How to indefinitely fund tournaments, using economic principles of compound interest

Agreed, Eric. Any fund of this type must be made up of stable investments & be able to account for inflation. In reality, $1,000,000 doesn't fund a $100k tourney every year. Due to the lower interest of said stable investments & adding some of the earned interest back in to help balance out inflation, the $1,000,000 actually funds a $50k tourney.

Then, as LC3 mentioned, there has to be someone to oversee the endowment/annuity & they'll want to be paid for those services. In addition, I'd guess the fund needs to cover the tournament expenses as well. So, to get your $100k tournament, you would need roughly $2.5M to $3M in principal.

As an idea, it sounds great. The trouble will be raising the initial capital, then finding someone to oversee it.
 
You're half right. The problem is raising the capital. Unless you have all the time in the world. That's where compound interest (what Einstein called "the eighth wonder of the world") comes in. Give me enough money and I'll sell you a SPIA (single premium immediate annuity) you can use for pool tournements for the rest of your life. What about after you're dead? There's riders for that. What if you want to tap the principle some day? No problem! There's riders for that. You want to talk about "hustlers", the pool world has nothing on Goldman Sachs.
BTW, I think I can come up with some causes that are more endowment-worthy than pool tourny's.
 
TimKrazyMon said:
Agreed, Eric. Any fund of this type must be made up of stable investments & be able to account for inflation. In reality, $1,000,000 doesn't fund a $100k tourney every year. Due to the lower interest of said stable investments & adding some of the earned interest back in to help balance out inflation, the $1,000,000 actually funds a $50k tourney.

Then, as LC3 mentioned, there has to be someone to oversee the endowment/annuity & they'll want to be paid for those services. In addition, I'd guess the fund needs to cover the tournament expenses as well. So, to get your $100k tournament, you would need roughly $2.5M to $3M in principal.

As an idea, it sounds great. The trouble will be raising the initial capital, then finding someone to oversee it.
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Thing is, like many have said, this sort of thing is done all the time. The problem in the original post is that the expectations are out of line and the methodology is wacked. Kudos to the original poster for a good idea, unfortunately, s/he just doesn't know what works and what doesn't in the real world.


Eric
 
Ok, some posters who know more than me have voiced their thoughts. I thank you.

Yes, its true, I'm by no means an expert on any of this. However, as others have posted, there are things like this in existence already for the science world, universities, etc. Its not a new idea. Its just new in our pool world.

I understand the math I used is an ideal case.

What we seem to have today, is literally like a person who lives "week to week". Money is raised for an individual tournament or a year of tournaments via sponsors, player fees, room added money, spectator fees, etc. Wouldn't it be worthwhile to use some investment strategy to supplement this money?

I also agree, given pool's track record of thieves as tour directors, that there would have to be a very careful and thought out process for withdrawing from this account.

Again, my whole point of this was to think of ways to use investment strategies to help our sport.
 
I think if a person started a network of pool player owned businesses (sponsors) for pool you could generate a lot of money. Every contract made through this network, 10% is charged.

Example transaction between two people using the pool network...

Player wants a cue and contacts a sponsor cue maker. A contract for a cue is made for $500. Player pays network $500 and once cue maker is finished he receives $450. The $50 is 10% and put into an organization to hold tournaments.

People would get service and business, pool receives money for pool tournaments. There is probably $1,000,000 worth of home tables and rooms posted on this site. If that work was done here it would have been $100,000 to the pot.

A craigslist or ebay type thing with the money going to pool.
 
Your idea is interesting, and though your original details leave much to be desired, you have the basis of a good, workable idea.

As in a college endowment or a charitable foundation, you don't spend all your earnings every year. That way you let the principal build up, though more slowly than it would if you left all the money in.

You could minimize management costs by buying index funds, which mirror the S&P 500 or the entire market (Wilshire). Reinvest all dividends automatically and poof, no high $ money manager needed. It's true that fluctuations in the stock market are substantial, but unlike our government, you can avoid problems by being conservative with your payout ratio and avoiding raising it too quickly just because the endowment had a good year.

Oversight is needed to manage payouts ratios, to insure continued life of the endowment.

This would work best if you could find a way to continue to add money over time. Whether by small donations from players, AZ posters or sponsors, or all of them. It will become easier to get these once you've already reached a critical mass.

Tournament expenses could be covered by sponsors. Obviously you still need the talented staff to run the tournament, not free, but covered by the sponsors. If you can guarantee a large $ add, sponsorship will be easier, though never easy, to come by.

I think much of the criticism here, though accurate, has been overly harsh. I think you're onto something. And once you make it work you could replicate the strategy and create a series of "Majors". You might even convince a sponsor to put up the initial money for the endowment to have their name forever linked to the tournament.
 
Scott Lee said:
These days, when bank CD interest rates average around 1.5%, people would KILL to make 10% on any investment, that had any kind of security.

Scott Lee
www.poolknowledge.com
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It amazes me how 10% interest is always used as the model. I think Madoff did this and looked what happened.

Problem with most annuities is the guarantee rate. They are sold promising 10% but that is usually for the first month or so then it drops dramatically. They also get sold and the new company changes the rates plus any early withdrawal has real stiff penalties.
 
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