Investing like former Timberwolves owner Glen Taylor isn’t as difficult as it seems

Jeanie Buss, majority owner of the Los Angeles Lakers, announced last month she had agreed to sell most of her family’s stake in the NBA team based on an updated valuation of $10 billion.

Her father, Jerry Buss, first purchased the Lakers in 1979 for $67.5 million.

A week after that sale announcement, NBA owners formally approved another league transaction: the Minnesota Timberwolves and the WNBA’s Minnesota Lynx going to Marc Lore and Alex Rodriguez for $1.5 billion. Former state senator and businessman Glen Taylor, current owner of the Star Tribune, had owned the Timberwolves for 31 years after paying $94 million for the team in 1994.

Owning a professional sports franchise is unattainable for most. What’s not: earning a similar long-term investment return.

Taylor’s internal rate of return during his three decades as Timberwolves owner was 9.4% per year. The Buss family’s ownership of the Lakers, which looks even more eye-popping at first glance, was 11.6% per year.

It’s true these calculations do not consider annual cash flows (ticket sales, marketing, TV revenue, etc.), capital expenditures or taxes paid. But seeing the “start-to-finish” dollar amounts do remind reasonable annual returns can add up to massive long-term gains.

The same is true in the stock market, a much more accessible means of investing. Success, however, does require an emphasis on the big picture. Weekly headlines or short-term performance too often influence investors.

Investors changing their investment allocation based on market movements is a lot like a professional sports team switching head coaches every couple of years: Neither are a winning formula.

U.S. stock benchmarks have rallied back to all-time highs, which is an opportunity to remind readers there has never been a bad time to invest in equities if you held those investments for the long term. Some will argue it’s a poor time to buy stocks immediately following a strong rally, like the 30% gain experienced since early April. History suggests otherwise.

Data that Creative Planning CEO Peter Mallouk published shows since 1989, money invested into the S&P 500 at an all-time high has actually outperformed money invested on “any given day.” Think of that the next time it feels like stock prices are too high. Market momentum can be a powerful force, indeed.

The truth is the sooner you invest a dollar, the longer it can remain invested and the more compound interest can work in your favor. Some basic math helps illustrate how average returns can add up through time.

In the past 50 years, large-cap U.S. stocks have increased by roughly 12% per year (including dividends). Corporate bonds have increased by roughly 4% per year. A portfolio of 75% stocks and 25% bonds has therefore averaged 10% per year.

Using those figures, a $10,000 nest egg that grows by 10% each year would be worth $192,000 after 31 years (Taylor’s tenure as Timberwolves owner). If the same $10,000 remained invested for 46 years (the Buss family’s era with the Lakers), it would be worth $802,000. Patience and discipline pay off.

Of course, there is no guarantee future returns will be as good as historical precedents, and it’s only human to focus on potential pitfalls. It’s easy in today’s politicized environment to find reasons not to invest.

But owning stocks is not a bet on government efficiency or any presidential administration. It’s a bet on the ability of American CEOs to navigate the economic environment and grow profits; something they have done successfully for generations.

The long-term returns from professional sports franchises don’t seem so outrageous when you break down their annualized gains. Investing like a billionaire owner is not as difficult as you might have thought.

The Timberwolves winning an NBA championship on the other hand ... We understand if that still feels impossible.

Ben Marks is chief investment officer at Marks Group Wealth Management in Minnetonka. He can be reached at ben.marks@marksgroup.com. Brett Angel is a senior wealth adviser at the firm.