W.I.T. #47 - Investment Return on an NBA Franchise

Three Things Worth Sharing

Really cool calculators – Looking up data for this episode reminded me of this great website that has dozens & dozens of practical as well as just super-interesting calculators which I had written about in a previous edition of ‘Three Things Worth Sharing’.

Interactive U.S. Property Taxes by State – We often think of ‘state taxes’ as tax on income, but you’d be surprised at the ‘no or low tax’ states where property taxes really sock it to a person!

Quotable – "A simple filter for managing your time: You're not focused enough unless you're mourning some of the things you're saying no to." - James Clear

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VIDEO TRANSCRIPT

John Scherer:

John: Is the return on investment of owning an NBA franchise the type of thing that only rich people can get? That's what I'm thinking about. Just before the new year, Senator Herb Cole passed away. He was a great Wisconsin business leader, political leader, and civic leader, and I had a chance to actually meet him. A good friend of mine used to work in his office here in Wisconsin, and she invited me to come to a Bucks game here. Pull up a picture. There's Senator Cole and I at the old Bradley Center. A great experience having a chance to meet him and reading a lot of the things that have been published about him since his passing. One of the things that caught my eye was his investment in the Milwaukee Bucks. John: He bought the Bucks back in 1985, and one of his goals was to keep the Bucks in Milwaukee. And, of course, he sold here back in 2014, coming up on ten years ago. And they talked in the newspaper article about when he bought the Bucks, he put in $20 million. And then when he sold the Bucks in 2014, he got $550,000,000. And just looking at the numbers, it seems like, holy mackerel, what a great return on investment, right? But being the kind of numbers guy that I am, I wanted to dig into that a little bit. And just for reference, I've seen numbers that say he put in 18 million or 20 million, and the exact numbers aren't the specifics. But what I did is I went and pulled up and said, okay, what happens if you put in $20 million and almost 30 years later, you come out with $550,000? I'll pull up a quick snapshot from an online calculator, and you can take a look at the number right there in the middle, starting with 20 million, ending with 550,000,000 over 29 years, that return is 12.1%. Certainly a very nice return. John: Right? I mean, pretty happy. If you knew you're going to get 12% over the next 30 years. Golly, snap that up. There's no guarantees and any of that that you can get that kind of return anyplace. But I took a look at, okay, well, how does that compare? That's a great number, but what does that really mean? What's the context? And so it remind. Actually doing this reminded me of one of the great calculator pages. We'll put a link to it in the meeting notes here. But I went in and said, well, took a look and said, well, what did the S and P 500 do over that time frame? And the return was something around 11%. John: Right? So not quite 12%, a significant difference over a 30 year time frame. But that same return in just the S and P 500 would have been 450 or so million dollars. I mean, a pretty significant. And then I took a look at, we've got some things that test data going way back and the type of portfolio that we put together for clients, not just us large cap s and P 500, but have some small cap, have some international and all stock portfolio over that same time actually returned just a couple of ticks better, just a little over 12.3% or it would have. Of course, we weren't managing investments back in 1985. It's all hypothetical. But again, the frame of reference going, golly, this great return put in 20, you get back 550. Man, how can a regular person do that? Well, that is just really comparable, at least in this one case, to investing in a diversified stock portfolio. John: So I thought that was really interesting to put some context behind those numbers. And anyway, that's what I'm thinking about here today. And as always, interested in knowing what you're thinking about. If you're watching on YouTube, drop a comment down in the comment box or shoot me an email directly. And as always, thanks for watching.

John Scherer CFP® is a fee-only certified financial planner based in Middleton, Wisconsin. John has over 20 years of experience advising clients on personal tax, investment, and financial planning. You can reach him by email at john@trinfin.com.