Entrepreneurship can be bring large rewards, both financial and personal, but it is not for the faint of heart. Roughly 20% of businesses do not survive their first year, 50% do not make it past five years and only 33% survive to ten years. The major reasons why businesses fail is that it does not solve a consumer need, lack of capital, the wrong management team, competition and pricing (Otar, 2018). Prior to starting a business it is vital that the founder craft a thorough, well-thought out and well detailed business plan, especially in light of common failures. Once a founder has created their plan, they are left with how to fund it. Unfortunately, the access to capital early on is difficult; the founder can rely on credit cards, cash savings and collateralized loans on their assets, or seek money from friends and family (Morrissette, 2007). For businesses that demonstrate strong growth potential, venture capital firms are also available. However, another option exists in the form of Angel investors, or micro funding.
An angel investor is someone who puts up their capital, in the form of debt of equity, to invest in the business of someone that is not a friend of a family member (Shane, 2012). Angel investors can serve a vital need in the business community by providing debt or equity financing to small businesses looking to start. Like all investors, angels want to see a return on their investment (Sudek, 2006-2007), however, they also demonstrate more altruistic reasons for investing, such as generating psyching income in the form of helping to create growth and jobs in their local community (Morrissette, 2007) or by having a desire to coach and mentor a young entrepreneur and have the ability to help a young business grow (Edelman, Manolova, & Brush, 2017). Aside from proving capital, Angel investors also generally have a desire to work in the businesses that they fund by investing their own time and expertise into the business, in addition to their money (Shane, 2012). This allows founders to essentially access partners who want to work alongside them to help them succeed. While Angel investors may differ in their motivations, they tend to want to invest in businesses where the founder(s) is passionate and trustworthy, they have faith in the management team and there is an exit strategy (Sudek, 2006-2007). Angel investors may also choose to form a syndicate of a portal to pool their funds together, but each investors still makes their own individual decision on whether or not to provide capital to a business. This means that the personality of the founder(s) is extremely important (Sudek, Mitteness, & Baucus, 2008), with those being perceived as conscientious and tough more likely to obtain funding (Murnieks, Sudek, & Wiltbanks, 2015). The amount of funding also varies, from the low thousands to several hundred thousand (Shane, 2012). They also tend to have a 4-6 year investment horizon in which to see a return (Sudek, 2006-2007). Once an Angel investor listens to a pitch from the founder, they have to make a decision on whether or not to perform due diligence (further evaluation) and invest (Sudek, Mitteness, & Baucus, 2008). Since most angel investors do not use as formal an evaluation process as a venture capital firm does, this can be a prime opportunity for investors to pitch their idea when they are still the early stage of launching their business. Gender differences also exist, with few female founders seeking outside Angel capital, as little as 5% (Florin, Dino, & Huvaj, 2013). For entrepreneurs looking to start a business, thoughtfulness of the product and access to capital are vitally important to sustainability. Angel investing can be a great way to seek additional capital. Many Angel investment deals are fairly simple, either an equity stake for capital or a loan, but they can get more complex and mirror venture capital type structure of convertible preferred shares for companies that exhibit high growth and early exit potential (Shane, 2005). Either way, the benefits to the founder are many; not only are they able to access capital when they need it, but they are also accessing expertise, desire for success and a connected network that can be used for further growth. They may be hard to find, depending on the location, but an Angel investor may be just what entrepreneurs need to help their business succeed. References Edelman, L. F., Manolova, T. S., Brush, C. G. (2017). Angel investing: A literature review. Foundations and Trends in Entrepreneurship, 13(4-5). Florin, J., Dino, R. & Huvaj, M. N. (2013). Research on angel investing: A multilevel framework for an emerging domain of inquiry. Venture Capital, 15(1), 1-27. Morrissette, S. G. (2007, Summer). A profile of angel investors. The Journal of Private Equity, 52-66. Murnieks, C. Y., Sudek, R., & Wiltbank, R. (2015). The role of personality in angel investing. Entrepreneurship and Innovation, 16(1), 19-31. Otar, C. (2018, October 25). What percentage of small businesses fail: And how you can avoid being one of them. Forbes. Retrieved from https://www.forbes.com/sites/forbesfinancecouncil/2018/10/25/what-percentage-of-small-businesses-fail-and-how-can-you-avoid-being-one-of-them/#3db3161843b5 Shane, S. (2005). Angel investing: A report prepared for the Federal Reserve Banks of Atlanta, Cleveland, Kansas City, Philadelphia and Richmond. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1142687 Shane, S. (2012). The importance of angel investing in financing the growth of entrepreneurial ventures. Quarterly Journal of Finance, 2(2), 1-42. Sudek, R. (2006-2007). Angel investment criteria. Journal of Small Business Strategy, 17(2), 89-103. Sudek, R., Mitteness, C. R., & Baucus, M. S. (2008, August). Betting on the horse or on the jockey: The impact of expertise on angel investing. In Academy of Management Proceeding, 2008(1), 1-6. Briarcliff Manor, NY 10510: Academy of Management.
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While working out in the gym, it is common to hear those working out dispensing “expert” advice to anyone that will listen. Two common pieces of misinformation is strength training for younger athletes and “muscle confusion.”
It is not uncommon to hear that adolescents should not lift weights as this will either cause them become “muscle bound” or cause injury to their growth plates. Gaining muscle size requires the release of hormones that are not yet present in adolescents, so rather than viewing weight training as a body building exercise, it should be viewed as part of a general fitness and conditioning program. The inclusion of strength training at a younger level allows for neuromuscular recruitment and training that translates to increases in speed and power in a sport setting. Additionally, strength training can support joint stability and improve movement quality as a result of this neuromuscular control. The concern for epiphyseal (growth plate) injuries are unfounded, as strength training does not cause excessive stress to these areas. However, the American Academy of Pediatrics does recommend that maximal lifts be avoided. This type of lifting can place additional strain on the body of anyone and younger athletes need to develop proper lifting mechanics in the absence of maximal effort lifts. Strength training plays a vital role in the development of neuromuscular coordination, strength and endurance, with minimal risk of injury. As such, its utilization should be encouraged, rather than discouraged with outdated misinformation. Children interested in gaining strength should focus their efforts on developing strength in movement patterns (squatting, lunging, hinging, horizontal pressing/pulling, vertical pressing/pulling) in a progressive manner rather than isolating specific muscles under supervision from qualified personnel. Muscle confusion has become mainstream in pop culture as a way to get people active and moving in a variety of ways that stimulate the body in a variety of manners and causing “confusion”. The term that is being replaced is adaptation. The goal of an exercise is to progressively improve (whether that is strength, size, speed or endurance) and to positively adapt to the load that is being placed on the body. Thinking of improvement as an equation Positive Adaptation = Load + rest + nutrition allows the body the chance to recover. Rest is both adequate sleep and not overloading the same muscle group or energy system too frequently. Overloading can lead to mal-adaption in terms of burnout, fatigue, stress fractures, strains, etc. Unfortunately, the body is not “confused” by what is being performed, it merely reacts (either in a positive or a negative way). What is being lost in this nomenclature is where exercise goals come into play. Effective exercise is based upon establishing and achieving goals, which requires progressive overload and positive adaptation to achieve success. By and large, adding in several workout methods together without a long term goal coupled with lack of sleep, extraneous life stress and poor nutrition leads to mal-adaptation and possibly injury. Rather than trying to confuse the body, we should be encouraging people to get active in a variety of ways that stimulates positive change. Intense exercise in any form without adequate recovery and nutritional strategies is not a recipe for long term success. Intentional exercise to stimulate an appropriate response is a healthier approach to exercise. While many people want to help others and dispense their wisdom to all who will listen, it is important to understand what is being said and that, in some cases, regardless of the intent, the message is inaccurate, and potentially, deleterious. If you are ever unsure about your exercise or safety, it is always recommended to seek assistance from a trained, certified and/or licensed professional who specializes in health and fitness. Conclusions
References American Academy of Pediatrics. (2001). Strength training by children and adolescents. Pediatrics, 107(6), 1470-1472. American Academy of Pediatrics. (2008). Strength training by children and adolescents. Pediatrics, 121, 835-840. Faigenbaum, A. D. (2000). Strength training for children and adolescents. Clinics in Sports Medicine, 19(4), 593-619. Sands, W. A., Wurth, J. J., & Hewit, J. K. (2012). The National Strength & Conditioning Association’s (NSCA) Basics of Strength and Conditioning Manual. Caffeine has been shown to improve endurance performance but does it have an effect on VO2 max? VO2 max refers to the amount of oxygen that can be utilized during exercise and is a way of measuring aerobic fitness.
Since caffeine has a physiological effect on endurance performance it is not likely that it would impact VO2 max. To test its effect, the researchers had 9 cyclists perform three intervals and measured their cycling time to exhaustion, peak power, VO2 max and RPE (rate of perceived exertion) for 3 conditions: no caffeine control, Placebo perceived as caffeine and caffeine. The results indicate that there is a difference in cycling time to exhaustion for the placebo and caffeine compared to the control, as well as increased power and RPE. There was no difference in VO2 max and their did not appear to be a difference between the placebo or caffeine. Conclusions:
Reference Brietzke, C., Asano, R. Y., De Russi De Lima, F., ..., Pires, F.O. (2017). Caffeine effects on VO2 max test outcomes investigated by a placebo perceived as caffeine design. Nutritional Health, 23(4). On February 20, 2019, Duke Men’s Basketball was competing against UNC Chapel Hill when start forward, Zion Williamson, planted his left foot and punctured a hole in the side of his shoe. This is one of the highest watched games, even exhibiting the attendance of former President, Barack Obama, and is watched by millions on television. The resulting shoe rupture left Zion on the court holding his knee, which was hurt in the process.
The resulting media response demonstrated the impact that the news outlets attributed the shoe damage to the parent company, Nike. Many of the responses discussed how Nike’s stock price was taking a hit in the pre-market trading, dipping as much $1.72 prior to the opening bell on February 21. While the media was discussing the negative business impact of the shoe, it also presented an opportunity to exam the statistical significance of the shoe using an event study. Markets are thought to be efficient in stock price, meaning that the known information about a company is reflected in the share price (Fama, 1998). If this is the case, then what should lead to changes in price are new information (Coates & Humphreys, 2008). However, it has also been observed that negative media news has a predictable pattern on share price causing a drop on the day of the news, but the price rising to pre-fall price over the next few days (Tetlock, 2007). The Nike shoe provided an example to examine if this was indeed the case. Prior to the game, Nike closed trading at $84.84 per share and opened the following day at $83.57, a decrease of $1.27 or 1.5%, which resulted in a decrease in market cap of approximately $2Billion! Over the course of the day, Nike’s share rose and it closed on 2/20/19 at $83.95 and opened the following day at $84.20. Its closing price on the afternoon of $84.76 was close to the pre-shoe incident, thus supporting a short term drop in price that regained its level over the resulting few days. The statistical analysis predicted a percent price decrease on 2/20 of 1.32%, which did not achieve statistical significance (p 0.199). Thus, this price decrease, while having a market cap loss of $2Billion was not an unusual occurrence for Nike’s stock. Conclusion
References Coates, D. & Humphreys, B. (2008). The effect of on-field success on stock prices: Evidence from Nippon Professional Baseball. International Association of Sport Economists. Working Paper Series, Paper number 08-05. Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of Financial Economics, 49, 283-306. Tetlock, P. C. (2007). Giving content to investor sentiment: The role of media in the stock market. The Journal of Finance, 52(3), 1139-1168. Ticket pricing for events One of the main sources of revenue for sports or events is ticket pricing. As such, it has gotten a lot of interest from professionals and researchers alike in order to determine the best way to maximize the price of tickets. What is unique about sports and entertainment though, is that they do not rely on only one source of revenue, but have several ancillary revenues streams once on premises, such as parking, concessions and merchandise. While tickets are important, maximizing ticket revenue may decrease spending in these other areas and decrease total revenue. There are three main ways that managers can price their tickets; cost based, variable of rmulti-tier and demand or dynamic based, but many will utilize a combination of these methods. When pricing, one the most important to things to keep in mind is the willingness to pay of the consumer. This concept sets the maximum amount that a consumer will pay to attend the event. This concept is how pricing has changed to accommodate different consumer's different price sensitivities. Offering a ticket to a consumer based on their willingness to pay can capture a larger total revenue than offering a ticket for the same price. The hotel, airline and tourism business has been doing this for years. They have adopted dynamic ticket as a way to generate the maximum amount of revenue by offering different prices to different consumers, and sport and entertainment has followed suit. Now, it is common to see prices fluctuate depending on the demand for the event. Cost based ticket pricing is based on setting the price for a ticket in response to the total cost of running the event, plus whatever profit is required. Every seat in the house is therefore priced at the same rate. This helps the company to guarantee an income, assuming they sell out, and make easier budget decisions since there are no unknown costs or revenues. The downside is that if the cost is below the consumer's willingness to pay for that ticket then money may be left on the table, so to say. Variable or multi-tier tries is based on pricing tickets depending on external factors that may impact demand, such as seat quality, quality of the opponent or performer, day of the week, etc. While it is still priced long before the event, it is attempting to create different price points for consumers will different willingness to pay levels. This is why seats that are considered premium have a different price attached to them. Offering the same product (entertainment) at different rates allows the venue to capture revenue from these different price points, which increases total revenue. The final way to price tickets is dynamically. In this scenario the tickets are all priced based on demand for that event. It can then fluctuate up or down depending on how the market is responding. In general, dynamic pricing increases revenue by an average of 14%. In true dynamic pricing, the market (potential consumers) set the price based on their demand for the product. This means that highly coveted events can sell for very high prices, while less attractive events will be sold for less. In sport, however, there is an added concern, the fact that season tickets are also sold. Many organizations are loathe to price tickets below the price of their season ticket holders, therefore devaluing the season ticket. Many will then attempt to set a price floor that is equal to the per game price for the season ticket. This means that the cost of the ticket from the venue is set a minimum, but that does not mean that alternative ticket sources (StubHub, etc) have that same constraint. The secondary ticket market where consumers can buy and sell tickets from a third party not the venue itself has applied pressure on the sport and entertainment venues to adopt to different methods of prices in order to compete. Ironically, they are competing against themselves since, in essence, the tickets are to their own shows. But, purchases made by third party, secondary sources, may not include a relationship with the venue, so they may be losing out on potential income from ticket sales. They will still make money at the venue assuming that the purchaser will spend money once inside the venue. Two ways that venues are attempting to handle this is to have their own ticketing marketplace, where consumers can buy and resell tickets directly through the venue. They accomplish this by partnering with a ticketing company that can handle the trading back and forth. The benefits to the venue are that it captures the revenue from incremental selling, as well as the initial purchase. It is a way to compete with the third party markets that do not contribute a percentage of the sale back to the venue. This has been a major problem in the tourism industry when consumers purchase hotels and flights through alternative methods instead of directly through the hotel or airline. The other method that the venues have started to implement is to systematically decrease the price of the ticket over time. This allows consumers the ability to purchase a ticket at the price they are willing to pay for it. The longer they wait, the cheaper it may become, but once the venue is sold out there are no more tickets. The impact of ticket prices has made it so that venues can see incremental increases in their revenues that then go toward supporting their bottom line. Sport and entertainment also benefits from the fact that the ticket price is fairly inelastic, meaning that as price increases, demand and attendance does not change much (at least not at the higher competitive levels). This also makes it easier for the venue to capture the maximum amount of revenue from the ticket sales. However, managers also need to be aware of how their consumers spend money in aggregate at their venue. If a higher price leads to fewer in venue purchases this may actually lead to a net decrease in revenue generated. The ultimate goal is to generate the maximum amount of revenue per person, not necessarily the maximum amount per ticket. Understanding how they spend on all the other purchase options helps managers make the most informed decision regarding pricing and attendance. Care must also be demonstrated not to price a core group of consumers out of the venue, however. Ticket sales and venue visits should also be viewed across the whole calendar year and not on a per event basis. Paying high price tags for every event may cause consumers to stop coming or change their purchase habits. Families may also not be able to afford incremental price increases for more than a few events, so if families are the core of your consumer base, it is necessary to see how they react and respond to changes in prices. Conclusion:
References: Drayer, J., Shapiro, S. & Lee, S. (2012). Dynamic ticket pricing in sport: An agenda for research and practice. Sport Marketing Quarterly, 21, 184-194. Kaplan, D. (2015, October 25). Dynamic ticket pricing makes successful debut in the NFL. Sport Business Journal. www.sportsbusinessdaily.com/Journal/Issues/2015/10/26/Leagues-and-Governing-Bodies/NFL-dynamic.aspx Young, J. (2017, December 3). Dynamic ticket pricing use takes off, and teams hope it'll lure fans back into sports stadiums. CNBC. www.cnbc.com/2017/12/01/dynamic-ticket-pricing-use-takes-off-and-teams-hope-itll-lure-fans-back-into-sports-stadiums.html Concussions have been in the news for the past few years, and with good reason; mild traumatic brain injuries can impair cognitive function, social behavior, concentration and if not treated, set up for second impact syndrome. The treatment for any suspected head injury is to see a physician.
If you have seen the news, you may have also seen the results of a study out of Boston University where the researchers evaluate the brains of former football players for a substance known as tau. This substance is more prevalent in individuals that have impaired cognitive and neurological function and is termed Chronic Traumatic Encephalopathy (CTE). The findings in the study of 177 players at varying levels of football participation highlight a few things: of athletes that played in the NFL, 99% have signs of CTE, while only 21% of those that played at the high school level had CTE. Before jumping to the conclusion that playing in the NFL leads to CTE we need to understand the data a little bit more. First, a diagnosis of CTE can only be done post mortem once the individual has died and their brain has been donated for study. This is termed a convenience sample; the individuals that had their brains donated were probably displaying some cognitive impairment late in their life that led their loved ones to donate their brains. While this is really helpful for researching purposes, it provides a hurdle when drawing comparisons. Second, there is no comparison group. Typically, researchers match their study group with another, demographically similar group, to determine what differences exist. In this case, there is not a comparison group. So, what is the prevalence of CTE in the general population that did not play football at any level? We don’t know that answer yet. Third, does this relationship signal causation? It is concerning that 99% of the NFL brains showed signs of CTE, but does that mean that football was the cause? It is too early to tell, but this study is interesting in that it starts to gather data on brains in former athletes. As the data base continues to be populated we can start to identify relationships of CTE and sports, not only in football, but in other sports (contact as well as noncontact), as well. For instance, what is the prevalence of CTE in athletes diagnosed with multiple concussions compared with those that have no concussion history? What is the rate of CTE in hockey, soccer, gymnastics, etc. The more information we have, the better prepared we are to make changes. Personally, I am interested in learning if rule changes have an effect both on injury rates and long term health. If athletes learn proper technique, get stronger, have limited opportunity for concussions then we should see a reduction in both those areas. While data collection for CTE is still in its infancy, it is too early to draw conclusions regarding the safety of certain sports, including football. As more and more information is gathered we can then accurately identify relationships and make recommendations regarding safe play. Until then, emphasize technique, play safe, have fun and make a decision to play that is based on your personal likes, history, family and medical input. Conclusion:
References: Mez, J., et. al. (2017). Clinicopathological evaluation of chronic traumatic encephalopathy in players of American football. Journal of American Medical Association, 318(4); 360-370. Rabinovici, G. (2017). Advances and gaps in understanding chronic traumatic encephalopathy. Journal of American Medical Association, 318(4); 338-340. If you coach overhead athletes you are undoubtedly aware of the commonality of the shoulder pain they can suffer as a result of their sport. Many of the visualized changes to the shoulder are a result of normal adaptation to exercise, but painful motion and restriction in sport are not. If your athletes are developing shoulder pain from an abnormal adaption that has limited their range of motion and internal rotation, commonly referred to as GIRD Glenohumeral Internal Rotation Deficit, then stretching may be part of the answer. As an athlete moves there arm overhead they shorten and strengthen the muscles on the back of their shoulder, this allows for greater range of motion in that direction. As a result of this change, the muscles that perform the opposite movements can become weaker and 'stretched out'. Looking at how your athletes move their shoulder can identify those that have diminished motion. Once a deficit is confirmed then the next step is working to correct it. A new study has evaluated the effectiveness of the sleeper stretch to treat diminished range of motion. Those athletes that performed the stretch daily for 8 weeks had improvement in shoulder motion compared to those that did nothing. When performing the stretch it is important to make sure that the shoulder blade stabilized, failure to do so will lead to the motion gained in the stretch coming from the shoulder blade and not the intended musculature. Of additional importance is the inclusion of shoulder strengthening exercises to both prevent this mal-adaption from training and to subsequently help restore strength and stability to a shoulder that is recovering from injury. Exercises that can help provide stability include rows, straight arm pulldowns, scapular punches and 45 degree shoulder raises. By keeping track of your athletes and how they move, you are able to put them in a strong position to both improve their performance and teach them skills and techniques to keep playing. Reference:
Chepeha, J. et. al. (2017). Effectiveness of a posterior stretching program on university level overhead athletes: A randomized controlled trial. Clinical Journal of Sports Medicine. http://journals.lww.com/cjsportsmed/Abstract/publishahead/Effectiveness_of_a_Posterior_Shoulder_Stretching.99478.aspx Photo credit: Google, http://peakformhealthcenter.com/preventing-injuries-baseball-pitcher/ https://i.vimeocdn.com/video/446393978_640.jpg Two studies came out this week that specifically pertain to coaches. Both articles focus on the injury aspect of coaching (one of the responsibilities of being a coach), but deal with different aspects.
As you have seen me write numerous times, there are ways to decrease the risk of suffering certain injuries. One of the most widely studied injuries, and most detrimental to a player, is the ACL. Soccer has been looking at ways to reduce ACL injuries for years and have implemented several different programs with that end in mind. A new study is now examining the effectiveness of ACL programs that are run by the sport coach or by a clinical provider (think PT, ATC, MD, etc). The results of the study show that coaches who demonstrate understanding of a program can effectively implement it with their athletes at the same level as a clinician. What that means for coaches is that with adequate training in an injury reduction program, coaches can effectively implement it with their team. Most injury prevention programs are pretty simple and focus on developing and improving nueromuscular control. Teaching and reinforcing how to squat, lunge, jump, land, balance and change direction are the key elements of this type of program. By constantly incorporating and reinforcing proper movements every day during a warm up session, athletes develop and improve their movement over time. This will in turn carry over into their movement on field. As I've said before, the added benefit of these types of programs is that they also tend to build strength and thus, improve performance. The second article deals with preparing for an handling an emergency situation. Unfortunately, injuries, including serious injuries, are a part of sports. Once again, with adequate training and practice, these can be managed effectively. In our local area alone there have been a couple of sudden collapses on the field or on the court. With quick acting and an AED, athletes can be saved. Hopefully, none of us will ever encounter a life threatening injury, but it is important to practice CPR skills just in case. A task force looked at the development of emergency preparedness and response and created an outline with their recommendations. The focus of their work was on preventing and managing conditions that result in sudden death or disability and include cardiac conditions, head and neck injuries. Amongst their findings are creating a specific Emergency Action Plan per sport and per location, adequate training and practice of neck stabilization, access to an AED in the event of an emergency and proper practice during periods of extreme heat. Conclusions:
References: Huggins, R.A., et. al. (2017). Interassociation task force document on emergency health and safety: Best practice recommendations for youth sport leagues. Journal of Athletic Training, 52(4), 384-400. natajournals.org/doi/pdf/10.4085/1062-6050-52.2.02?code=nata-site Pfile, K,R, & Curioz, B. (2017). Coach-led prevention programs are effective in reducing anterior cruciate ligament injury risk in female athletes: A number-needed-to-treat analysis. Scandinavian Journal of Medicine & Science in Sports. onlinelibrary.wiley.com/wol1/doi/10.1111/sms.12828/full I have always had in interest in how things work and why certain recommendations are made. I recently got curious about the profitability of home ownership and resell value, so I undertook some research to ascertain what the research community had to say on the subject. First, it is very hard to get economic information on a local level; most of the information that is compiled looks at national trends and large regional differences. Second, access to information is quite limited; the research articles are not accessible to the general public and I had to rely on my University credentials to gain access to the information. This poses a barrier to information for interested consumers to make fully informed decisions. Third, the research has a hard time controlling for all the variables and assessing the full picture. In an effort to provide a full picture of home ownership as a driver of wealth I will rely on the information gleaned from several articles in an attempt to clarify the boundaries of wealth building. I suppose many of us have been told that home ownership is the path to wealth and that we should buy a house as soon as possible. The rationale given is that your monthly payments go toward decreasing the principal owned on the house and thus constitute equity. The second aspect of home ownership is that land appreciates over time and when you sell you will not only receive the equity you have paid into the house, but also the difference in cost from the selling price to the purchase price. In this way you will have acquired 'wealth'. What has always struck me about this is the cost of ownership. When you purchase a house you have additional costs that you have to consider above the cost of renting. These costs include insurance, mortgage insurance, interest, taxes, home improvements and equipment or appliances. While you can deduct interest and taxes on your income taxes the other payments need to be rolled into the total cost of ownership when considering home ownership as a wealth builder. When you go to sell your home, these incremental costs need to added to the initial purchase price along with the closing and realtor fees in order to truly determine if home ownership is a profitable endeavor. When deciding to purchase a home, think with the end in mind: how desirable will your house be when you decide to sell? There are two types of home buyers; consumers and investors. Consumers buy a home in as desirable a neighborhood as they can afford without considering ownership implications and resell value. Investors, on the other hand, view home ownership as a means to an end and buy ever increasing houses over a period of time to ultimately end up in a highly desirable neighborhood. As they buy and sell they look to buy in areas that will appreciate over time to maximize their resell value, whereas consumers purchase homes that they want to live in without considering resale value. Those that follow an investor mind set build more wealth and see more money at resale over consumers. The main risk is predicting what will be a desirable neighborhood when the home goes up for resale. The desirability of a location is what drives the underlying appreciation of the housing asset. For homeowners that buy a house and subsequently undertake remodeling projects to increase home value, they also need to be wary of what projects they choose to do. The idea that a remodel will increase home value above the cost of the remodel is not a guarantee. If the remodel is not in line with other houses in the community then the value will not be realized. For example, if no other house in the neighborhood granite counter tops then putting in granite may not make sense for that particular market. Once again, think with the end in mind. If a remodel is meant to improve your experience in your house then by all means do it to maximize your enjoyment, but go into it knowing that it might not increase your home value. When you go to resell it is important to determine what your remodel recoup ratio is to determine profitability: the cost of remodels added to the purchase price compared to the sale price. Achieving a ratio of 1 (100% return) is very unlikely. As with all things, there are external factors that determine this ratio, what is the cost of construction (materials and labor), what is the cost of new housing and what is the market doing. Remodeling can provide a return close to, or above 1, if the cost of construction is low and the market is strong at resell. Those two factors allow a housing remodel to achieve profitability. So far we have seen that it is possible to earn a profit at resell, but it is not a guarantee, so the other question is how does home ownership compare to renting and investing as a means of wealth creation? One study compared these over series of 30 years from 1970-1999 in 10 year increments. The author compared home ownership appreciation (sales price minus purchase price) to renting and investing the difference in cost of home ownership to renting into a stock and bond portfolio. After 10 years, the house was sold and the portfolio was sold and the incremental value was compared to each other. For 1/3 of the time, home ownership was preferable to renting and investing for wealth, 1/3 of the time renting and investing was preferable to home ownership and 1/3 of the time it was impossible to tell. The identified factors that led to wealth were as follows: market timing of home purchase and resale (buy low sell high) and interest rates. If a home buyer was lucky to buy a home when the market was low and sell when the market was high they would achieve greater profitability. If they bought when the market was up then this limited profitability. There are a couple of limitations that need to be addressed though: 1. The resell value only looked at resell to purchase and did not consider remodeling costs 2. the stock and bond portfolio was not specified, so the asset allocation was unknown. 3. The assets were sold after 10 years thus limiting continued compounding earning potential that is proven to be a builder of wealth. Our final article looked at home ownership as a builder of wealth, specific to minorities. Once again, the results are mixed: home ownership was preferable since it provided a forced savings mechanism both in saving for a down payment and in the monthly pay down of principal. Ownership wealth is also dependent on the resale value which is dependent on location and market cycles. In order to modify the risk of market fluctuations, time lived in the home is a factor. Length of time will flatten the risk profile, with 8 years being the cutoff time to both pay equity and build wealth. Once again, total wealth is dependent on market conditions at time of resale. Wealth is only realized if ownership is maintained, those that lose their house, lose their wealth. On the other hand, for renters to achieve wealth they must invest money into an investment account. Failure to invest provides no opportunity for wealth. Conclusions:
Overall, it appears that to a certain extent, luck is involved when looking to build wealth with a home, you are dependent on the market conditions at both purchase and resale, as well as the borrowing environment as a whole. In order to truly create wealth and earn a profit with a home sale a full cost of ownership picture needs to be considered that adds the incremental cost of ownership to the purchase price, remodeling costs, maintenance and closing costs. It is also advised to invest money for both home owners and renters to take advantage of wealth accumulation over time. To the old real estate caveat location, location, location needs to be added market timing, market timing, market timing. Only an ideal combination of location with low purchase price and high sale price leads to wealth maximization via home ownership. The water is a bit murky when it comes to home ownership and resale as a sure thing. The best we can do is to make wise decisions based on all the available information and to incrementally invest money. It may be that we need to rethink home ownership as a profit building mechanism and change our view to one of a savings account. In this light, we can change our thought processes from home ownership being a way to build wealth and look at it as a way to build up a cash cushion that is realized at resale, regardless of how profitable the endeavor was. References: Choi, H., Hong, H., & Scheinkman, J. (2014). Speculating on home improvements. Journal of Financial Economics, 111. 609-624. Haavio, M., & Kauppi, H. (2013). Buying a home with a resale value: Location, location, location. Scandinavian Journal of Economics, 115(4). 1046-1083. Herbert, C., McCune, D., & Sanchez-Moyano, R. (2013). Is homeownership still an effective means of building wealth for low-income and minority households? Joint Center for Housing Studies, Homeownership built to last: Lessons from the housing crisis on sustaining homeownership for low-income and minority families-a national symposium, September 2013. Rappaport, J. (2010). The effectiveness of homeownership in building household wealth. Economic Review, Fourth quarter 2010. 35-65.
When it comes to injuries we all want to keep our athletes healthy. If it was possible to know who would suffer an injury we would try to identify that person and add in prevention strategies. There is some good news on that front. Performing a balance excursion test can help to identify those athletes at risk of suffering a knee or ankle injury.
The test is fairly easy to perform and the down and dirty method is to visually look for differences side to side. A link to a video demonstrating the test can be found here: www.physio-pedia.com/Star_Excursion_Balance_Test To make things even easier for you to administer, performing just the anterior motions (the first 4) are effective in identifying differences that can lead to increased risk. The cutoff for injury is 4cm, which can be hard to see, but if you pay careful attention and mark the movements you will be able to determine those differences. In the event that your athletes show a difference side to side and you are concerned they are at risk for injury, implementing the usual injury prevention exercises are effective at modifying risk. Simple exercises to perform are single leg balancing on an unstable surface, squatting, single leg squatting, lunging, jump training and core strength. Or, to make things even easier for yourself and your team, just incorporate all those exercises into your daily warm up. While not every injury is preventable, it is in our athletes best interest to identify those that are at great risk and work to minimize that risk. Conclusion: 1. Learn how to perform the Star Balance Excursion Test and test your athletes 2. Identify those that might be at greater risk and implement injury prevention strategies References: Plisky, P., et. al. (2006). Star excursion balance test as a predictor of lower extremity injury in high school basketball players. Journal of Orthopedic & Sports Physical Therapy, 36(12). www.jospt.org/doi/abs/10.2519/jospt.2006.2244?code=jospt-site Stiffler, M.R., et. al. (2017). Star excursion balance test anterior asymmetry is associated with injury status in division 1 collegiate athletes. Journal of Orthopedic & Sports Physical Therapy, epub March 29, 2017. www.ncbi.nlm.nih.gov/pubmed/?term=Star+Excursion+Balance+Test+Anterior+Asymmetry+is+Associated+with+Injury+Status+in+Division+I+Collegiate+Athletes |
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