• FOOTBALLINDEXdigest

Building Your Football Index Portfolio

Updated: Jun 27


Short or long term? Performance or Media players? Dividends or capital appreciation? Preparing to build a portfolio on Football Index involves key decisions and a lot of research. Read on for a few tips and thoughts.


You've tested the market and started small and now it's time to move to the next step and plan and build your Football Index portfolio. With in excess of 4000 players there are choices to be made, but how do you decide and which factors influence price movements? How do you minimise risk, whilst maximising opportunities?


When building a portfolio on Football Index, there many questions to ask yourself, some of which will change over time. In a nutshell, the questions below may provide a good basis for planning your portfolio.


  1. Short term or long term? Or combination of the two?

  2. Diversity or more focused?

  3. What level of risk are you comfortable with?

  4. How much and what type of research do you enjoy?

  5. How robust do I want my portfolio to be?

  6. Which teams/ leagues/ countries do I have the most interest in?

  7. Future proofing your portfolio


Short Term vs Long Term Trading


One of the key decisions facing all Football Index traders is whether to focus on short term or long term trading. First, lets consider what is meant by short and long term trading.


Bets (virtual shares) on Football Index last for three years. For the first 30 days of the bet, the shares are eligible for IPDs (In-Play dividends) where the player earns dividends for every goal, assist and clean sheet in the 30 day period. After this, players are then only eligible for the performance and media dividends.


Short term trading will mean different things to each trader, but broadly speaking we can classify this for arguments sake as being within the 30 day period, or thereabouts, as opposed to long term trading which is generally understood to mean longer than the IPD eligible period up to the three year expiry date (and beyond for career dividends).



Short Term Growth
Long Term Growth

Short term trading summary

  • More active style of trading

  • Potential for large profits in a short space of time

  • Mainly only suitable for lower end of the market

  • Fixture research is likely to be the base of research

  • Alternatively, media potential may offer opportunities

  • More suited for those able to commit time to monitoring player prices and exiting quickly

  • Requires significant liquidity and volatility in the market to sell at a peak

  • Likely to be more risky than longer term trading if events change or don't pan out as predicted

  • Exit points can be difficult, or impossible in some cases

Long term trading summary

  • More passive style of trading

  • Reduced potential for immediate returns

  • Profits are generally smaller and steady over time

  • Long term holds will usually iron out nay dips over time

  • Likely to be less risky than short term trading as long term will present numerous opportunities for exit

  • Great strategy for a growing market

  • Less dividend potential due to IPDs expiry

  • Risky for older players as they near retirement

When evaluating if your preferred strategy is orientated towards short term or long term strategies, as with all trading on Football Index, it's worthwhile having a portfolio which includes both. this can really help to mitigate the risks and see you through turbulent times. The recent COVID-19 lockdown for example, has seen prices fall across the market and made exiting players at the lower end of the market very difficult. Whilst this is an exceptional circumstance, we should remember this is always possible and should be factored in to your planning.


In contrast, longer term trading enables traders to ride the dip and not worry about short term market dips. Although this strategy doesn't maximise the opportunities which short term trading does in relation to Football Index announcements, promotions and matchday trading.


2. Diversity or More Focused?


Alongside short and long term trading is the question of diversity. In short, this will mean buying a range of players with various attributes to cover the main areas of Football Index trading

  • Capital Appreciation

  • Performance dividends

  • Media dividends

  • Market trends & cycles

  • Future developments and updates to the platform

My post on Identifying players to Buy on Football Index goes into more detail on the types of players below and their key attributes, and what to look for when carrying out your research. Whilst this list is not exhaustive and the player database is highly diverse, hopefully this will give you a solid base from which to begin and enable you to build a robust portfolio which grows with the overall market, covers trends and cyclical movements, as well as return dividends, which can be withdrawn or used to further develop your portfolio.


Key player types:

  • The King(s)

  • Performance players (dividend earners)

  • Media players (dividend earners)

  • IPD (In-Play Dividends) players

  • Transfers Players

  • Young players

  • International Players

  • Outsiders

In the category above called Outsiders, you may like to include players from leagues which are not currently eligible for dividends, either in anticipation of a move to an eligible league, European competition or international football qualifiers and tournaments. These players can often be picked up at a lower price, especially around times where there is a heavy focus towards dividend earners (domestic match days and dividend reviews for example).


Diversifying your portfolio will not only provide you with a robust portfolio, but also minimises any losses which can occur on a player, should they receive a serious injury, be transferred or other unfavourable circumstances.


As any trader knows, market cycles and movements can provide excellent opportunities for trading, but it's also important to protect your portfolio as much as you can through diversifying. This will also ensure your experience on Football Index is fun and enjoyable. Tracking your players to see how they are progressing and whether they will win dividends is one of the best aspects of Football Index, and although the schedules may change, if you hold players for all the purposes above, you will always have a stake in the game.


On the flip side of diversification, is the risk, but also opportunities offered by setting your portfolio up to capitalise on a specific area, or a cycle and focusing your portfolio around this. For example, trading in and out of players on match days, or concentrating a specific league, team or competition. The risks with this approach are obvious, but timed correctly, and well researched, this can prove extremely successful, enabling you to time trades much more effectively, better predict market movement and individual performances.


One example in the trader community of focusing specifically on Ligue 1 and French talent is FIGenesis on his website FI French talent.


The two strategies can also be combined, with part of your portfolio set aside to diversify and balance out the other with a view towards long term growth and stability, and the remaining part to be your main focus. The question of how this is split would likely come down to your expected returns and target growth. As with the general market on Football Index, this can be difficult to predict, but there have been many times in the past, where the market has grown vastly over a short period, and there will no doubt be similar movements in the future. At the time of writing, there is huge anticipation and excitement about new technology being introduced and a dividend review in the coming months. Therefore, setting a target can be very difficult and very much a question of risk vs reward. Are you happy to accept slower gains in return for relatively less risk? How active are you able to trade and how much time can you commit?


Taken in the extreme, there are some well known traders on Football Index with very large portfolios of 1000+ players covering all of the above and more! On the flip side, there are also some portfolios with larger holdings in only a few players. As with all aspects of Football Index, there is no right or wrong way to form your portfolio and it very much comes down to personal preference and circumstances.


3. Level of Risk


Following on from the players discussed above, we can now look a little closer at what risk is and what it represents when trading on Football Index. In short and for the most part, risk is the probability of a drop in value and it's implications. Buying any player on Football Index carries a certain level of risk, but why are some more risky than others?


When assessing risk levels, it's important to understand the possible outcomes which could cause a player to drop in price. These include, but are not limited to


  • A serious injury or worse

  • An unfavourable transfer

  • A drop in performance and subsequent repercussions (dropped from the team etc)

  • Fallout with the manager

  • Retirement


Of course, the risk with an individual player is also based on the players character and personal circumstances and can be a two sided coin. For example, a player who has a turbulent relationship with his manager, may carry a risk of being transferred out or dropped, but on the flipside, he may also feature heavily in the media and return consistent dividends.


There is an argument on Football Index that players who are priced highly, and therefore have many traders with large stakes held in them, are less risky than those with lower prices and less money currently held in them. This debate is less clear when you factor in, the ability to sell and how this is changing with the (soon to be introduced) Order Books system and Matching Engine. A player priced highly will of course be tracked more than a lower priced player, but it's important to understand the potential for capital appreciation and price growth when weighing up the risks associated with different areas of the market.


In order for a player priced at 50p to increase by 1p, it will take approximately £300 - £450.


In contrast, in order for a player priced at £14 to increase by 1p it will take approximately £8,400 - £12,600.


The above calculations are based on a players price moving 1p for every 600 - 900 shares purchased which is generally believed to be the case for players in the current market.


This difference in the money taken to move the player and achieve growth is huge, and it could be argued that the potential for quick and sudden rises in lower priced players reduced the risk somewhat, as all it will take is a single good performance, transfer rumour or similar and profit can be made. In the opposite case of a higher priced player, there will need to be either a large amount of traders buying at the same time, or a single big trader buying one player.


To summarise, as with all areas, it's important to determine definitively which of the two contrasting players above are more 'risky' and will come down to trading styles, technique and research.


Another factor above which is important to mention is retirement of the player. The official line at the time of writing, in the Game Rules is that retired players may be removed from Football Index which can lead to concern over older players and the potential for the stake held in them to be lost.



Game Rules: Retired Players

This can massively affect the risk level of older players and make buying and selling more difficult. As any trader will know, the current dilemma for traders around Lionel Messi is a case in point. A proven dividend winner and possibly the most consistent performer, seemingly at the top of his game but undoubtedly towards the end of his career. A valid argument for holding here would be how the dividends won are spent, and if the advantages of this outweighs the risk.


In an overall sense, reducing exposure to risk is important and many traders minimise this by ensuring the steps above are taken. Another popular option for experienced traders, is withdrawing their initial deposit once their portfolio has made significant profit. This essentially means that the risk is offset by the fact that any money remaining is profit which would otherwise not have been made, so the financial impact of any large loss reduced.


4. How much and what type of research do you enjoy?


As with many trading scenarios, at the centre of decision making is research and one of the key questions new traders should be asking themselves is how much time they are willing, and able to commit to carrying out research for their portfolio. In addition, the type of research as well.


In a broad sense, player research can be directed in two ways - Football Index specific, and general football. As discussed, there are some excellent third party Football Index data providers (see Resources section) which can be a good way to understand why some players are valued so highly on Football Index and others are not. Whilst this specific research can be a good starting point and will help to understand the market movement, it's important also to research players from a general football perspective. For this, there is a large range of options available from statistics websites and apps, news and simply watching matches! Researching players from a general football perspective can have the benefit of unearthing players who are performing well, but perhaps not suited to the current performance matrix scoring system, or not playing for a large team.


For example, a player may have excellent passing statistics, but this is limited because the team does not play possession based football, or a transfer may go under the radar because he is at a smaller club and the focus is elsewhere. The general concept here is to delve deeper into the football world and not become too centred on Football Index specific data.


On the subject of statistics, it's worth addressing the question of which stats are more important? Of course, goals and assists will always be the two key stats in determining the success of an attacking player, but looking closer at the current performance matrix, it's important to note that this can, and likely will change in future.


At the time of writing the current performance matrix has been in place for the 2019/20 season, and the general consensus is that it places a large weight (points allocation) towards crossing. The debate in the trader community about this is a lengthy one, but the important thing to note here is that this may or may not change, so buying players exclusively for this carries a certain risk, whether the change may be now or in the future, or not at all. Therefore, it's important to consider which valuable parts of player's stats are perhaps undervalued and may be revised in the future. For example, tackling or multiple goals which form a crucial part of a match but are perhaps not rewarded as highly as they could be?


Of course, away from statistics, watching matches is perhaps the more enjoyable side to research for many and this should not be underestimated. Identifying a player through research and then watching him play could be beneficial to understanding why he is underpriced on Football Index and which aspects of his game are the strongest and weakest and how this is reflected in the current performance matrix.


In addition to player performance, on the media side, research can be difficult. Aside from reading daily news, it can be difficult to understand what exactly is happening inside clubs, especially in regard to transfers and player/ manager relationships. In addition, reliable news outlets and sources are often either unreliable or purely speculation based.


One option here are club fan groups and forums, which have far more detailed knowledge of players at the club and the internal relationships. As a football fan, you may well be already familiar with this and able to use this to your advantage.


6. Which teams/ leagues/ countries do I have the most interest in?


New traders to Football Index will often be football fans first and foremost. This is a great thing, and it's clear that Football Index, driven by Adam Cole is especially keen to retain this as the platform grows. The passion and knowledge base of the game within the trader community is also excellent with traders coming from a range of backgrounds. However, one of the potential pitfalls when first joining, is to buy players from the team you support or follow. Whilst this contradicts my point above about having a good knowledge of clubs, it's important to be aware that opportunities can be missed if this affects your trading strategy.


Remaining objective when assessing players can be very difficult and traders will often find themselves buying players who they would not follow otherwise. Likewise, it's important to also look deep into the market when carrying out research, as there are teams and players developing, dropping and even overperforming in every league. Finding these can be very rewarding and satisfying and prove to be a great trading strategy.


7. Future proofing your portfolio


Whilst the above should give you a broad basis for building a solid portfolio on Football Index, it's important to also mitigate against future risks, the unknown and any future developments or changes to the platform.


My post on The Risks of Buying Young Players partly addresses this in respect of young players and their development, but it's also important to remember that we are still very much in the stage of growth at Football Index itself. Whilst this is an excellent phase to be part of, it does stand to reason that there will be developments to the platform which over the long term, will be beneficial, but does require a level of flexibility with your portfolio planning and management.


In regards to trading and player selection, the points above on player types should ensure your portfolio is diverse enough to cover most eventualities and it's important to highlight that Football Index is primarily focused on dividend returns and performance on the pitch where possible, so building a portfolio around players who perform well consistently will always be a secure and lucrative strategy.


Screenshots above from the Football Index app and website.


Thoughts, comments and suggestions below please.

© 2020 by INDEXnotes
 

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