Thoughts on buying for dividends or growth
I'm sure this topic has been discussed many times, both on here, and in peoples heads.
I've been here about a month now, invested about £300 and already up to around £380, peanuts I know but a good return in a month. I see FI as a high interest savings account. The company is doing well, they are investing in a big marketing campaign and I can only see more money coming into the market. You only have to look at players prices 1 year ago to see the growth.
I spent most of my morning at work on whoscored.com making a spreadsheet of all the youngsters who've played the start of the season so I can keep tabs and grab them early.
Then I had this thought. Why do players value actually go up? The answer I came up with is basically, for dividend payouts. We buy young talented players hoping they will perform well and earn dividends when they reach their full potential, the more people buy, the higher their price goes, but it essentially the driver has to be dividends because if they didn't exist there would reason to hold one player over another?
My question now is, would it be a better strategy to dump all the players have potential long term growth potential (long term savings account) and only buy expensive dividend magnets to reinvest the payouts to aggressively grow?
All thoughts are welcome!
@RichardMS Balanced portfolio all day long.
I dumped my youngsters for exactly the reason you mentioned, about 6-8 months ago youth players were not fashionable, today they're all the rage :-D
The best growth will always be with 'break out' players, if you can predict who's going to force there way into the media eye or break into one of the top teams.
Good point, If you can find a 'break out ' player who will start to earn dividends e.g. if you got Fekir a year or two ago your ROI would be huge.
My issue is though how much money would be tied up 'spreading the net' on young potential 'break out' talent? would that money give a higher ROI if it was just all pumped into a Pogba, Neymar?
I personally like to split my portfolio with both approaches. I have holds for dividends but also hold a variety of young players.
I always try to have in mind a point in time when I will look to sell (maybe playing regularly in the first team or an international call up). The benefit I see is that if you can buy lots cheap and see a big enough rise then it's been a good investment.
By this point you also should have a good idea if the player may go on to bigger things then you should have a good investment to build on and hold.
Different ways to do things of course which is the beauty of FI
Yeah I think most people like a split, and thats how I've done it and it's probably the safest method. I've just done done a few quick calculations using my portfolio.
So i've invested £325 so far. portfolio is worth £387 using the above strategy. However..
I got Pogba at £6.63 a month ago. £325 / £ 6.63 = 49. If I bought 49 Pogbas my porftfolio would be worth £49 x £8.65 = £423 + (according to FI edge) £0.75 per share (since I joined). Total = £459 ish
If i pumped all my money into a young James Maddison at the same time, a good young player who I think will do well this season. - £325 / £2.45 = 132. My portfolio would be worth £393 now -
So both examples would mean a better return than spreading it out, but obviously these are extreme examples in a vacuum and with hindsight.
One last example just for fun - Samuel Saiz (Im a Leeds fan) - £325 / £0.66 = 492 x £1.34 (current value) = £659!
Again these examples don't really mean anything but it makes me think if spreading out is the best option.
Really random tip. I found watching match of the day and the players they highlighted there quite a good pointer then cross referencing them with the data. I got on salah and son very early off the back of this.
It’s about risk. If you go more on less players the potential profit is larger but so are the losses if it doesn’t go your way. The spread minimises the risk but also the profit to a degree. Got to do what your happy with.
" I spent most of my morning at work on whoscored.com making a spreadsheet"
You should be sacked immediately
@RichardMS I can answer that. 4 months ago I held MB players and they returned me less than when I sold them up and then invested in younger players afterwards. I held Neymar and Pogba but recently sold them too and have all my money invested in youngsters. An average month returns me £2k capital appreciation from an £18k portfolio. At the moment that has only slowed down a bit because:
A) People pulling money out because of the technical issues.
B) Players pumping money into the already big players now the season has started and they can win MB and PB with already expensive players.
C) People getting fed up with young players not winning MB or PB already.
I will hold onto my young players though and eventually they will rise highly again I reckon.
@RichardMS Yes, I've thought about this. I've looked at 1 player and thought I could make 100% profit, and then another and thought I could make 40% profit. I've bought both, but if I just went for the 100% profit player I would have more.
@RichardMS All makes good sense BUT what if the one player you have spent big on gets a bad injury?
I'm very risk-averse, so I'm going for the spread option and enjoying a little increase in valuation every day, like a savings account with great interest rates.
There's no way I'd lump lots on one player - my general invesments have been £40-50 on highest value players (Mbappe, Kane), £20 on mid value (those in the £3.50-5.50 range) and £10 on youngers around the 90p-£1.20 mark, with a couple of £5 on players at 24p or so 'just in case'.
So far in 10 days I have nearly £2 in dividends, but that is more of a bonus to me than the plan.
In a couple month after the index has settled down following the share split and I've got more experience of the market, maybe I'll change my strategy, but I certainly don't want to be risking big losses over injuries, etc.
I have a simple strategy that starts with.. invest in players that play as these are the ones that can win the buzzes and grow through regular performance... But that said i'm sure plenty of folk are making money on the likes of Mason Greenwood because whilst i've held Alessandro Schopf at a small loss all season for his one dividend payment the other night i'm sure another Chelsea teenager who's been loaned out to a non PB club has tripled in value without kicking a ball within that time?
So i suppose the best solution is to diversify?
The more varied your portfolio the more open you are to winning MB, PB, G&A & capital growth....
The beauty of FI is that there is more than one way to make money, what you choose is probably down to your knowledge, market confidence, funds and time commitments.. 'hands off' just invest in the best players and watch your pot grow.... 'hands on' why not invest in that Japanese youngster who's not yet kicked a ball and flip them on the height of their growth?? I don't think there is a right or wrong yet whilst FI is still in its infancy??