Finance gurus advice to Olympic medalists on how to invest their award money

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While the International Olympic Committee does not offer any cash price to winners, the countries usually shower their medalists with gifts and monetary rewards. The story is no different in India. It has been raining rewards for the medalists not only from the centre and state governments but also from sports authorities and top businessmen.

For example, Uttar Pradesh, Haryana and Odisha have announced the highest awards at Rs 6 crore for gold winners, Rs 4 crore for silver and Rs 2 crore, Rs 1.5 crore and Rs 2.5 crore, respectively for bronze. Similarly, Mahindra and Mahindra Group Chairman, Anand Mahindra has promised to gift the gold medallist the upcoming SUV XUV700.  Not to mention the sponsorship deals chasing players following their success stories in Tokyo.

India clinched its first gold medal in Tokyo last week, making javelin thrower Neeraj Chopra the second Indian to win individual gold at the Olympics. Apart from Chopra, India won six more medals bringing laurels to the country. The silver medals came from weightlifter Mirabai Chanu and wrestler Ravi Kumar Dahiya. The bronze medals were won by shuttler P.V. Sindhu, boxer Lovlina Borgohain, wrestler Bajrang Punia and the men’s hockey team.

With the amount of money pouring in for the sportspersons, Money9 spoke with three top financial planners on what their advice is to medal winners in terms of parking their money for best returns. Here’s what they have to say:

Suresh Sadagopan, Founder, Ladder7 Financial Advisories

Sportspersons have short careers, in some cases just a decade. Many sportspeople are also employed in jobs which give them a salary too. Army, police, and various PSUs employ sportspersons, which provide them with a sustained income over the years when their sports career comes to an end.

Many sportspeople are also able to pivot to a role of a coach/ umpires, some open academies, some join as tutors in regular schools and colleges.

However, we have come across many cases where the sportsperson is left with no financial stability. Cases of sportspeople who live in penury abound.

That is why, when they are earning, they need to invest their money carefully so that it comes in handy in the future. When they win money at the peak of their careers, they should invest it in growth assets like equity (based on their risk profile), so that it will grow into a good corpus by the time their career tapers off. They may not know much about finances and would be well advised to take the services of a professional financial advisor who would be able to plan based on their situation and goals.

They may also put aside some funds out of their winnings for their current sports-related needs, which needs to be in a debt-oriented instrument as that offers them a non-volatile, low-risk asset with has high liquidity. For the same reason, it can also be invested in arbitrage funds, if needed in the near term.

The worst possible course of action is to fritter away the money without investing and indulging in conspicuous consumption.

Prableen Bajpai, Founder, FinFix Research and Analytics

Who better than a sportsperson can understand the depth of the words: ‘there are ‘no overnight gains’ and every achievement is the result of years of toil and hard work.

With windfall gains from various institutions and companies, the first step should be to ‘not do anything right away. Give things time, and till then let the money sit comfortably in a simple fixed deposit of a credible bank.

Each player or athlete comes from a different background and will have different goals and plans. However, like any regular investor, it is important for them to figure out their goals and risk appetite, and then arrive at an asset allocation structure that they find comfortable. The right allocation will have components of real estate, gold, fixed income products, as well as market-related products but the percentage allocations (0-100%) will vary from person to person.

Take slow and steady steps towards allocating any money. Don’t fall for complex products which ‘sound’ impressive. Sports is a high-risk, short-lived career, so there is no harm in taking a conservative approach towards investing.

Rishad Manekia, Founder and MD, Kairos Capital

It is often seen that a sudden inflow of a large amount of money can make people take hasty financial decisions that end up creating a financial mess. Whilst I am sure each one of these athletes must have their plans and I wish them all the best in their future endeavours, I would like to speak for a moment on how to manage such an inflow of funds.

When thinking about how to plan for these funds, the first thing to do is to take a step back and try to avoid any impulse purchases or investments. Typically, the tendency is to enhance your lifestyle by buying a high-end luxury car, real estate, or taking exotic foreign vacations. While celebrating achievements is one thing, spending funds recklessly is not advisable. Once the money is spent, it is gone and the opportunity for it to be used for productive investments that can take care of future financial needs is lost.

Ideally, one should first build an emergency corpus. Next, aim to clear debts, if any, and be debt-free. Many of these athletes are young and can participate in many other sporting events. They should keep aside funds to participate in future events – this is what goal-based investing is all about. Evaluating requirements for life and health insurance is also important.

All of this takes time and careful consideration and this is why it is better to not rush into things and park the money in short-term funds whilst figuring out their requirements.

Many times people take financial advice from friends, family or acquaintances, which may not be the right thing to do. It is better to approach a qualified financial planner or advisor.