the overall market (while losing less sleep in the process).

Free Retirement Essentials Kit Shows Athletes What They Should Do Now In Order To Avoid Going Broke In Retirement, Like Vince Young!

Now athletes can get a FREE Retirement Essentials Kit that helps them to know what to do to avoid going broke in retirement, protect their assets, and maximize income in retirement.

This kit is free with no obligation and is offered exclusively to athletes who are serious about not going broke in retirement.

To get this free kit simply go to FreeRetirementEssentialsKit.com to get your copy.

 

1 http://www.investmentnews.com/article/20120715/REG/307159982#

2 http://www.investmentnews.com/article/20120715/REG/307159982#

 

3 “Determinants of Portfolio Performance,” Financial Analysis’s Journal, Gary P. Brinson, L. Randolf Hood, and Gilbert L. Beebower, 1986. “Revisiting Determinants of Portfolio Performance: An Update,” Brinson, Singer, Beebower, 1991. “Determinants of Portfolio Performance II: An Update,” Benson, Singer and Beebower, 1996