A couple of weeks ago, news broke that the Los Angeles Lakers were being sold.
The Buss family, who had been owners of the basketball franchise for decades, announced they were selling their majority ownership to billionaire businessman Mark Walter for approximately $10 billion.
Yes, you read that right, billion with a “b.”
The sale made headlines not only because the Lakers are one of the most famous sports franchises on Earth, but also because the $10 billion price tag is nearly double what other franchises have recently been valued at.
Before this sale, the most expensive franchise purchases in U.S. sports were the Boston Celtics at $6.1 billion, the Washington Commanders at $6.05 billion, and the Denver Broncos at $4.65 billion.
Dr. Jerry Buss, a businessman who built his wealth primarily through real estate, initially bought the Lakers in 1979 for $67.5 million.
I literally had multiple people reach out to me about the sale, exclaiming at how much the Lakers sold for compared to what Dr. Buss bought the team for. Here’s one text I received:
“Jake, any chance you could find me a sports team to invest in? How do I get Lakers-like returns? ”
Well, let’s consider that question for a moment.
Just for fun, let’s imagine an alternate universe where Jerry Buss doesn’t buy the Lakers in 1979, but instead decides to invest all of his money into the U.S. stock market.
Maybe without his influence, the Lakers wouldn’t have won their league-leading 11 NBA championships since 1980. Maybe Kobe and Shaq never would have teamed up to create their dynasty. Perhaps Lebron doesn’t end his career in the purple and gold.
I have to say, as a Utah Jazz fan and lifelong Lakers hater, this alternate reality sounds pretty nice.
But setting the basketball aside, how would this move have turned out financially for Jerry Buss?
If Buss had invested his $67.5 million into the S&P 500 in 1979, he would have achieved an 11.95% average annual return over the past 46 years.
Without any additional contributions, his initial investment would have grown to be worth $12,620,950,277 today.
That’s $12.6 billion. And yes, that’s billion with a “b.”
Not too bad. The S&P 500 has grown at a faster pace, and by a decent margin, than the most valuable sports franchise in America since 1980.
Now, would I rather have owned the Lakers over the past 40 years than just stash my millions into an investment account? Yes. I imagine you get access to some pretty awesome life experiences as the owner of the Lakers. I’d sign up for that job.
But I do think there are some key lessons here.
The first is you don’t need to own a sports team or some other fancy private investment to earn miraculous returns.
An annual return of 11.95% may not seem like a whole lot, but when you compound that return over 46 years, you end up with a total return of 18,597%.
“Average returns sustained for an above-average period of time leads to extraordinary results.” — Morgan Housel
The second lesson is how much you save is far more important than your investment returns.
How was Dr. Jerry Buss able to amass billions of dollars in wealth?
Well, he started with $67.5 million. In 1979. Then invested that money for multiple decades.
Yes, investment returns matter. But they have far less of an impact on your wealth than the amount you save. Doubling your returns isn’t nearly as impactful as doubling your savings rate. For example:
- Saving $1,000 a month at a 12% annual return for 10 years gets you to $210,584
- Saving $2,000 a month at a 6% annual return for 10 years gets you to $316,339
More savings beats higher returns in almost every instance.
What’s great is that your savings rate is actually within your control. Some professional investors will grind 24/7 to try and add 0.1% to their returns when there are two or three full percentage points of needless spending or mismanaged personal finances that can be reined in with way less effort.
Big investment returns are awesome when they can be achieved. And some people might be able to achieve them, at least for a period of time. But the fact that there’s so much effort put into achieving high returns and so little effort put into savings presents an opportunity for most people.
The stock market has produced awesome returns over the last 40 years, yet we still have a retirement crisis. We don’t have a returns problem; we have a savings problem.
So no, you don’t have to own the Lakers to become wealthy. You may just need to save a bit more.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.