When I speak to fellow athletes about investing, risk often comes up in our conversation. I can totally understand the fear that comes with putting your money in an investment. There is no 100% guarantee how it will work out. You might lose a part of, or all the money you invested. In spite of this, I believe that investing is actually the less risky path as a professional athlete.
Let me explain.
All investments involve some risk. Investing in stocks is buying ownership stakes in businesses. If those businesses do well, you as a part-owner of the business benefit from it. That comes in the form of cash dividends paid out to all shareholders and your ownership stake becoming more valuable.
However, if the business struggles you might not receive any dividends at all and your ownership might lose value. In the worst case scenario, the company you invested in goes bankrupt. In bankruptcy, the company’s assets are sold and you might receive some part of your investment back, or you might be left with nothing at all.
Investing in public stock markets also comes with volatility risk. Irrespective of how the company is doing, stock prices move up and down on a daily basis. Seeing your investment values go down in a short space of time can be very unsettling. This is mostly what causes investors to sell during market crashes and recessions – they panic after they see stock prices move down.
It is clear that investing is no sure thing and there are various risks involved.
However, I believe that is the LESS risky option for professional athletes.
Athletes usually retire from sports without another source of income but bills to pay every month. If you have no income coming in, whatever you have saved up will be gone eventually. Unfortunately for most athletes, that comes sooner rather than later. Of course, there are other careers to pursue after sports. But with no prior work experience in another capacity, it is not so easy. It is difficult to transition straight away from pro sports to a “normal” job and the (entry level) salary is on a much lower level than we are used to.
When the alternative is slowly draining your savings until you have nothing left at all, investing to create a passive source of income from investments does not seem so risky at all by comparison. That is why I started to invest in dividend stocks and real estate investment trusts during my career. My goal is to cover all my expenses through the regular cash payments I get from my investments. Retirement doesn’t mean I will be sitting on the couch, not lifting a finger all day. It will be exciting to pursue other interests and hobbies, whilst also having a lot of time to spend with my family. However, it is important for me to create a base level of passive income (through investing). In that way, I am approaching retirement from a position of strength.
You can check out my personal investment portfolio here.
When faced with the choice of not having any passive income at all once I retire from football, or investing money (that comes with risks) into assets that provide passive income, the choice is clear for me. I will put a large percentage of my each salary towards creating a future stream of income for me and my family. As I am actively documenting my investing journey on this blog, I hope I can inspire and help others do the same.
