Objective information about retirement, financial planning and investments


Risk, Reward, and Peyton Manning

Peyton Manning

Ok this is what you get for reading a blog written by a financial advisor who is also a pro football fanatic. Peyton Manning is a certain Hall of Famer and undoubtedly one of the true “class acts” in the world of professional sports. The decision by the Colts to release him and the sweepstakes to sign him by a reported 12 NFL teams provides some great examples of assessing risk and reward that are applicable to investing as well.

Know when to cut your losses. No matter what the Colt’s owners might say, the decision was in large part driven by the $28 million bonus due to Peyton on March 8. Couple this with his uncertain health, the fact that the Colts have the top pick in the upcoming draft, and the fact that they are clearly in rebuilding mode and you have a classic decision by the Colts to cut their losses and move on. Investors need to have this mentality in viewing their investments as well. Let’s say you buy a promising stock. It’s now down 15%. Do you hang on or do you sell and cut your losses? The answer lies in your assessment of the potential upside of holding the stock. If you still feel the stock has the same upside as when you bought it keep it, if you feel the money could better be deployed elsewhere, sell. In the case of the Colts they clearly feel that Andrew Luck is better investment going forward than is Peyton Manning.

Always assess the downside risk and the upside potential of your portfolio. Investing, in my opinion is about the level of risk you assume first, then about the potential upside. For the teams bidding on Manning the expected upside is a trip to the Super Bowl. There are any number of teams that are a top-flight quarterback away from a deep playoff run. What’s the downside? First if Manning can’t play or play at a level near what he has shown throughout his career they’ve spent a lot of money (I don’t expect Manning to come cheap) without reaping the hoped for reward. The other downside risk is that a developing young quarterback (Tim Tebow, Mark Sanchez, Matt Schaub, etc.) finds their career derailed and never develops into the long-term star their teams expect.

Is the risk worth the potential reward? This is a question all investors should ask on a continuous basis about the configuration of their portfolio and about the individual holdings within their portfolio. In the case of Peyton Manning my question is why would this guy ever set foot on a football field again? I’m not a doctor, but 3 or 4 neck surgeries would be more than enough to tell me that I don’t want to take the risk of serious injury that could undoubtedly occur from being hit by a 300 pound defensive lineman. I just don’t see any potential upside for him that would be worth the risk of serious injury. As a fan I hope that we have seen Peyton play for the last time, for his sake and the sake of his family.

Feel free to contact me if you need help reviewing your portfolio to determine if you have the right risk/reward balance.

Photo credit:  Flickr

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  1. He has not needed the money for some time. He has been playing for other reasons.

    • Roger Wohlner says

      Zvi thanks for the comment and I’m sure you are correct. I have to wonder based on his performance last season if he has much “left in the tank.”

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