Monday, July 27, 2009

Another Athlete Investing Lesson

I don't know what it is about hockey players getting scammed all of sudden but it seems like this is a growing trend. Not too much detail yet in the article, but it goes back to a few central themes here at Badskiblog. Keep it simple. Invest in what you know and understand. Invest in people you trust. And if you don't understand what the people you trust with your money are investing in, don't let them invest in it. I spoke about these very lessons in a post a few weeks back where a bunch of other hockey players were scammed out of some money. Check it out here.

Former Detroit Red Wings star Sergei Fedorov says a man entrusted to manage his money during the past 11 years swindled him out of $43 million.

Federov, who played the last two seasons in Washington, won three Stanley Cups with the Red Wings. (Jamie Sabau / Getty Images)
In a lawsuit filed Thursday in Wayne County Circuit Court, Fedorov says Joseph Zada of Grosse Pointe Shores also broke a promise to repay him $60 million by April 20.

The suit says Zada "acting in concert with others" and "intentionally lied to Fedorov" whenever he asked about the money.

There was no answer Thursday at a number listed for Zada in Grosse Pointe Shores.

Fedorov, the 1994 NHL MVP and three-time Stanley Cup winner with the Red Wings, has signed a two-year contract with a Russian club of the Kontinental Hockey League. He has also played for Anaheim, Columbus and Washington.

It's sad this had to happen to a guy like Federov. He has been great for the game and is a class act. I just imagine what I could do with $43 million dollars. In fact, if Federov had done relatively little and sat on the sideline over the course of those 11 years stuffing his $43 million under his pillow, and then invested it in a money market fund that earned an average annual return of 4% his money would have grown to a cool $66,196,524.42. Vanguard's Prime Money Market Fund has averaged an average return of 6.27% since its inception. Although this ignores the effects of inflation it certainly beats losing $43 million over that same period. Imagine if he had merely bought a total market index fund? With all the time athletes spend on the road they could read enough personal finance and investing books to become dangerous, or at least to be able to claim responsibility for losing their own money instead of paying someone else to do it for them. Live and learn I guess.

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