For professional athletes, the earning potential during their career is often significant, but it’s also typically limited to a relatively short period. To achieve long-term financial security, it’s crucial to invest wisely and build wealth beyond the sports field. This blog provides guidance on how UK athletes can make smart investment choices that will help secure their financial future.

The Importance of Diversification

Diversification is one of the fundamental principles of investing. It involves spreading your investments across different asset classes—such as stocks, bonds, real estate, and businesses—to reduce risk. For athletes, who may face a sudden end to their career due to injury or other factors, diversification is particularly important.

By diversifying your investments, you help protect yourself against the volatility of any single asset class. For example, if the stock market takes a downturn, your real estate investments might still perform well, balancing out your overall portfolio. This approach not only reduces risk but also increases your potential for long-term financial growth.

Choosing the Right Investments

When it comes to choosing investments, it’s important to consider your risk tolerance, investment goals, and time horizon. Some athletes prefer conservative investments, such as government bonds or blue-chip stocks, which are classed as low risk and offer more stability. Others might be willing to take on more risk for the potential of higher rewards.

Examples of investment options:

  • Stocks and Shares: Investing in publicly traded companies gives the potential for significant returns, but it also comes with risk. Working with a financial adviser can help you build a diversified stock portfolio that aligns with your risk tolerance and goals*.
  • Real Estate: Property investment is a popular choice for many athletes. It offers the potential for rental income and long-term appreciation. However, it’s important to research the market and work with a property expert to avoid common pitfalls.
  • Private Equity: Investing in private companies can be lucrative but requires a higher level of expertise and risk tolerance. These stocks are often less liquid than publicly traded stocks, meaning it may take longer to realise returns.

The Role of Financial Advisers

A financial adviser plays a crucial role in helping athletes make smart investment decisions. They can provide guidance on everything from asset allocation to tax planning, ensuring your investments align with your long-term financial goals. Look for an adviser with experience working with professional athletes, as they’ll understand the unique challenges and opportunities you face.

When choosing a financial adviser, it’s important to find someone you trust and who has a responsibility to act in your best interests. They should provide clear, transparent advice and be willing to educate you about your options. Remember, the goal is not just to grow your wealth, but to protect it over the long term.

“Do not save what is left after spending; instead spend what is left after saving.”
Warren Buffett

Understanding the Risks

Every investment comes with some level of risk, and it’s important to understand what you’re getting into before you commit your money. Higher-risk investments, like stocks or private equity, offer the potential for greater returns but also come with the possibility of significant losses. On the other hand, lower-risk investments, such as government bonds, offer stability but may not keep pace with inflation.

One of the biggest risks athletes face is putting all their money into a single investment, such as starting a business or buying real estate. While these can be profitable, they can also be risky, particularly if they require significant capital. Diversifying your investments across different asset classes can help mitigate this risk and ensure that you’re not overly exposed to any single investment.

Tax Considerations

Investing comes with tax implications, and it’s important to understand how your investments will be taxed. In the UK, capital gains tax is applied to profits made from the sale of assets such as stocks or property. However, there are allowances and reliefs available that can help reduce your tax bill.

Working with a tax adviser can help you navigate the complexities of the UK tax system and ensure you’re taking advantage of any available tax breaks. This might include using ISAs (Individual Savings Accounts) to shelter some of your investments from tax or utilising your capital gains tax allowance effectively.

Preparing for Life After Sports

Investing wisely is not just about growing your wealth; it’s about preparing for life after sports. Many athletes face a significant drop in income once they retire, and having a well-diversified investment portfolio can help bridge that gap. It’s important to start planning early, even if retirement seems a long way off. The earlier you start investing, the more time your money has to grow.

Consider working with a financial planner to develop a long-term investment strategy that aligns with your retirement goals. This might include setting up a pension, investing in annuities, or creating a passive income stream through rental properties or dividend-paying stocks.

Final Thoughts

Investing is a key component of financial planning for professional athletes. By diversifying your portfolio, working with trusted advisers, and understanding the risks and tax implications, you can build long-term wealth that will help support you long after your playing days are over. Remember, the decisions you make today will impact your financial security for years to come, so take the time to invest wisely and protect your future.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

*This is provided by Rowan Dartington, the Discretionary Fund management and Stockbroking arm of St. James’s Place, which is wholly owned by the St. James’s Place Group. The value of an investment with Rowan Dartington may fall as well as rise. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Please note that it is not possible to invest directly in property through SJP.