Football Index Tutorial: Cash Builder Series – 6th Installment

Sixth Installment of Cash Builder – February 2020 Progress Reviewed

Introduction

If you haven’t done so already, and have not yet tried Football Index (“FI”), I’d suggest that you read our Football Index beginner’s guide as it explains most of the key concepts (including dividends, buying and selling players and commission). If you’d like to follow along, you can join Football Index here.

Welcome to the latest article in my Football Index cash builder series for 2019/20. At the start of the season, I deposited £100 onto the platform and my goal is to grow that balance as much as possible. Each month I will top up my balance by adding another £100 (if I’m able to), but the focus of this series is percentage return on investment rather than cash balance.

If you haven’t already, and are new to the Index, please give my beginner’s guide a read and if you have any questions please reach out to me on Twitter @FPLBraveheart.

The state of the market

There have been a number of developments in the market since I last provided an update at the end of January. First, Neymar is no longer the king. He was knocked off top spot by Jadon Sancho shortly after the close of the January transfer window as the press (and traders alike) started to turn their attention to the summer transfer window.

The Sancho rise was off the back of him being linked with a move to Man United. Whether that would improve his value (he’d be with a less friendly team for matchday dividends but a more friendly team for media dividends) remains to be seen should such a move ever materialise. His move to top spot was shortly followed by rises for the likes of Timo Werner (who is strongly linked with a move to Liverpool in the summer) and Jude Bellingham (being linked with moves to Man United, Chelsea and Dortmund).

Football Index announced yet another type of dividend for the month of February. I’m not a big fan of the short-termism from the platform, as I noted in my previous article when discussing the innovation of “transfer dividends”. That being said, I appreciate that Football Index is trialling new things in order to stay fresh but I would like them to try and let the market “settle” for a little while. I’m writing this article slightly into March and they seem to be giving me my wish so far in March. This is ahead of the announcement for the Euro 2020 promotions in April (but I’m happy for there to be short-term promotions when it comes to an international tournament and sufficient notice has been given by Football Index).

Football Index market continues to grow and the market cap has now topped £100m for the first time. As of the end of February, it was sitting at £103.84m. The market cap is the total amount invested in players and as it continues to go so too will there be natural growth throughout the Index. One way of working out if your trades are successful or not is by comparing them against the natural growth of the market. If you beat the rise in the market cap then you are most likely to be a profitable trader (rather than someone simply being lucky by being in the right place at the right time).  

My strategy: overview 

In the opening article of this series, I said that I would be going with an in-play dividend hunting approach. My reasoning for that was that there were a lot of players under £2 who score or assist frequently and so represent good value for returning regular dividends. However, in light of the massive 57% increase in performance dividends announced at the end of October, I decided in November to diversify my strategy and have more than one strategy by which I would profit.

To summarise the strategies I’m using, I’ve been targeting players for a number of reasons:

  • they are a young player who has potential to become the next big thing (“youth strategy”),
  • they are priced quite low because they are not frequently competing for performance dividends but they score and assist a lot (“IPD strategy”),
  • they are currently injured (and have been for quite some time) and are nearing a return to first-team action (“injury strategy”),
  • they are likely to move teams soon and so may have an improved chance at performance or media dividends (“transfer speculation”),
  • they are regularly putting up good scores for performance and/or media dividends and are likely to return regularly (“long-term holds”).

There was a strategy update for me in February.

My wife went on two hen parties and so I had the house all to myself. As I was watching plenty of football without any interruptions, I thought it would be a good time to try “in-play trading”. This is an incredibly short-term and violative form of trading. It involves trying to be one of the first to react to a bit of news.

For example, a key player being omitted from a line up so I’d buy his deputy who is likely to benefit from the omission. I did this when I heard that Vardy was likely to miss out verses Norwich on 28 February. I bought shares in Iheanacho and was rewarded by 13% profit from that trade alone.

Another strategy is buying a player who has just scored his second goal in a game (or a defender who has scored his first as defenders get 2p per goal). I had mixed success with this strategy. I profited on the likes of Stindl with his 2 goals and an assist against Augsburg (15% profit post-commission) and Boyata after he scored against Paderborn. However, very often I was too slow to react to the news and bought in just as the player’s graph started to peak and turned negative.

Also, it is important, if using this strategy, to make sure there is sufficient liquidity in a player (i.e. enough players are wanting to buy him) otherwise you may be left with a large number of shares that you don’t want. This happened to me on a number of occasions, mainly with defender goals so perhaps that is not a worthwhile strategy unless the defender in question happens to get a second goal or an assist in the game. 

How was February?

I was able to devote more time to my trading this month, however, it was not positive attention. My attempt at “in-play trading” were not profitable with the result that the month was not as profitable as it otherwise ought to have been (if I had stuck to my medium-to-long-term trading strategy).

The reason for this was because too often I was caught with players that had insufficient market sentiment (i.e. other players wanting to buy my shares in those players) and so I had to sell them to Football Index through instant sell, absorbing the lower sell price as a consequence. 

I have decided to change up my strategy slightly for March and so I won’t go into the profit analysis for each player as I’m selling up my whole portfolio in order to spread the cash I have in Football Index by buying at least 50 forwards.

The reason I’m doing this is because, as a small portfolio, I want to build up my positions in players and putting 10% of my portfolio in a player means that I’m less diversified and so I’m more at risk from that player having a downturn in prospects. There are fewer forwards in the game and so it should mean that I have more regular returns from matchday dividends. And, finally, as I’m building up positions, it should mean that I have a regular stream of goal and assist dividends as forwards are far more likely to be receiving those.

The one caveat is that I won’t be buying shares in every forward as there are many that I do not think represent value or are on a downward trend due to age (unfortunately, Messi and Ronaldo). 


Cash builder summary

  • Balance at start of February: £295.00
  • Balance at 29 February (minus expected commission) : £296.56
  • Monthly Return on investment (%): +0.56%
  • Total Return on investment (%): +17.24%

If you haven’t already, and are new to the Index, please give my football index newbie guide a read and if you have any questions please reach out to me on Twitter @FPLBraveheart.

Rules

  • I will invest £100 in the first week of each month,
  • I will buy no more than 5 players,
  • I will look to short-term trades (i.e. 30 day/monthly cycles) rather than longer term,
  • Every trade I do, whether profitable or not, will be discussed in this series of articles.

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FPL obsessive | Scottish | Top 200 of all-time.

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