Reasons to be cheerful...
We've come a long way
One year ago the Index looked very different. The top names of summer 2017 were trading at a fraction of their current prices. Lukaku (£1.05), Kane (£1.20), and Neymar (£1.40) have seen exponential growth in a year. Even the top names of last summer, such as Pogba (£2.00) and Rooney (£1.40) have seen decent rises despite a diminishing buzz return.
Those of us who spotted the Index early have benefited from this massive appreciation of share values and really cheap buzz returns. A rising tide lifts all boats, and players bought for 50p a few months ago have universally risen to the £1 ballpark, which makes a 5p buzz return twice as expensive. But with our 2017 players trading for a multiple of their 2016 prices there's now a question in where the natural baseline price point lies for the average Index future. As the share price increases it starts to reflect a slightly more modest ROI potential.
Reasons to be cheerful
But I don't feel we're even close to the ceiling. Everyone on the Index right now is still on track to benefit massively from natural appreciation of share prices, thanks to the much more generous dividends of tiered media and performance buzz that basically triples the payoff we receive. Prices have not yet caught up to this quite astoundingly profitable opportunity. As a baseline, I'd consider a reasonable annual ROI of 8% in a reasonably risky stocks and shares portfolio. If we account for the chance of a player falling out the index, a massive (multi-year) long-term injury, and the sunk cost of instant sell and commission costs, I think the average trader is justified in hedging risk across the portfolio and looking for an approximate albeit very ambitious average buzz return on 15% per annum.
There is still massive value in pretty much every end of the Index. The top end just need 5/6 buzz wins and a few 2p or 5p placings to hit 20% ROI by next July. Given the number of games that Lukaku, Hazard, Neymar, Kane, Pogba etc. will play in, and the media interest in each of them, and the upcoming World Cup, there is plenty of buzz to go round at the top of the market.
Similarly, the cheaper players, whether that's a wunderkid like Diaz or a carthorse like Fellaini, only need 2 buzz wins to more than justify their place on your portfolio. Consider the chance of a transfer rumour or Champions League red card or a Premier League wonder goal, and you've pretty much locked in a return on the right players.
So in conclusion
With pretty much every pick, there is still massive long-term potential even for traders running a steady and unmanaged portfolio. I think unless a media king like David Beckham emerges, and unless buzz returns increase, then you can probably expect the hundred highest valued players on the index to keep rising quite gradually. Its hard to know where they'll top out until performance buzz for the new signings becomes apparent (mainly Lukaku and Neymar), but at the moment a 15% return is probably within reach by Christmas for all of them, which means £5/6 is still too cheap. Similarly, a good season from the £1-2 big club EPL players (Matic, Kante, Ramsey, Fabregas, Eriksen) should push them up over £2 basic.
So I don't think that FI has yet reached its natural ceiling. As people move on from the heady days of chaotic summer transfers and start investing in the steady performers and safe picks for the coming season, there's a lot of room for growth based on people looking for a decent 15% ROI in every share. There's a lot of money still to be made in basic portfolio appreciation and buzz returns before you even think about flipping and reinvesting. The big question is whether that comes from new money or existing traders investing more. I'd predict that (if the Index can keep growing and attracting new traders) by this time next year the top ten will be trading around £7-8, the mid-tier average will be about £2.50, and the lower tier players will be dropping out the index at about 80p. Which is good news for all of us trading right now!
A very good read :D
Generally speaking, history says you should expect a 10% returns from a high risk investment like stockmarket equity. Football Index is extremely high risk - unlike companies, every player will be worth zero at some point and a serious injury can cripple a player's value. From a financial perspective really you have to expect a 15-20% return minimum for a player to be a 'good investment' due to the extreme risk level.
As things stand though, that 20% should be achievable for people who trade sensibly.
Whilst I think players were heavily over-priced last season, logically speaking after the dividend upgrade, players' true value is three times that of last season and I'd agree player prices should deviate towards that.
IMO it's far from it's natural ceiling.
Unlike all other established 'stock markets', this is new. People are still joining all the time, and with every person that joins it means prices increase. How many people do we know have left, compared to how many we know have joined? The only way the value of the overall market can realistically fall is if people pull their money out of a player(s) and don't reinvest in a different one. For me, that'll only happen if FI changes something big (maybe drop back to a flat 5p media buzz, or fails with the release of PB).
They seem to have stepped up their advertising, and as soon as the league starts and PB shows it's face properly we're going to see another increase.
I'm building my portfolio for the World Cup- there's no way people like Kane, Alli and Neymar (if all fit) won't reach the £7-8 mark naturally by that point. Big names that all the new people will instantly want in their portfolio, and will probably smash PB and media well before the hype about the WC even starts.