Business

Develop passive income and make money while you sleep

BY PETA-ROSE HALL

Friday, February 26, 2016    

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When you think about your working life — it’s finite. It will come to an end someday, maybe not now, but sometime in the future. Famous basketball player LeBron James of the Cleveland Cavaliers is well aware of that. With an eye on the future, he is investing in assets that can give him passive income as well as assets that can grow his capital so that he can create for himself an “income for life”.

When he was 22 years old, James set a goal of reaching US$1 billion in earnings in his working life. He knew that he could not achieve that amount from his salary and endorsements alone. Somehow, he knew that he had to learn to invest, because it was through investments that the possibility existed of achieving this goal.

There was a lot to learn and he sought advice and talked to people who knew about investments. He met with world-famous investor Warren Buffett. After meeting with Buffett, he set up a company, LRMR Marketing, to handle his investments in business start-ups, real estate and other companies.


James is one of the highest-paid players in the NBA. He earns a salary of US$22 million a year and endorsement income of US$42 million. So why would someone who earns that much worry about creating “passive income”?

No doubt James knows that at some point, like us, he too will be retiring, and his earned income, or income from his salary, will come to an end. What many people don’t pay attention to is investing a portion of their earned income, from their salary today, to create passive income from their investments in the future.

Earning a lot of money does not mean that you will end up with a lot. In fact, you can earn a lot and keep very little.

Take the case of heavyweight champion, Mike Tyson, “Iron Mike”, who earned US$300 million in his career, only to end up with US$27 million in debt. The inevitable result was bankruptcy.

No doubt James has taken note of “Iron Mike’s” spectacular failure and wants no part of that outcome. Instead, he probably wants to follow the lead of basketball Hall of Famer Michael Jordon, who has reached the US$1-billion mark from endorsements and making wise investments.

James has made some investment and bought shares in companies, and in this way is creating a diversified portfolio. Here are some of his investments:

• In 2008, James invested in Dr Dre’s headphones start-up Beats. This company was sold to Apple in 2014 and LeBron made US$30 million on his investment as a result. (Chi-ching)!

• He is a minority ownership in the Liverpool Football Club. He has also recently invested in a pizza business called Blaze.

• He has set up companies that have in themselves attracted investors. Time Warner, led by its Warner Bros division, has invested US$15.8 million in his multi-platform media company Uninterrupted. He is also a shareholder in a production company called Springhill Productions.

So even though James is a highly paid athlete and has recently signed a lifetime deal with Nike worth US$90M — the biggest endorsement deal in Nike’s history — he has not rested on his laurels. And neither should you.

We can all learn from James’ example. We can take a long-term view and become owners of businesses by buying shares in companies.

Investing in companies listed on the stock market can have a positive impact on an individual’s net worth over time. It can provide another source of income, through dividends, and you can grow your capital.

Each one of us has the potential to do more and to grow our assets. We should not rest on our laurels, because with commitment and determination and a fixity of purpose, you too can make money while you sleep.

The results for James have been impressive so far. In only 11 years James has transformed his net worth from US$13M to an estimated US$300M... with more to come.

Peta-Rose Hall is managing director of BPM Financial Ltd.

phall@bpmfinancial.com

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