Redskins Commanders To Be Determined recently sold for over $6 billion. Every time a sports franchise sells, the numbers get bigger, and people can't believe the huge payout for the owner. Reviled owner Dan Snyder purchased the team back in 1999 for $800 million, which was a record at the time. Yes, $6,000,000,000 is much more than $800,000,000, but how good of an investment was it? Many unknown factors would impact the return calculation on this type of investment, like the ongoing profits of the business, the loans taken out to buy the team, etc. However, if we take that out of the equation, to grow $800 million to $6 billion over 24 years, you'd need to achieve a return of about 9% annually.
This is a good annual return, but how does it stack up against a simple S&P 500 index fund? Here's a chart showing an investment of $800 million into an S&P 500 index fund from May 1999, when Dan bought the team, to June 2023, when he sold it:
The annual return would have been just over 7%, and the ending value would have been about $4.2 billion. That's not bad, but it still falls short of the $6 billion paid for the team. What about an investment in the tech-focused NASDAQ index?
Despite terrible timing luck, with the tech collapse of 2000 keeping the index underwater for over ten years, the annual return still would have been over 9%, and you would've been left with almost $6.7 billion!
Does this mean Dan would have been better off putting his $800 million into an index fund and holding it for 24 years? Probably not, since the business also likely generated profits over the years, he paid himself a nice salary and got to spend time in a very exclusive club of NFL team owners. However, he's also been under constant public scrutiny and is now hated by all Washington football fans and most football fans in general. I can assure you that every Washington football fan wishes he had put his money into an index fund instead of buying the team!
You probably will never have the opportunity to invest in a sports franchise. You probably don't have $800 million to turn into $6 billion, but you can easily access investments that could earn a similar return with much less hassle. Don't let the big numbers distract you from the big picture. If you save and invest diligently over a long period of time, your money can grow to a number that will allow you to meet your goals in the future. As always, if you need us to help you develop a plan for investing your portfolio, contact us anytime.
-Chris Benson, CPA, PFS
The views expressed represent the opinions of L.K. Benson & Company and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. Please see Additional Disclosures more information.