Don't Invest Like Gretsky.
Wayne Gretsky, the Great One, was the best hockey player of his time and arguably the best of all time. He is thought to have a net worth of around $200 million. Is he also a good investor? We read through an interview Gretsky did on investing and we have to say that the answer is a resounding no.
While we do admire Gretsky’s conservative nature and his self-imposed limits on borrowing, we also learn in the article that Gretzky keeps most of his money in the bank and low risk bonds.
So, how much is he leaving on the table? Even with a sizable deposit, it is unlikely that the bank is paying out more than 1-2% in interest and the bonds (especially low risk ones) are likely not paying out more than 3-4%. A well diversified portfolio with a mix of investments (equity, fixed income, cash) should yield 6-8% over the long term.
If Mr Gretsky had about $100 million to invest (we’ll assume he has $100 million tied up in is personal assets and other investments – like his restaurant), and assuming he could get an additional 4% in a properly managed portfolio, he is missing out on $4 million per year in additional investment income! Maybe his father taught him to be frugal to the point that he doesn't really need the extra money, but wouldn’t it be nice to have a private jet (and he could buy a new one every year!).
Sure it is good to be conservative and frugal, but not to the point where you ignore the advice of financial professionals who have studied the economy and market for years. A conservative portfolio doesn’t need to be so conservative that you give up so much of the potential return. So, play hockey like Gretsky. But don’t invest like Gretsky.