Reinvesting a £10,000 hold in Messi
Morning FI Traders,
Previously I provided a table which looks at the power of compounding interest you receive from dividends. With dividend returns being so much higher than that in common stocks I wanted to give an actual example. So I calculated what would be the dividend returns over 12 months if you invested £10,000 into Messi.
Before I show the table of course I wouldn't advise anybody to put this amount of money into a single player. The purpose of the table is just to give everybody a representation of what is possible when reinvesting the dividends you earn.
As the table shows if you had reinvested all of your dividends you would have received a total of £5454.40 in dividends in just 12 months providing a total yield of 54.56%. Which of course is incredible when you considering very popularly blue chip stocks provide anywhere between 2 - 6%.
However what is most striking about the table is the difference in dividends you would have received by April 2020. By reinvesting your dividends and thus increasing the amount of Messi's you own you would have received 50.18% more dividends than if you did not reinvest your earnings.
It begs the question what is the potential of doing this over many years. I certainly want to find out and will be doing analysis on it very shortly and I'll be sure to post.
If you find this kind of stuff interesting I've got a new Twitter account @FIStoxxy.
Any questions or thoughts let me know.
Geronimo159387 last edited by
Compounding dividends is a very powerful & often underrated tool to increase your portfolio value. I see many new users complaining they can't afford the big dividend earners, as they are too expensive but this table demonstrates both why they are expensive in the first place & how your holding can be dramatically increased by no other method than simple reinvestment.
Keep up the good work, excellent analysis; my only note of caution is that some of the best priced dividend earners like Messi & CR7 are getting towards the end of their careers & are closer to either retirement or moving to a non PB league so are more susceptible to sell offs & subsequent capital depreciation. A realistic exit route for such players is advisable but just imagine the long term results of a similar analysis on a player at their performance & dividend earning peak such as Bruno.
These tables are interesting.
I always reinvest divs but very rarely in the player I got them from, I tend to pick a new player that I fancy to rise.
So question is, is it better to reinvest in the player from whom I got the div from, or a different one?
9stevo last edited by
@MrWh1te I do both, if the divs come from a premium hold then I'll reinvest them in that hold, if they come from a hold lower down the food chain then I'll use it to top up cheaper holds or build up a cash balance
@NewUser159387 thanks for the feedback.
Your perspective around the dividend earners is 100% correct. The only reason I've not heavily invested into Messi and Ronaldo is due to that fact. As I'm new to FI investing I'm uneducated around how their prices will fluctuate in the next few years but also how likely their dividends will occur through either PB or MB.
I still think there's a good case for holding these players.
@MrWh1te the strategy of reinvesting dividends in the same player is a concept similar to that of stock investing in which you simply invest your dividends into the same stock. It saves time but it's not the most rewarding as you could spend time to find better options.
Simply put this method only suits people who are chasing passive income. That is income you receive with doing as little work as possible to free up your time for more meaningful things in life.
Thank you that makes sense
For those who wanted to see Ronaldo's returns over 12 months.
Coleyscrooge last edited by
I’ve wondered whether FI might offer an automatic dividend reinvestment scheme, where dividends earned are automatically used to buy more shares in the player who won them. This would be similar to “scrip dividends” for anyone used to trading in equities.
For example - your 500 Kanes win media today and earn you £25. You wake up tomorrow and see in your transaction history three new shares in Kane (at his buy price of £7.30) and £3.10 in cash (the change).
Would people opt in if this was an option?