A few years ago, I was advising a professional ultimate fighter about his investments. Although successful in his sport, he was unsophisticated about finances. For example, against my advice, he kept a large balance in his checking account because he liked calling the automated line and hearing, “Your balance is X million dollars.”
One day he came to see me about moving some of his money into alternative assets. After asking the fighter a few questions, I concluded that he was clueless about the subject and that one of his “business advisors” (aka parasites who seem to hang around successful people) had been hinting about “alternative” investments that would pay off handsomely.
Being a good advisor, I walked him through a range of possible alternatives, such as derivatives, real estate, hedge funds, private equity, etc. I tried to make him understand diversification with possibly some exposure to different types of investments.
Unfortunately, he was smitten by his crony’s suggestion that he could quickly earn multiples on his money. Why should he listen to my advice that would bring in annual returns of only 10 to 20 percent?
When after several months the fighter had not mentioned the subject again, I assumed he had decided not to proceed. Then one day he proudly announced that he was now a big player in alternative investments.
When I asked for details, he told me that he bought some Ferris wheels and was going to make a killing leasing or selling them to carnivals and amusement parks. Of course, he had not considered things such as valuation, maintenance, transportation, storage, insurance, etc., much less the secondary market prices for Ferris wheels.
I knew immediately that this would not turn out well — it didn’t — and I severed my relationship with him. I sometimes wonder what has happened to him and hope that he at least has hired a good accountant who can get him the tax write-offs.
The anonymous author is a West Coast investment manager who has been known to visit Coney Island when in New York.
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