The news broke a few weeks ago that Daniel Snyder was finally ending his dreadful reign of the Washington Commanders. While the Snyder era produced a losing record and zero championship, he made out like a bandit when selling the fledgling franchise. Snyder’s initial investment of $750 million in 1999 turned into just over $6 billion 24 years later, or a 700% return! Is Snyder’s return on investment that out of the ordinary?
Compounded returns are powerful and oftentimes large numbers can hide something small. While Snyder’s 700% return over 24 years sounds like a lot, it actually works out to an annualized 9% return. This is oddly similar to the S&P 500’s roughly 10% return since its inception in 1957. We realize the calculation is basic and doesn’t take into account the annual profits of the Washington Commanders. Sure, Snyder had a lot more fun owning a sports franchise but that required a lot of work. Owning an index like the S&P 500 takes a click of a button and is more diversified by spreading risk to 500 of the US’ largest companies versus owning one NFL team.
This also shows another point to long-term investing. If Snyder had instead invested in an S&P 500 exchange traded fund (SPY in this example) during his Commanders reign, his $750 million would have turned into roughly $3.1 billion, or just under 7% annually. 7% isn’t a bad return but it is handily lower than the S&P’s historical annual return of 10% we mentioned earlier.
Chart provided by Kwanti
It is important to understand there are periods, in this case 24 years, where the returns will be lower than the historical average. Looking back, he purchased the team right before a terrible 10-year stretch for the S&P 500, which saw it suffer through the tech bubble and financial crisis. If he had given up and sold after suffering another negative market in 2008, then he wouldn’t have benefited from the incredible run since then.
Albert Einstein is credited with saying “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” Snyder’s 700% return on his Commanders investment seems like a lot, even when comparing to the S&P 500 over that time. In reality it works out to 9% annual return. One doesn’t need to be a billionaire to get good returns over long periods, just patience.