Professional athletes face unique financial challenges. Your time as a pro athlete is limited due to the physical constraints of aging and injury. Depending on your sport, you may only have 5-10 years of prime earning potential.
However, many athletes are awarded high signing bonuses, salaries, and prize money while they are top performers. And much of this cash comes in when you’re in your late teens or early twenties and haven’t had a proper financial education.
The good news is that you can use the initial cash influx to create passive income streams that can support you for life. Through smart high-net-worth investing strategies, you can create a plan to maintain income long after you retire from your sport. This is the secret to having options when you retire young! With passive income, you have lifelong financial freedom. You won’t need to take whatever job comes along; you can pick and choose your future opportunities based on how interesting they are to you, and not just how much they pay.
Here’s your comprehensive quick-start guide to investing as a professional athlete.
10 Things to Consider When Building an Investment Portfolio as a Pro Athlete
Before we get into specific investment types, let’s discuss what you should be looking for as you consider how to invest:
Career length. Most pro sports careers are short, so investments should account for early retirement.
Diversification. Diversification is key in building an investment portfolio. To mitigate investment risks, avoid putting all money into one asset class; mix real estate, stocks, businesses, and alternative investments.
Passive vs. active investments. Passive investments convert your existing money into more money while active investments also require your time and energy. Passive investments are better when you’re focused on training and competing. You might consider adding more active options when you retire from the sport and have more time to devote to other ventures.
Tax implications. Investors are granted certain tax breaks. For example, when you invest in real estate, you can use deductions to offset your taxable income and lower your income tax bill. Work with professionals to minimize tax liabilities and maximize deductions on investments.
Legal protections. Structure investments properly to avoid lawsuits, liability, and financial mismanagement. You might, for example, keep your investments in an LLC (limited liability company) or trust rather than under your own name.
Financial education. Learn about investing as you go so you can make informed decisions and avoid financial scams.
Trusted advisors. Build a team of vetted financial advisors, CPAs, and legal experts to help you make sound investment decisions.
Liquidity. Assets that are easily converted to cash (like stocks and bonds, for example) are considered highly liquid. While you want to keep a certain amount liquid, it’s also helpful to keep some less liquid assets (like buy-and-hold real estate). Illiquid assets aren’t as tempting to sell when you need some quick cash; they can be left to appreciate over time, protecting your wealth.
Philanthropy and legacy. Consider charitable giving, foundations, and generational wealth creation to leave a lasting legacy.
Top 5 Investments for Pro Athletes
Now that you know what to look for when building a financial portfolio, let’s discuss ideal investment types for professional athletes.
1. Yourself, Your Health, and Your Brand
Your top investment should be you. This category covers several critical investment vehicles such as:
Healthcare and injury prevention. Prioritize top-tier medical care, regular checkups, and preventive treatments.
Elite training and recovery. Hire the best trainers, nutritionists, and recovery specialists to extend your career longevity.
Appropriate insurance. Comprehensive insurance policies can help cover the cost of necessary care and protect you from lost earnings in the event of injury or other health problems.
Brand building. Establish a social media presence and allow the public to get to know you. This can open opportunities for product lines, speaking engagements, and other personality-based income sources.
2. Stock Market Securities
Many pro athletes invest in the stock market, often favoring index funds for long-term growth. These funds track market indexes like the S&P 500, offering automatic diversification and reducing risk. Mutual funds also bundle stocks and bonds but are actively managed, typically resulting in higher fees and lower returns, making index funds the more cost-effective option.
Another solid choice is a real estate investment trust (REIT), which owns income-generating properties and pays investors dividends. Like index funds, REITs provide diversification but also generate cash flow that can be reinvested for growth.
These investments help athletes build long-term wealth, particularly in retirement accounts, where they can benefit from stock market gains and compound interest with minimal effort.
3. Direct Real Estate Ownership
Purchasing a home is a popular investment choice for pro athletes. Instead of spending money on rent, homeownership allows you to build equity while benefiting from property appreciation and homeowner tax incentives.
A natural progression from owning a home is buying a second home as an investment property or investing in rental properties to generate passive income. Whether it’s a single-family home, duplex, or multi-unit building, rental properties provide steady cash flow along with the same appreciation and tax advantages as your primary residence.
The main challenge of direct real estate investment is the time commitment. While turnkey properties with reliable tenants require minimal oversight, vacancies and maintenance issues are inevitable. If managing rentals doesn’t fit your busy schedule, you can hire a property manager to take care of the day-to-day tasks.
Alternatively, real estate crowdfunding and syndication offer a hands-off approach to property investing, making them attractive options for busy pro athletes…
For pro athletes looking to invest in real estate, these models offer several key benefits:
Hands-off investing. With a demanding career, managing rental properties may not be practical, but crowdfunding and syndication allow you to invest passively while still benefiting from real estate appreciation and income.
Expertly vetted opportunities. Instead of analyzing deals yourself, you can rely on the experts behind the platforms that conduct thorough due diligence. This makes it easier to choose high-quality investments.
Lower capital requirements. Pooling funds with other investors grants access to large-scale real estate deals without funding the entire purchase yourself.
Built-in diversification. If you are investing $100,000 in real estate, you can spread your capital across multiple syndication deals instead of sinking the entire amount into one property. This reduces risk and increases exposure to different markets or property types.
High-earning professional athletes often have funds available for alternative investments, which can be tailored to their individual interests.
Alternative investments cover a diverse range of asset classes, from commodities to collectibles. Some options, like cryptocurrency, come with high volatility, offering the potential for significant gains but also substantial losses. Other options, such as precious metals, are valued for their stability and ability to preserve wealth over time.
You could even purchase a franchise (like a healthy fast-food chain or fitness center to tie into your personal brand) or invest in an esports team or video game development project. If your base investments are sound, you can take some extra risk with alternative investments that are of interest to you.
What to Watch Out for When Investing as a Pro Athlete
Understanding how to invest as a professional athlete requires that you know about common pitfalls, including the following:
Investment scams. Sophisticated scammers may target you if they believe you have cash available. Before investing, always check the track record of the firm you’re investing with or the seller you’re buying from.
Bad financial advisors. Avoid unqualified or unethical advisors who may mismanage or steal money. Make sure your chosen advisor has referrals from clients in a similar position to you.
Friends and family asking for investments. It can be difficult to deny financial requests from family and friends when you suddenly come into money. Locking up your capital in less liquid investments is one way to protect your wealth.
Taking on too much debt. Remember that your earned income could decline over time, making it harder to repay debts. If you leverage debt, for example, using a mortgage to buy a house, make sure you can comfortably cover the payments, even on a lower salary.
High-risk startups or prestige projects. Don’t invest emotionally. Take the time to complete your due diligence before investing in any company or project.
Market volatility. Markets are cyclical, so the value of your investments may go up and down over time. Don’t panic during market downturns; they are only temporary.
Tax liabilities. Improper planning can lead to hefty tax bills. For example, many investors forget that they will need to pay capital gains tax on their investment income (although this tax rate is lower than the earned income rate, further benefiting investors). International athletes need to be especially careful with taxes. American athletes living abroad, for example, must report global income to both the US and their country of residence (although some foreign income may be excluded from American taxable income).
Consider Real Estate Syndication Investing with Gatsby Investment
As an elite athlete, your demanding schedule may not leave much time for researching, analyzing, or managing investments. By working with a trusted investment firm, you can build wealth passively while staying focused on your career.
At Gatsby Investment, we specialize in real estate syndication projects designed to deliver strong returns. If you want to invest in real estate without the burden of sourcing deals, overseeing renovations, or managing tenants, Gatsby offers a hassle-free solution. Our real estate investment opportunities include both short-term development projects and long-term rental opportunities, with the potential for double-digit annualized returns.
With Gatsby, your money works for you so you can stay focused on what you do best.
Welcome to the Gatsby AI assistant. I am here to answer your questions about investing, our investment products or other helpful information about our company.
