Friday, November 8, 1996
Rock 'n Roll Investing
by Cbstd

How do you think Rock Stars invest their money? Do you think their investments are as wild and crazy as their Rock 'n Roll lifestyle?

Not all pop stars were educated at the London School of Economics, like Mick Jagger, so they are dependent upon managers and agents to help them handle the vast sums of money that super stardom brings.

Through a series of unusual circumstances, I had the opportunity to chat with a gentleman who manages an English Rock 'n Roll band, one with a household name around the world. Ever the inquiring Fool, I asked this fellow how he advises his star clients to invest their money.

Taxes and retirement are the two principle concerns for his clients, avoiding the former and preparing for the latter. Right off the bat, these rockers put the maximum allowable amount into a Pension Account, the English equivalent to a self directed IRA. This pension is a guaranteed annuity, an unexciting insurance policy. Not a very glamorous investment, but a simple way to put away some money for the day when the spandex doesn't fit any more.

After the pension is funded, the next move their manager advises is to buy residential property. A good house in a good neighborhood is an excellent way to preserve capital while providing a calming effect on a rocker's lifestyle.

Frankly, I was a bit disappointed to hear this. I was expecting to hear about off-shore investments and partnerships in the swinging celebrity discos. But I suppose covering the pension and providing a pleasant place to live makes sense. After these basics are provided for, then our rock stars can get a little wild, right? So where does all the other money go, I asked.

Money market instruments. Safe, boring, unimaginative cash accounts. Paying about 5.8%, depending on the term of the instrument.

After figuring for a 40% tax rate and accounting for 3% inflation, these rockers were just barely making a 1/2 % net return on their money, I cried. Where is the investment for growth?

It was at this point that I learned the truth about the difference between the rich Rock 'n Roll stars and all of the rest of us. While we may save and invest and hope to retire with a comfortable nest egg, these Rockers already have their egg, and it's already a golden one. This gentleman, Manager to the Stars, is solely interested in preserving what they already have with the safest, most conservative investments possible.

I was shocked to think that I live my investment life like a wild man compared to the hardest of hard rockers. I indulge my lustful desires for capital gains while these hot cultural icons are rocking another way, in comfortable chairs, timidly waiting for their notes to mature.

Living my dull suburban lifestyle, I am secretly living on the cutting edge of financial adventure. And those Rock 'n Rollers, they will just have to find their comfort in thousands of adoring groupies.

Transmitted: 11/8/96